5 tips for effective rolling forecast implementation

The big difference between a budget and a rolling forecast?

Before we dive into the approach to effectively implementing a rolling forecast, it's good to take a quick look at what a rolling forecast actually is. A rolling forecast has a slide the horizon, each month you take out the past month and add a month at the end. This way you are always looking a fixed number of months ahead.  

The benefits? Once you've made your annual budget, it's actually outdated. With a rolling forecast, you review your plans monthly. This allows you to easily implement developments. Think for example of internal developments, but certainly also macro-economic events. Because one thing is certain: your organization is also affected by all kinds of unexpected developments.

In addition, a rolling forecast is year-transcending, which makes it easier to look further ahead than just the current year. A third advantage is process-oriented: it's a great start for the annual budget you have to make anyway. With a rolling forecast, the budget process becomes an iterative process, shortening the run-up to your budget.

5 real-world tips for effective rolling forecast implementation

With a smart approach, you can start implementing without hesitation. These real-world tips will help you start reaping the benefits quickly:

1. Determine why a rolling forecast is useful for your organization

By carefully discussing in advance which problems you want to solve with the introduction of a rolling forecast, it is easier to make the right choices during implementation. The main reason for introducing a rolling forecast may vary per industry or organization.

For example, we often see in manufacturing companies that the coordination between sales and the factory is not optimal. As a result, products are successfully sold, but not produced or not produced enough. This leads to complaints and loss of sales. A rolling forecast then helps to better align sales and production.

The goal also helps determine what horizon is wise; how many months do you want to look ahead for your organization and within your market?

2. Above all, don't start too big

Of course it is tempting to grab all the processes right away. But it is much better to start small. By first doing a pilot for a limited part of the process, you can let the organization get used to it. This can even be a small part of a chain process. Also consider how much finance or IT knowledge the users have.

For example, in our production example, it is convenient to first look only at the outlet. Suppose we assume an 18-month horizon. Then the end users don't have to do anything but check month 17 and complete month 18. The rest will be filled automatically. So a lot less work for more insight.

Once the end users have adopted this way of working, you can tackle the other processes. Eventually you will want to forecast all your revenue streams, profits, regions, production, etc. in this way.

3. Consciously choose your seasonality

Seasonality is essential for budgeting and forecasting. With an annual budget and forecast, applying it is quite logical. But with a rolling forecast, where 18 months sometimes spans 2 years, what considerations do you make? Suppose the current period is December; then with 18 months ahead, you look at both January next year and the following year's January. Which January then suits seasonality, the last January or the one from 2 years ago?

Our advice is often to make sure you don't use the same seasonality twice within one forecast. That means that for the upcoming January you pick the seasonality from 2 years ago. This choice is important, especially with constant growth, because that way you keep historical growth intact.

4. Put a clear lock on the month

Provide a hard deadline for making adjustments. For example, agree that the forecast will close as of the ^23rd. Does anyone still have adjustments? Then those have to wait until the next month. That way, the manager of the department or business unit still has time until the end of the month to approve the adjustments.

When setting the deadline, take a fixed day of the month, so everyone starts working with a monthly structure. Very common for financials, but sometimes it takes some getting used to for other disciplines. Make sure there is enough space between the deadline and the end of the month, so that even on weekends or holidays there are enough working days for the approval round.

5. Automate as much as possible - more can be done than you might think

Not only can you automate the above approval flow well, the entire rolling forecast becomes especially effective if you automate as much of the process as possible. For example, a smart setup ensures that a total revenue value for 18 months based on the historical seasonality of one's own organization is automatically distributed correctly over the 18 individual months. This not only saves a lot of time, but is also much more accurate.

And that's just one of the examples. Nice thing about Oracle Planning and Budgetting is that Oracle does a good job of allowing exceptions, so you can include difficult models relatively easily. Curious about what Oracle itself says about rolling forecast? You can find it in their article What are Rolling Forecasts and How to Use Them in Enterprise Planning and Budgeting?

In addition, for any EPM cloud solution, everything is in the cloud, so users worldwide see modifications in real time. That saves a lot in version control and all the drawbacks that come with it.

Not cut-and-dried, but manageable

Does all this mean that an implementation of a rolling forecast is a routine operation? No, certainly not. There is a lot involved and choices to be made.But it is a manageable implementation, which will give you many benefits.