Do You Use Rolling Forecasts? Learn Why No Traditional Budgeting
In this fast-paced environment of business, the forecasting process and the traditional annual budgeting has become outdated. The 2008 financial crisis witnessed the shortfalls of not making well ahead of time the required static assumptions and how the forecasts went worthless. This was the time that the CFOs expectations changed drastically. The offices of finance started quickly working on reforecast and its response to the fluctuations in the market.
There is a need for faster benefits and above all requirement is for more accurate and clear forecasting. Many companies increase agility and are adopting methodologies such as rolling forecasts. This is because they are powerful tools.
What is a rolling forecast?
A rolling forecast is a tool allowing to plan continuously with a number of periods. If the forecast period is for 12 months, with the end of each month, another month gets added. In this way, the forecasting is into the future always for 12 months period. The rolling forecasts contain 12 forecast periods as minimum, but it also includes 18, 24, 36, and more.
Why say no to traditional budgeting?
The biggest difference in the traditional budgeting and rolling forecasts process is the annual budgets determining the fiscal year upcoming entirely. It is a long process to arrive at an annual budget as it involves research in lots.
Thus, there is a need to consider Smart Rolling Forecast. There is no need to spend time unnecessarily hanging around the annual budget, instead making decisions is best with rolling forecast. Even in case you are considering the forecasting methods and traditional budgeting, there are several benefits in employing the rolling forecasts such as:
A complaint is regarding the traditional annual budgeting and the time taken to complete and now it is actually irrelevant. It is because the rolling forecasts are found to be much better. It permits making tweaks than allowing the mistakes to mount up, thus one shot is enough to make annual changes.
Rolling forecasts permit adjusting the forecast so that we accommodate recent trends or changes, so that we can respond to the decisions that are time-sensitive. The outlook is continuously updated in the rolling forecasts and so you can have a data for long-term always as the organizational needs make crucial business decision. Moreover, the rolling forecasts predictions are better as they do not rely on the past results. Any fluctuation is accounted throughout the year and it allows improving the forecast quality.