3-9 Forecast: A Balanced Approach to Financial Planning

Rolling forecasts prioritize key business drivers—the metrics that directly influence financial performance—rather than static line items. By focusing on these critical variables, organizations can ensure that their forecasts are flexible, meaningful, and aligned with real-world dynamics. Fast-changing market conditions, new technologies, and shifting customer expectations are just a few of the factors making traditional financial planning methods often fall short. Static budgets, locked in at the beginning of the fiscal year, quickly lose relevance when unforeseen events and opportunities arise. Additionally, rolling forecasts are not bound to the finance industry. In fact, this method of forecasting is used in supply chain management and in other plans across various departments.

Rolling forecasts thrive when they involve collaboration across departments. Unlike static budgets, which are often siloed within the finance team, rolling forecasts rely on input from stakeholders across the organization. Rolling forecast timeframes can be adjusted to suit the needs of your business. Every forecast is bespoke to the business it is for, and rolling forecasts are no different. Select a time horizon that makes sense for your business model and industry.

Supply Chain Management for Healthcare

Rolling forecasts can be made for twelve months into the future or for as little as one week into the future. A rolling forecast’s horizon decides how far the forecast projects data into the future while increments determine how often the business rolls forward forecasts. The dynamic nature of a business combined with a company’s sensitivity to market conditions decides both the time horizon and increments for a rolling forecast. High forecast accuracy signifies the reliability and precision of the rolling forecast budget. This accuracy helps organizations make informed decisions based on trustworthy projections.

In fact, in today’s market, I can promise you that any AOP is wrong within seconds of the final submission. Rolling forecasts are indeed useful, but maintaining them could demand modern finance tools and software. It is important to invest in robust technology that can process complex data sets since integrating real-time information from various sources makes the forecasts as accurate as possible. Using automation tools could also reduce the burden and make the operations more efficient. Rolling forecasts are a forward planning procedure that retains the forecast horizon by adding one more period (for example, a month or quarter) to the total as soon as the current one is over.

Fostering openness and cooperation is needed to overcome this cultural resistance. According to the 2021 FSN Agility in Planning, Budgeting and Forecasting Global Survey, organizations that prepare rolling forecasts outperform peers that forecast 4 times a year (Figure 1). What kind of organizations can benefit from a rolling forecast process? Interacting regularly with consumers, suppliers or regional operations simply leaves organizations with no escape. From the roller coaster ride and volatility of global markets today. This flow means improved decisiveness and stated resource utilisation and can greatly improve a firm’s capability in dealing with change.

Budgeting & Forecasting

• But first, decide if you’re making a budget on paper, with a spreadsheet, or in an app.
• Business budgeting software can also help relieve some of this strain by way of automation.
• Additionally, this approach facilitates driver-based planning, where you can base your forecasts on key metrics, like human capital, sales, market share and production rates, instead of past results.
• It’s important to remember that these need updating during your rolling forecast.
• In this case, you add February of the next year into your 12-month forecast.

Now you’re stuck working off the same projections that made sense in Q4, What Is A 12 Month Rolling Forecast hoping things get back on track. It’s important to remember that these need updating during your rolling forecast. If you acquire more clients than usual – or if staff turnover increases – update your forecast and assumptions to reflect this. In a dynamic landscape like project management and professional services, resource planning based on information from who-knows-however-many-quarters-ago just won’t cut it. It’s because static financial plans completed in isolation add little value to managers and don’t drive the business.

Engage key contributors

You must ensure that the entire exercise aligns with your business cycle to achieve short and strategic goals. Unless you opt for an add-in that extends Excel’s capabilities and provides a centralized server with reporting automation capabilities, your best bet is to go for modern XP&A solutions. They automate the data collection process and bring siloed data from various financial and non-financial sources into a single data model. By analyzing historical data comprehensively, you’ll create a strong foundation for your forecast. Datarails FP&A software replaces spreadsheets with real-time data and integrates fragmented workbooks and data sources into one centralized location.

• Divide the total by your time period Dividing the total by your time period gives you your average for each unit.
• Particularly if you have reoccurring similarities in the monthly fluctuations.
• As such, rolling forecasts are a solid first step toward agile planning and budgeting for organizations looking to become more reactive and adaptive to change.
• The use of this method has doubled in three years, from 15% in 2022 to 30% in 2025 (according to TSOCFP).

9 Forecast: A Balanced Approach to Financial Planning

The organization can then copy and save the “base case” when locking a rolling forecast. For example, if the company forecasts monthly, they would copy the base case at the end of each month for the January forecast, February forecast, March forecast, etc. By the end of the year they will have two months of January included in their forecast. They’ve made a New Year resolution to start working out and they get a gym membership. Then in April, you only have one month of January included in the forecast and you can’t compare the different 15-month timeframes. There’s no fixed point here since the sales can differentiate significantly depending on the month.

Why Businesses Are Shifting To It

Lastly, the specific business targets outlined in static budgets function as an effective standard to evaluate the company’s performance. Ordinarily, static budgets are part of an annual cycle and are prepared at the start of the fiscal year. This approach draws from historical data on the company’s performances and accomplishments to come up with an improved resource allocation strategy for a given period.

Once done, it’s used to create projections for the next 9 or 12 months ahead so that the business has a consistent snapshot of the future. Learn more about what rolling forecasts are, why even small and medium sized businesses need them and why they’re better than traditional budgeting. You’ll also learn about best practices for implementing rolling forecasts in your organization and how a unified xP&A platform can simplify and streamline the process.

How to do a 12 month moving average in Excel?

If you don’t fancy fussing with spreadsheets and manual calculations, Runn creates automatic rolling forecasts, so you can accurately forecast without the hassle. By referring to a rolling forecast – rather than a static one – resource managers can ensure their resourcing decisions are effective, proactive, and strategic. Given the goals of a forecast – to facilitate better business decision-making – a rolling forecast is highly beneficial compared to a static one, especially in fast-moving sectors. This template is particularly valuable for businesses operating in dynamic markets or those seeking to improve their financial agility and decision-making processes.