Implementing the Rolling Forecast

The main limitation of the traditional budget is that it does not react to what is actually happening in business during the year.

A?Rolling Forecast?solves that problem, by helping companies to continuously plan (forecast) over a set time horizon.

What is a Rolling Forecast?

Rolling Forecasts?provide a continuous forecast over a specific time horizon (usually 12–24 months).

Here is a side by side comparison of the traditional and the rolling Forecast

The white boxes are actuals, and the blue ones are the forecasts.

If you look at the second review, the first quarter has gone white, which means it is actuals, and there are 5 quarters of forecast (with a new forecast quarter added).

From Traditional Budgeting to Rolling Forecast

The traditional budget is outdated and does not focus on value creation. Value creation is the most important reason for adopting the Rolling Forecast.

There are several concerns that could arise during implementation. People could be resistant to change. In particular, they may be concerned about the time it would take to implement the project, and also question the cost versus the benefits.

Key Success Factors for Rolling Forecast

Executive sponsorship, stakeholder buy-in and realigning the culture are important people-related factors in implementing the Rolling Forecast.

The right technology is another crucial element.

Collaboration and sharing data among?teams?is essential.

Even if we have the right people and technology, a complex process could make the implementation unsuccessful. The process must be simple, easy to maintain,?driver-based,?agile, and quick to adapt to the changing environment.

Conclusion :

• Rolling Forecast is?not a measurement tool but a management tool that creates value.
• Forecasting?is not?budgeting?multiple times a year, but rather a call to action to engage when the forecast is updated.
• Executive sponsorship is fundamental to making the change happen.
• Transformation?is difficult.?Implementing a change management?support structure is therefore vital.?
• Progression and not perfection is the key. Expect to fail quickly, adjust and try again. If we just plan and analyze it to be perfect, it is never going to happen.
• Successful implementation of a rolling forecast is?not just a finance function, but requires?collaboration from all departments involved.

A rolling forecast helps leaders get better visibility into the future and enables them to make faster, more accurate decisions. It can?transform?the way we manage our business.

This article is adapted from my original article published at fpa-trends.com

Credits: Ahmed Ezzat, CFO at?MFQ Companies, Anand Joslin, Finance Director at?Accor, Nevine White, VP Accounting at?Hargray Communications, Andreas Simon, Director MEA at?Jedox.

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