5 Tips for Implementing Rolling Forecasts

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If you’re confident rolling forecasts would be a useful tool to add to your organization’s existing FP&A toolbox, check out our five tips for implementation.

Communication is key

The first and most important point is to involve all stakeholders in the communication process. Be sure to provide explanations on why you think it is valuable for your organization the advantages rolling forecasting can offer.
It may seem obvious; but in reality, projects often fail due to lack of communication with and between stakeholders. If stakeholders do not clearly understand the value for the organization, the success of implementing rolling forecasts may be at risk. This applies to management as well as to departments and their managers.
For example, you present management with points such as greater risk awareness and the identification of new opportunities through more precise planning figures. Department heads are pleased about greater flexibility, for example, if the budget is adjusted during the year based on new findings, because current actuals suggest a higher level of engagement. In this way you avoid shadow budgets altogether.
Close-up of businessman hands pointing pen to chart

Careful planning

As we pointed out in our last post, rolling forecasts can either replace or supplement other forecasts, such as the year-end forecast. There is no universally perfect answer as to which way is the right one for your organization. Carefully exploring how the options can best meet your organizational needs is key.
The implementation – whether as a replacement or a supplement to existing processes – can then be planned and executed. A replacement of your existing forecast process requires more persuasion and initially involves more planning than adding rolling forecasts as a supplement. It should also be kept in mind that the legal framework and guidelines for financial statements, etc. remains the same. With that in mind, a step-by-step and parallel implementation is strongly recommended when replacing existing processes, in order to identify and address any issues early.
A step-by-step implementation is also beneficial when using rolling forecasts as a supplement. For example, you can include only a few key figures and departments at first and then gradually expand the use of rolling forecasts. Continuously monitoring will help keep things in check for the drivers used and the interval and forecasting horizon.
Analyzing business chart

Coordinate and implement new processes

If you forecast during the year, this also requires regularly updated actuals in your database. Simple and obvious. It also means that data collection processes will change. It is no longer sufficient to collect and evaluate data once a year. The teams in various departments have to provide data more frequently – depending on the interval selected for the rolling forecasts. Here, too, open communication is required to promote support and to involve departments to participate in the process of selecting suitable KPIs.
Here, too, much can be automated: This keeps the effort for stakeholders manageable. Software solutions for FP&A offer convenient options for this that don’t heavily rely on IT support, if any at all.

Keep performance targets and rolling forecasts separate

To ensure maximum benefit from rolling forecasts for your organization, the data included and the forecasts themselves should not be tied to performance targets. The forecasts are much more useful if they are based on accurate, consistent data. However, if forecasts are linked to performance targets, the probability of whitewashing increases. This means that the data loses precision and the forecast becomes less meaningful.
Team work process

Using integrated and unified planning processes

Sure, with Excel, rolling forecasts can be implemented. But any professional who plans solely with Excel knows that planning processes are quite time-consuming already. A further FP&A instrument such as rolling forecasts adds additional strain. To circumvent this issue, a modern technology solution with a central database to ensure data is consistent throughout is recommended. An additional advantage is that many of the tasks involved can be automated and tedious merging and reviewing spreadsheets can be eliminated. With a central system in which all departmental managers enter their figures independently, you easily declutter your daily processes as a finance professional and have time to focus on being a strategic partner across the organization.


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