Content area
Full Text
The nervous starter - establishing rolling forecasts in your organisation.
Okay, you've been thinking about things for a while and you've decided you're going to adopt a rolling forecast... now what? Rolling forecasts are wonderful in theory, but somewhat frightening to put into practice. In a nutshell, so much to do and so little time to do it!
Rolling forecasts have been widely put forward as a tool to improve budgeting outcomes in organisations and have been lauded as possibly replacing the annual budget for over a decade. Groups such as the Beyond Budgeting Roundtable (BBRT) have been advocating for its adoption in organisations globally. Clearly, budgeting over shorter periods and re-thinking future predictions more frequently can only result in better predictions. However, to what extent does your organisation actually benefit from better and more frequent budget predictions?
Organisations considering a rolling forecast must reflect on the effort needed to make forecasts work as theory or best practice indicates. Rolling forecasts are great, but only if your organisation actually benefits from more accurate numbers and is willing to invest the requisite effort to enable their proper construction and execution. I'll delve into five practical factors you might wish to consider before undertaking the task of establishing and using a rolling forecast. First though, let's be clear on what a rolling forecast is.
ROLLING FORECASTS DEFINED
A rolling forecast is a commitment to periodically cast a series of short-term budgets that cover a medium-term horizon. So, if I commit to constructing six quarterly rolling forecasts, I will have six quarterly budgets spanning an 18-month period. At the end of the first quarter, I'll update my forecasts for the remaining 1 5 months and add a fresh forecast covering the new sixth quarter (see table below). This practice repeats itself every quarter. Of course, you can construct six one-month rolling forecasts or four quarterly rolling forecasts - you can pick any forecast period and forecast forward as many periods...