7 Factors That Influence the Success of Rolling Forecasts

7 Factors That Influence the Success of Rolling Forecasts

Remember the baseball great Yogi Berra?  One of my favorite Yogi quotes is “It's hard making predictions – especially about the future.”  This is especially true in today's market.

Predicting the future in business is tough, and rolling forecasts are becoming a popular way to address this, particularly in industries that are more dynamic and volatile. Yet, while a rolling forecast will improve the accuracy of your planning, there are specific tactics that can optimize your results and ensure precision. Here are some of the main factors that will influence the success of your rolling forecasts.

1. Clearly outline your 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.

Yogi Berra predicting the future2. Consider the frequency and time horizon best suited for your organization. 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.  

3. Ensure the forecast is driver-based. 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.

4. Focus on the 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.

5. Encourage participation. 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.

6. Align all company goals. 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.

Rolling forecasts

7. Find a system that works. 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.

Rolling forecasts can improve both the accuracy and efficiency of financial planning, but it won’t be effective on its own. In order to gain the most impact from your rolling forecasts, you need to implement a strategy that is conducive to the goals of your organization. With cloud-based planning and EPM software, you can effectively plan and execute your forecasts with both speed and agility, while encouraging collaboration and participation across departments.

To learn more about how to apply driver-based planning techniques, check out this free white paper.

Download the Free White Paper

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Increase Employee Retention with Cloud-Based EPM Software

Increase Employee Retention with Cloud-Based EPM Software

Many finance professionals report that they find their work to be tedious, repetitive, and mundane, which can lead to employees feeling distanced from their work.

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Consequently, their productivity declines. Employees that are expected to utilize a diverse range of skillsets often feel more connected to their work, and are better equipped to thrive.

According to a 2013 Gallup study, about 77 percent of employees that are engaged in their work report that they intend to remain with their current company for at least another year, and about 47 percent claim they hope to remain with their company indefinitely.

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The results are clear. If companies hope to retain their high-performing talent, they need to keep their employees actively engaged in their work by enabling them to minimize tedious labor and utilize a more diverse skillset. A recent whitepaper called “Holding On to Your Top Talent: Why Infrastructure Is Key” provides insight into improving employee retention among finance professionals.

How Spreadsheets Are Deterring High-Quality Employees

A majority of businesses are still relying primarily on spreadsheets to conduct their budgeting and forecasting. However, this is a fatal error from a business process standpoint, but is also problematic if you hope to retain your best employees over the years. Spreadsheets provide a number of limitations, which lead to incredibly tiresome work and inaccurate forecasting. This inevitably increases the frustration and dissatisfaction of employees. In addition to inaccurate numbers, spreadsheets make data sharing difficult. Spreadsheets are often shared via email, which can be confusing to organize and keep track of.

Is Legacy Software the Solution?

Recognizing the inefficiencies of Excel, many businesses turn to legacy, on-premises EPM software in hopes of streamlining budget management. Unfortunately, these systems are often equally tedious, leading employees to rapidly disengage from the task at hand, subsequently impacting productivity.

The Solution Is to Focus on Infrastructure

It’s clear that in order to improve the work experience of employees, you need to provide staff members with all of the tools they need to thrive. To maximize engagement, consider the core sources of frustration your staff are experiencing.

  1. Your staff need easy data sharing. Sharing spreadsheets via email is complex and confusing. A cloud-based platform makes sharing data easy, while ensuring files remain organized.
  2. Your staff need a single source of truth. When they can’t rely on the numbers, employees inevitably feel frustrated. With an EPM software solution that consolidates data, integrates operational and financial results, and links the processes of the budget cycle together, your employees can find a single source of truth that significantly enhances the accuracy of the numbers.
  3. Your staff members want software that’s easy to use. Software that is confusing or requires a steep learning curve will quickly frustrate your team. They want a solution that is intuitive and natural. Find a software solution that can seamlessly guide employees through the budgeting process, while offering a spreadsheet-like user experience, so employees can acquaint themselves with the new software quickly.
  4. Your employees want streamlined reporting. Find a software solution that allows for efficient and multi-dimensional reporting that is interactive and accessible on all devices.

Where Does the Cloud Fit In?

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The cloud enhances collaboration and data sharing.

To truly improve the work environment of employees, offering cloud-based forecasting and reporting solutions is imperative. Not only does it allow for easy sharing, but it can connect remote workers, be accessed from all devices, and eliminate the hassle and costs associated with on-premises software.

For a business to thrive, you need to be able to retain your best employees over the years. Statistics continue to reflect that workplace engagement and employee retention are strongly correlated. By providing your finance team with an intuitive, cloud-based EPM software solution that can improve the ease and accuracy of forecasting, they’ll feel more engaged with their work.

To learn more, read Holding On to Your Top Talent: Why Infrastructure Is Key.

Download the Free White Paper

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Don’t Get Fooled Again When Moving from Excel to EPM Software

Well, it was a long wait, but recently, I finally got to see the legendary rock band The Who on their 50th anniversary tour at Madison Square Garden in New York City. 

The Who

The show was originally scheduled for October 2014, but Roger Daltrey became ill.  This postponed the last leg of the North American Tour until March 2016.

But despite that, the band didn’t disappoint.  Their set included hits from their early days in the ‘60s and historic albums, such as Who’s Next, Tommy, and Quadrophenia.  Finishing on a high note, the epic show ended with their anthem “We Won’t Get Fooled Again.” 

That closing song got me thinking about something we see time and time again in the EPM market: companies getting fooled into using “tool-based” EPM solutions.

Moving From Excel to EPM Applications

What I’m referring to is what happens to some companies who decide to make the move from Excel to packaged EPM applications for budgeting, planning, forecasting, and reporting.  One reason they typically decide to make the move to EPM applications is being fed up with all the manual effort and maintenance required to support an Excel-based approach to these key processes. 

The unfortunate mistake some companies make, though, is selecting a “tool-based” EPM solution instead of a solution based on pre-built packaged applications.  For standard EPM processes – such as financial budgeting, workforce planning, CAPEX planning, project planning, and quarterly forecasting – there are plenty of pre-built applications in the market that can do the job.

In other words, there’s no need to reinvent the wheel and “build” a solution that that ends up taking more time and costs, and requires a high degree of ongoing maintenance. 

This would be like building your own General Ledger using an Oracle database and C++ or Java.  No one builds their own GLs anymore.  There are plenty on the market that can address most needs.  Making a recommendation like this would get someone fired!

Where a company has unique requirements that demand a more customized approach, selecting a tool or platform that can support “special or advanced” requirements may be justified.  But even in these cases, a pre-built solution might be able to address a majority of the requirements, with some customization to address the specific needs.    

There’s a better option.

The Best of Both Worlds

If your company has a need to support standard planning, budgeting, and forecasting requirements – as well as unique, company-specific needs – then you’ll want to look for a solution that has both pre-built, packaged applications and a modeling solution that supports custom development.

For instance, Planful provides a cloud-based EPM suite that includes standard modules for Planning, Consolidation, Reporting, and Analytics.  In fact, the Planning module includes purpose-built features for financial budgeting, workforce planning, capital planning, and initiative planning.  These features address the key requirements of many organizations, across industries.

The Planful Cloud EPM Suite also includes a Modeling module that allows companies to create solutions to requirements not supported by the core modules. 

Examples of “special or advanced” use cases supported by the Modeling module include Advanced Revenue Planning, Sales Operations Planning, Advanced OpEx Planning, and Long Range Planning.  These use cases often require more granular data, more complex calculations, and more granular time periods than is required for financial budgeting. 

What’s powerful about the Planful approach is that the custom applications created in the Modeling module can be integrated and linked to the financial plans and models being run via the core Planning module.  This enables you to create a strong linkage and alignment between operational models and financial plans.

The Takeaway

The WhoSo “don’t get fooled again” by buying an EPM “tool” to replace your Excel spreadsheets.  You’ll just be trading one set of maintenance headaches for another set. 

Instead, select pre-built EPM applications that already include support for best practice processes – and will be supported and maintained by the vendor.  Reserve the tool-based approach for unique requirements, but make sure you can link your custom planning and modeling solutions to the core planning systems. 

To learn more, check out our free white paper: “Introduction to EPM in the Cloud.”  

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Is Your Annual Budget Obsolete?  Try Rolling Forecasts to Stay Ahead

Well, the first quarter of 2016 is behind us.  Is your 2016 annual budget already obsolete?  Probably – and why? Because “stuff happens” and conditions can change quickly in business. That makes it nearly impossible to accurately predict revenues and costs quarters, or even months in advance.

The annual budget has long been the go-to practice of businesses, but it unfortunately presents a lot of disadvantages, particularly for dynamic businesses that need to be able to alter the budget on a whim.

Rolling forecasts can provide a more versatile addition or alternative to annual budgets, enabling businesses to respond quickly to change.

The Disadvantages of the Annual Budget

The annual budget has a lot of limitations, and the larger or more dynamic the business, the less effective annual budgeting will be.

1. Annual budgeting is inaccurate. It’s nearly impossible to accurately predict where your business will be or how your resources should be allocated a year down the road. Even the slightest change in the global economy or competitive environment could drastically change the course of your business, and trying to accurately plan out so far in advance is impractical.

2. Annual budgeting is rigid. By creating an annual budget, you are binding your business to a strict spending regimen, without taking into account the potential for fluctuating demand. In doing so, you’re needlessly creating a rigidity in your business model that will inhibit your ability to grow.

3. Annual budgets are purely quantitative. Annual budgeting focuses solely on the quantitative nature of business, but there are many other important aspects that the budget will fail to capture. It can be difficult to accurately allocate funds from a purely quantitative framework, since some departments have difficulty quantifying the services they provide. Additionally, it makes it challenging to respond to new demands by the public. Say, for instance, your company needs to improve upon current customer service policies in order to meet the demands of consumers. You’ll need to redistribute funds to accommodate this sudden need, which is difficult when operating within the confines of an annual budget.

4. Annual budgeting is time-consuming. An annual budget can be incredibly time-consuming, often requiring numerous iterations to get it right. Particularly if businesses rely on Excel and email, the budget can take months to finalize, while requiring you to pull data from multiple spreadsheets.

Rolling forecasts

Rolling Forecasts Will Help You Stay Ahead

The annual budget has too much rigidity to be able to support the fluctuating nature of fast-growing businesses. As a results, many companies are augmenting their annual budget with a rolling forecast.

With a rolling forecast, your company will be able to revise the budget anytime new information arises or your business takes a new direction. It provides the elasticity that you need to alter your customer service tactics, add new product lines, and adjust funding based on economic trends, so your finances will always be distributed based on the current needs of the business.

A rolling forecast enables you to model a variety of “what-if” scenarios, so you can plan for future circumstances, while responding quickly to present circumstances. It will allow for more business growth by providing an opportunistic approach to finances, since you can periodically revise budget allocations based on current trends.

With cloud-based enterprise performance management (EPM) software, you can easily implement a rolling forecast within your business, allowing you to enhance the accuracy of budget allocations, while improving the efficiency of the budget cycle. With added flexibility, you’ll have the agility your business needs to stay on top of trends and maximize on the most current business data.

To learn more, read our Best Practices in Rolling Forecasts white paper.

Get the Rolling Forecast White Paper

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A recent virtual event, put together by Argyle Executive Forum partnered with Planful, focused on the pressure on Finance organizations to fuel steady growth in a demanding and difficult environment.

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With a tumultuous economy and countless regulations, CFOs face a lot of obstacles when trying to grow their business. The event confronted these issues, offering a variety of tactics to manage Finance more effectively to support business growth.

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The Role of the CFO

As pressure for business growth increases, businesses seek to improve financial management.

Over the years, the role of the CFO has grown and evolved, with CFOs facing greater challenges today than ever before. As a result of the shifting role of CFOs, in a recent Argyle survey, about 55 percent of CFOs report that the collaboration between them and their and CEO has risen. In other Argyle survey results that were revealed during the virtual event, LOB executives were asked what they feel will be the most critical part of the relationship with the CFO and Finance team. About 39 percent of respondents said that supporting growth initiatives was the most important, while 25 percent said aligning Finance and operating plans was critical.

As Finance teams focus on growth, one of the key concerns is figuring out how to streamline financial planning and analysis (FP&A). As a result, 46 percent of CFOs say they have increased their investment in FP&A in the last one to two years. Of the CFOs polled, they emphasized that their primary goals moving forward were to:

  • Become more focused on innovation and growth,
  • Focus on adapting to change and growth,
  • Invest more in FP&A to produce better results,
  • Align finance and operations,
  • Leverage data more effectively.

How Finance Has Changed Over the Years

One of the main themes throughout the event was how the role of Finance has changed over the years. According to Laura Freeland, Vice President of Finance at Transplace, it’s the responsibility of the Finance department to ensure there is one source of truth, which can be achieved by consolidating data and integrating it across departments. Additionally, ensuring all team members are able to access data easily can help to facilitate collaboration between departments.

As the structure and expected skill sets of Finance teams change, financial teams have to be ready to adapt. Denise Dettingmeijer, Chief Financial Officer of North America at Randstad, says that her team is expected to constantly innovate and push the limits of thought, which makes the collaboration between departments all that more useful. Since departments can collaborate and share financial data, financial goals are becoming a focus throughout the entire organization, leading to more creativity and collaboration.

Moving Away from Annual Budgeting

Manage finance

Annual budgeting is no longer meeting the needs of growing businesses.

As the role of the Finance department shifts, annual budgets are no longer sufficient for creating accurate forecasts. Adam Carson, Vice President of Finance at Barracuda Networks, utilizes rolling forecasts because they provide a greater level of precision and control over the budgets. He runs multiple financial scenarios to gain deeper insight into future finances and tests a variety of variables prior to making business decisions, helping to minimize risk and more accurately allocate funds among departments.

The Increasing Need for the Cloud and Mobile

As the need for data sharing increases, many large enterprises are turning to the cloud to provide them with convenient and secure data sharing, as well as anytime access to company data. According to Brian Bloomquist, Vice President of Corporate Financial Strategy and Analysis at Marriott, it’s important to his company to begin shifting data to a mobile framework to increase access for employees. He says it’s particularly useful for distributing reports over the Internet, making it more efficient than before.

The role of CFOs is changing, and Finance teams need to possess a more versatile skill set to keep up with the demands of a fast-growing company. Businesses desire an FP&A model that is cloud-based, enables collaboration between departments, helps to integrate finance with operations, and provides more accurate forecasting.

To learn more, listen to the replay of this webinar.

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