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Rolling Forecasts: Seven Factors that Can Determine Your Ability to Predict the Future

Rolling Forecasts: Seven Factors that Can Determine Your Ability to Predict the Future

Can you predict the future? In finance, looking forward is a key part of making smarter decisions in purchasing, hiring, merging, and innovating. Essentially, your entire company relies on your ability to gaze into your crystal ball (read: financial software or in many unfortunate cases, spreadsheets), and tell other departments where your organization is going to be in 6, 12, and 18 months.

Too often, unfortunately, financial professionals at companies rely on two things—static annual budgets and spreadsheets—that hold back their ability to accurately and confidently say “this is where we are, this is where we need to be, and these are the steps we are going to take to get there.”

On the other hand, rolling forecasts have become a popular and effective method for gaining visibility into the coming months, always looking ahead through a specified time frame, as opposed to pooling all of your technological and human resources into a laborious annual (or whichever time frame you so choose) forecast.

Building an Effective Rolling Forecast: 7 Factors that Go into its Success

Establishing a rolling forecast, while initially labor intensive, is something that will save you time every single month from day one. A recent Host Analytics blog took a deeper look at what you can do to improve rolling forecasts, offering seven factors that influence the success of your rolling forecasts.

Clearly Defined Objectives

This is the most important step in the process, as it will form the framework for your forecasting process. Objectives can include driving growth, reducing costs, maximizing customer retention, optimizing headcount and others.  Your company’s specific goals and objectives will help to determine the aspects of your forecast that you need to focus on the most.

A Well-Defined Timeline and Frequency

The time horizon is never a one-size-fits-all solution, and it may change as your company changes. To choose the appropriate forecasting cycle and timeframe, you need to consider the availability of resources as well as the pace and volatility of your business. Fast-growing or dynamic businesses may require frequent forecasts, maybe monthly, and a shorter time horizon – maybe 1 – 2 quarters out.  Businesses that are less volatile may get by with quarterly forecasts and a longer time horizon – maybe 4 quarters out into the future.

Use of Driver-Based Forecasting

One proven method of ensuring your rolling forecast is efficient and accurate is to leverage driver-based forecasting. With this approach, updates are focused on the key data or drivers that determine the key financial outcomes of your company, instead of updating each line item in your budget. With a driver-based model, you can account for the most critical variables that impact finances, allowing you to forecast finances strategically and in a way that focuses on material changes.

A Commitment to Process

You need to consider the strategy and process for implementing rolling forecasts within an organization, so you can ensure consistency and buy-in across all departments. The process needs to be efficient, easy to implement, and encourage collaboration and participation throughout your organization.

Participation from Multiple Sources

Forecasting relies on the input of a wide variety of departments and managers.  To ensure accuracy, your financial team needs to encourage participation from throughout the company. Utilizing cloud-based planning and forecasting software is conducive to this aim, as it provides convenient access to reports and planning templates for all participants in the process.

Tactical AND Strategic Focus: Operations Collaborating with Finance

Oftentimes, businesses plan their operations and finances separate from each other, which can create disparities in resource allocations. For rolling forecasts to be impactful, you need to integrate operational and financial planning together, so the forecasts are representative of the entire company.

Stop the Spreadsheets, Use Smarter Systems

The success of rolling forecasts largely depends on the system you’ve implemented. If your company is relying on Excel and email, you can anticipate your forecasting process to be tedious and prone to inaccuracy. Cloud-based planning and enterprise performance management (EPM) software packages offer tools to improve data analysis and streamline the forecasting process, so you can conquer forecasting with greater precision and efficiency.

Effective Rolling Forecasts: How to Make It Happen

To make the most of your ability to predict the future, taking the first step may be the hardest part, but once you do, your organization will benefit immensely from this step in the right direction. Learn more about the value of rolling forecasts by reading 10 ways to make rolling forecasts work for you, as well as downloading the Host Analytics whitepaper, Best Practices in Rolling Forecasts.

As a proud provider of Host Analytics Cloud Enterprise Performance Management Software, Brittenford Systems can help you decide, implement, and operate your EPM software for success. Learn more by checking out the related resources below, and contact us for more information.


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