Today’s business environment is moving at a lightning pace. Many businesses increasingly struggle to keep up.
With the advent of big data, organizations are seeing a constant stream of information come their way. They’re under pressure to respond quickly to market demands. Plus, these organizations want to become more agile decision makers.
With so many brands facing these challenges today, it’s not unreasonable to ask if the traditional method of budgeting and forecasting has become outdated.
While it works in principle, the traditional approach can leave businesses open to more risk and even limit growth over the long run. These are not acceptable outcomes.
These are just some of the concerns organizations have and why so many are moving to rolling forecasts. Rolling forecasts allow a business to continuously forecast over set periods of time and provide a number of benefits over the traditional budgeting and forecasting system.
In this post we want to cover some of the reasons why rolling forecasts can drive ROI for organizations. If you’re considering moving to a rolling forecast system, these are a few areas where you’ll likely see better results.
Increase Accuracy
One of the biggest complaints you’ll get from anyone involved in the budgeting and forecasting process is a lack of precision with outcomes. These inaccuracies aren’t limited to the creation of an annual budget or forecast either— they can also lead to poor decision making down the line.
Many businesses struggle to deal with those unexpected variables that inevitably arise during a fiscal period. A static forecast that is likely to be outdated after a few months can’t be fully relied upon by key decision makers.
Rolling forecasts help remove that risk. By continuously updating information, organizations can adjust their forecasts and budgets to exploit potential trends. These quick adjustments enable better decision making because the decisions are based on up-to-date, accurate data.
Enable Driver-Based Planning
Every organization has those key line items that truly drive the organization. Being able to better understand and harness those key drivers means a much clearer operational view of business success for the management team and decision makers.
Traditional forecasting doesn’t provide the potential that rolling forecasts do in using driver-based planning. Part of the reason is that traditional forecasting is often based on previous results. Working only with data from the past leaves organizations exposed to risk and unable to measure the key non-financial drivers of the business.
Rolling forecasts allow organizations to take those key financial and non-financial drivers and plug them into the system. These drivers provide incredible insights into the total health of the business. They also allow key decision makers to focus their forecasts on those areas that will have a real impact on the overall budget and performance of the organization.
Improve Flexibility
Preparing for and executing a static budgeting and forecasting plan can be incredibly time consuming. Most members of the finance or accounting team spend their time gathering and inputting data rather than optimizing and analyzing it.
Spending so much time on data entry and planning doesn’t leave much room for flexibility, which is a key goal of many organizations . Here’s another area where a rolling forecasting method can change things for the better.
A rolling forecast allows flexibility in your organizational approach. Brands can use drivers and ‘what-if’ scenarios to project various outcomes based on any number of variables.
This flexibility rolls into better decision making as well. Because rolling forecasts are continuously updated, organizations will have the flexibility to jump on potential opportunities or divert funds to mitigate future risks.
Final Thoughts
While the traditional methods of forecasting have served many organizations well for decades, better solutions are available. Your business might be well served to consider moving to a rolling forecast system.
For more information about how to improve the effectiveness and efficiency of your business budgeting and planning process, contact us today at 905 473 6989.