Financial forecasting is imperative to the success of businesses, yet accurate financial forecasts can be difficult to create. So, how does a high-growth, dynamic business create accurate forecasts for their company, without exhausting their time and resources in the process? A whitepaper entitled, “Best Practices in Rolling Forecasts,” sets out to answer these very questions.
Rolling forecasts provide the agility needed to adapt to consumer trends.
Rolling forecasts can more effectively meet the needs of high-growth businesses because they provide a flexible framework that is routinely updated, so all variables and industry changes can continually be accounted for.
The whitepaper outlines these best practices for rolling forecasts that will enable large enterprises to reduce the time and effort of forecasting, while increasing accuracy.
1. Don’t rely exclusively on Excel. Excel isn’t collaborative enough to sufficiently generate accurate forecasts, and it doesn’t provide the flexibility needed for dynamic industries. Instead, your company needs a system that will factor in variables, enable fast iterations to the forecast, and serve as a baseline for future forecasts. Collecting data via Excel requires too much time and effort while being prone to errors, resulting in tedious budget cycles and inaccurate forecasts.
2. Outline your goals. The core objectives of forecasting are to establish a clear view of your company’s financial future to help inform business decisions, as well as to understand the potential impact of those decisions prior to implementing them. Your company should consider your primary goals with the forecast, so you can understand the drivers behind each objective and create better-focused plans.
3. Settle on a duration. Determining the appropriate duration will largely depend on the needs and goals of your company. Consider whether quarterly forecasting is sufficient or if monthly forecasts are needed. How far out should your forecasts project – 12 months, 15 months, 18 months? The growth rate and industry fluctuations of your business can help to determine the best durations for your company.
4. Choose your comparison periods. Comparisons for rolling forecasts can be trickier than with static budgets. You need to provide annual comparisons, comparing year to date (YTD) this year to last year, as well as comparing each month of the rolling forecast to the actual results from that month. While it sounds labor-intensive, EPM software can greatly simplify the process, making it much more efficient to accomplish.
5. Determine what is driving the revenue and expenses of your business. To ensure accuracy, rolling forecasts need to be driver-based, so you can gain the flexibility and agility needed to respond to internal or external fluctuations, update the budget quickly, or generate alternate forecasts.
Download our free white paper to learn 5 more tips to improve rolling forecasts.
For high-growth businesses, static budgets cannot provide the agility and flexibility needed to ensure optimal allocation of resources. Rolling forecasts can provide the agility needed to update planning assumptions regularly, better insights into the financial impact of decisions, and create a clearer vision of the financial future of your company. Excel fails to provide the tools and versatility that enable efficient and accurate rolling forecasts.
With Continuous Planning software, your financial team can more easily collaborate across functions, access advanced modeling capabilities, comprehensive planning tools, and multidimensional analysis to create more accurate rolling forecasts with less effort.