Implementing Rolling Forecasts




In order to survive and drive business performance in today’s increasingly competitive and turbulent economic environment, organizations must be able to anticipate changes and be adaptive. Traditional annual fixed budgets no longer play the tricks. Instead, organizations need to implement new forecasting techniques capable of helping them anticipate changes and better inform strategic decision-making.

Avoiding total reliance on the annual budgeting process to monitor and drive business performance and implementing rolling forecasts can help business leaders steer their organizations in the right direction in these volatile and uncertain times. Rolling forecasts help organizations obtain reliable and relevant insights on enterprise risks and opportunities; identify and forecast the key business drivers continuously; evaluate business strategies and effectively and efficiently align organizational resources and processes for competitive advantage.

To successfully implement rolling forecasts, organizations must:

Base Forecasting on Key Business Drivers: Abandoning the fixed annual budgeting process requires business leaders completely making the decision and committing themselves to move towards the use of driver-based forecasting. Although no forecast is 100% accurate, forecasting business performance should not be done on gut feel, otherwise the results will be disappointing. To avoid actual performance deviating further away from forecast performance, all the key drivers of the business that are relevant for decision-making and informing strategic direction must be identified first. These drivers are both internal and external and help the business remain on top of market changes and challenges. This in turn improves organization-wide alignment, forecasting control and decision-making processes.

Align Forecasting With Strategic and Operational Decisions: One of the main objectives of forecasting is to evaluate business strategies, align organizational resources and processes efficiently and reduce inefficiencies.  Since the use of rolling forecasts helps the organization to continuously evaluate its operating environment, business leaders are to perform “what-if” analyses and evaluate current strategies under different scenarios. This in turn helps formulate alternative strategies, allocate capital and operational resources effectively and set new targets. Priorities are redefined for the operative processes, and adaptation measures and activities are proposed by operational managers.

Create Ownership of the Forecasting Process:  Organizations that have successfully implemented rolling forecasts have done so because they involve the various budget owners in forecasting. Directly involving budget owners in forecasting helps decision makers get a broader and more accurate view of the organization’s current position and future outlook since each budget owner is approaching the process from a different perspective. Furthermore, they have not viewed forecasting as a process done to adjust the annual numbers to fill the gap and meet the targets. They view forecasting as a continuous improvement process that is driven by changes in the organization’s playing field.

Implement Technology That Supports Driver- Based Forecasting: Since rolling forecasts work on various assumptions, there is need to invest in a system that can easily analyse, interpret, integrate all this information and play different scenarios to ensure sound decision-making. Data and analytics are essential for rolling forecasts. Organizations that want to make the transition must focus on relevant data and data-related processes. Predictive analytics can help analyze historical and current internal and external data, show what is happening and predict where the business is heading.

Embrace and Drive Process Change: Moving from the fixed forecasts to rolling forecasts is a cultural change initiative that requires proper senior management. It is therefore important for management to design an appropriate change management policy that is capable of driving the process change. For example, the change policy must clearly explain the reasons for changing, the communication procedures, the measures of success etc.

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