The rise of the Rolling Forecast

I’m a big believer in producing an annual budget which requires input from all departments within your company and once created requires all departments to buy into its end result.

But increasingly this task is considered time consuming as a one off event in the year. It’s difficult to persuade the sales department to predict the sales for 12 months at the best of times but to ask them to set time aside to do so is not easy.

An accurate rolling forecast will in essence be able to replace the annual task of producing the budget by introducing it’s creation into your monthly business processes.

A rolling forecast always retains a forecast for the same number of periods going forward rather than a fixed number reducing as they count down. Let’s say 12 months. So that when you approach the end of your current financial year your next 12 month forecast will be readily available. This can then be cast in stone and used as a benchmark as you progress forward with your rolling forecast.

The power of a rolling forecast is that it’s a reality check. It enables your company to respond quickly to change of circumstances or an unexpected event. Your finger on the pulse.

Strategic output from your Board meeting or senior management meeting can feed into the rolling forecast to produce “what if” scenarios or the strategy can be implemented and the results produced at the next meeting. Powerful stuff.

” See I told you it wouldn’t work”

If each department has built into their business process a data output that feeds into the rolling forecast on a monthly basis, the production of the report becomes  a less onerous task.

The input should be kept simple and should be your key business drivers i.e

• sales leads and the likelihood of their conversion.
• overheads, e.g staff costs, pay rises, new employees, staff turnover etc.
• external market conditions, competitor pricing, geographic regions .
• cashflow, debtors days, overdue debts going legal.

For an SME having clear visibility of your future cash flows is essential, especially with the Banks being less than helpful at providing overdrafts or working capital loans. Also if you trade overseas you will be able to see your cashflow in the  different currencies, enabling you to place accurate currency swaps, protecting your future gross profit.

Most SME’s use excel spreadsheets to produce their rolling forecast but there are dedicated solutions around which are more stable and less reliant on the author staying around to explain how the excel model works.

To avoid those sleepless nights stay in control and implement a rolling forecast into your business process today.