If the last year has taught us anything, traditional financial planning and analysis approaches did not...
Planning and reporting that is both effective and efficient are essential for organisations of all sizes. However, opinions differ as to what this should look like in today's volatile markets. The use of forecasts has long been the standard for economically successful organisations. Forecasts usually serve as a budget plan basis as of year-end forecasts and are constructed either in Excel or with modern software solutions for planning, reporting and analysis, which can make forecasting less cumbersome. So, what are Rolling Forecasts, and why is embracing the role of technology so important?
The value Rolling Forecasts provide
Year-end forecasts help to make the decisions required to achieve annual goals. However, they can be relatively inflexible. Due to the time needed for preparation, they are also based on data that may be halfway up to date when creating the forecast but quickly become outdated during the fiscal year. This is where introducing Rolling Forecasts is particularly valuable for organisations in industries and markets with high volatility.
Rolling Forecasts are used periodically throughout the fiscal year. They either serve as a supplement to the fiscal year forecast, budget and other plans, or they can completely replace the annual forecast. For Rolling Forecasts, an interval is defined at which you create and review the forecasts. Since there isn’t a universally used standard, organisations must determine what best suits their needs.
Why are Rolling Forecasts useful?
Rolling Forecasts are a type of forecasting that uses an organisation's existing data to help predict aspects of business performance at pre-determined intervals. In this process, new forecasts are regularly prepared for a specific period on an ongoing basis. They are most often used in finance but can be equally helpful in other functions such as sales, HR, and more. In the uncertainty of the global pandemic, the use of Rolling Forecasts increased as businesses of all types looked to reduce uncertainty and increase agility.
How technology plays an important role
Rolling Forecasts often supplement the forecasts already in use in many organisations rather than replacing them. In practice, this means one thing above all: additional work for finance. Especially if their tasks are only supported by Excel spreadsheets.
To implement continuous performance management with Rolling Forecasting, a specialised solution is highly recommended. Having timely forecasts available is very beneficial. However, being able to act promptly on the forecasts is very important. Automating processes and unifying them to free up time for analysis and recommendations of action must come with a more agile approach.
Keeping communications consistent throughout the entire process of introducing Rolling Forecasts should be a top priority. Involve your key stakeholders at every step. Implementing technology is much easier — and execution much faster — if your business planning is already based on a modern software solution that serves as a central platform for all departments and processes. Optimised value creation is supported by collaborative, unified planning enabled by technology across all departments.
The role of AI in Rolling Forecasts
Continuous, predictive forecasting enabled by technology frees up resources and increases forecast speed and accuracy for better decision support. Replacing manual forecasts with automated driver-based models provides a level of data granularity that spreadsheets simply cannot. Utilising modern technology like Artificial Intelligence and Machine Learning solutions in their Rolling Forecasts has enabled large, multinational companies to achieve real-time, continuous forecasts with 90% accuracy and, in some cases, even higher.