In today’s highly volatile business environment, organizations are forced to be dynamic in adapting to changes to ensure their very survival. By embracing continuous planning or rolling forecasts, companies can remain agile, focused and flexible with their performance expectations.

A rolling forecast, or continuous planning, is a leading planning technique that will help organizations find opportunities amid persistent volatility and intense competition. A rolling forecast is a process in which key business drivers are forecast on a continual basis. Its objective is to foresee the risks and opportunities presented by a dynamic business environment, revisit strategy in the light of new business scenarios and align resources/activities for competitive advantage. Rolling forecasts are not simply periodic updates to the annual budget and are not associated with a specific financial year, which allows you to take full advantage of the flexibility that these forecasts can offer.

Rolling forecasts are indispensable to many businesses, they provide the versatile planning abilities that dynamic industries need.

Data isn’t the issue anymore

First and foremost, businesses need to gather large amounts of data for their financial report every year. From cash flow, balance sheets to non-financial KPIs, extracting all the data your report requires once a year can be difficult. Over the course of a year, many of your measurements can change, there is a lot of lines of expenses that you need to import and some of your data might have changed over the course of a year.

Additionally, reporting once a year this way leaves you open for problems with the comparison. If your data has changed over the reporting period, you might not be able to compare it to the year before.

An appropriate rolling forecast helps to solve said issues. By running frequent forecasts, you are constantly reviewing the data that is important to you. And a frequent exercise like this will make you consider a more appropriate measurement strategy for your business results, therefore making it more efficient. While a rolling forecast will force you to re-evaluate the importance of the data reported.

Accuracy

The greatest problem with yearly planning is that businesses need to create accurate plans for the future, with little information about the future. A common problem about traditional annual budgeting is that by the time it is completed and reviewed it becomes irrelevant.

Rolling forecasts are normally updated regularly, so businesses can adjust their forecasts to accommodate any changes, upcoming trends and to accommodate the plan that is far more realistic and reliable for the business.

Minimize Business Risk

The main objective of moving to rolling forecasts is to review the business strategy and align the recourses quickly and efficiently when the market changes.

A good risk-tolerance test benefits a business by allowing for the development of detail picture of investment and product strategies and ensuring an optimum level of investment risk or contained in the portfolio. A clearer relationship between the business’ goals and risk appetite will emerge and assist in the investment and overall decision-making process.

Opportunities

We already established that for a business to thrive one needs to be able to adapt to changing markets and trends. But this is particularly important for more dynamic industries that tend to experience more market fluctuations or those who only experience small changes in the market.

A frequent forecast can show where your business can be more opportunistic in their decision-making and when it is a good time to invest in something new. Additionally, a rolling forecast will give your business an ability to tweak your business assumptions, alter the budget and adjust the spending quickly to capitalise on the trend.

Make Decisions based on facts

A yearly budget or a forecast can become incredibly inaccurate in a couple of months, especially when you are thinking where your business is going to be in 12 months time. Additionally, every business decision will have its own risk and value.

Summary

A rolling forecast can help tackle this problem by offering an in-depth look monthly into your key business drivers. From here you can link the events in the market to our business drivers and assess how your business will be impacted by it. By linking other line items to the key “drivers”, planners can focus their forecasting efforts on material factors, such as orders or sales reps, and see the impact that changes to these line items have on the overall budget or forecast.

Are you interested in learning more about rolling forecasts and their benefit to the business? Download our whitepaper!