You May Be More Prepared For Rolling Forecasts Than You Think

February 8, 2017 Don Mal

While some research suggests other priorities are preoccupying CFOs, other experts suggest scenario planning and analytics are closely related. 

“That’s just how we roll.” Even if you’re not a gangsta rapper or a hipster, you probably recognize the phrase. It’s just a way of taking ownership for what may seem like an unorthodox or original way of behaving. Few companies would be nearly as confident, on the other hand, to say, “that’s how we do rolling forecasts.”

Despite the potential advantages of changing financial forecasting from an annual or quarterly activity to something that is better aligned with the business and market activity, rolling forecasts may still be mysterious to some. That could explain some survey data that was recently published by Financial Director which showed there the idea sits among other CFO priorities:

“The survey of approximately 955 senior finance professionals worldwide revealed that greater simulation or scenario planning is the top priority for CFOs when it comes to enhancing the planning process,” the article said. “Engaging with more non-finance stakeholders in planning, budgeting and forecasting (PBF), and shifting to rolling forecasts were ranked as second and third priorities, followed by more sophisticated analytical techniques.”

A logical follow-up question might have been, “Why not combine all of the above?” Bring together a diverse mix of subject-matter experts and stakeholders, look through KPIs and external forces that could affect performance and apply those sophisticated analytical techniques into a top-notch rolling forecast.

According to management consultant Carl Seidman, many of these things are more linked than some might realize. In a post he published that breaks down rolling forecasts into an eight-step framework, he highlights simulation of possible events in some detail:

One of the key benefits of rolling forecasts is consideration of an assortment of scenarios. Using scenarios, or ‘what-if’ analyses, FP&A teams can develop a range of possible financial outcomes given a set of assumptions and key drivers. As new information becomes available or as assumptions change, the flexible rolling forecast can be easily updated and new scenarios can be run. Staying current and preparing for the possibilities of the future will position a company to make better decisions.

Investments in IT offer a perfect example. Say you’re trying to determine when and how to acquire cloud-based CPM. Bryan Mueller, principal at research firm ISG, suggests there’s one sure way to bring CFOs and their CIO counterparts closer together.

“Building in flexibility and providing a regular platform to facilitate conversations will encourage innovation while clearly communicating constraints,” he writes in an online article. “Rolling forecasts and other mechanisms to include the capture of changes or decisions during the year can support alignment.”

If the idea of factoring all the possible scenarios facing a business seem overwhelming, maybe finance teams could begin with an area like IT to prove whether rolling forecasts are right for the organization. One successful pilot project, and you’ll be off and, um, rolling.

The post You May Be More Prepared For Rolling Forecasts Than You Think appeared first on Blog | Vena Voice | Vena Solutions.

About the Author

Don Mal

As Chief Executive Officer, Don executes Vena’s global growth strategy, manages customer relationships and secures long-term revenue. Prior to co-founding Vena, Don led the North American sales teams for Clarity Systems, an IBM Company. He then led global sales for Cognos FSR at IBM before co-founding Vena. Don holds an MBA from the Rotman School of Management and a Master’s Certificate in Project Management from the Schulich School of Business.

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