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Rolling Forecast

The traditional 12-month budget has been the dominant management control system globally for decades. In recent years, a process of change has been started towards frameworks such as forecasts, rolling forecasts or Beyond Budgeting.

Whereas budgeting is retrospective in nature and typically considered obsolete a few months into the fiscal year the rolling forecasting is forward looking and focusing on optimization of the future business.
Gains:
  • Rolling forecasting avoid sandbagging if your de-couple targets from rewards
  • Rolling forecasting makes your organization do the right things and adopts to a changing environment rather than discussing what went wrong retrospectively

Rolling forecast vs Budgetting

The optimization focuses on the company's operating model and key drivers that define the DNA of that company. Can clarify questions such as "do we have the right amount of resources to deliver according to the forecast" or "should we hire or lay off" etc.
The rolling forecast allows for an ongoing prioritization of resources and thus an optimization, so that the company can have a continuous learning curve and integrate these improvements in the company.
This should lead to better decisions and improve shareholder value. Traditional budgeting is typically a political process where negotiations and power are implicitly on the agenda.

Time horizon

  • Should the forcast time horizon be 12 or 24 months and how often should it be performed?
  • The decision should be determined on the company’s sensitivity to market conditions as well as its business cycles.

How to forecast

  • Find the drivers that describes your company’s DNA and that can be used to make the forecasting, fx. Number of units sold or available hours etc.
  • Consider whether you need to do retrospective analysis on Actual vs Budget, or if the focus is more on “what have we learned since last forecast?” and “what can we do to improve?”.
  • Setup a solid dataflow that can deliver that actuals data to support the forecast process and thereby replace any manual processes.
  • Define the new internal processes and communicate them to the relevant stakeholders. Ensure buying to the new procedures.
Laptop computer analysis business data on office table.

Ready to Roll?

  • Senior management buy in is key to avoid the sandbagging behavior
  • Reinforce line managers to understand that providing the true information is important.
  • They should think "what has happened since the last forecast - what new information has become available that changes my view on the future?"
  • De-couple the forecast from the reward
  • Reward should be based on periodic targets that does not change if the forecast changes - that would be like moving the goalposts after the game started

Implementation

  • Face it - Rolling forecast cannot be supported by Excel
  • Acquire a software like Jedox and avoid the cumbersome manual processes in either Excel or the ERP system.
  • Think big but start small with success stories obtained within 2 months
  • Should the static budget be abolished after the implementation of the Rolling Forecast? Typically, this will not be the case as it is such an integrated management control process and incentives are usually based on the annual target (budgets)

What are the customers saying?


“In 2011, we were hitting the limit with our Excel model, which had become very complex. We entered into a “Master of Science” collaboration with the purpose of converting our Excel to Jedox within 3 months. Today we use Jedox in the 5th year as our group budget and reporting platform”

Jan Knudsen
Jan KnudsenHead of Business
ABB

“Rambøll chose Jedox as a group budget and forecast solution for all 500 budget users worldwide – due to self-service, flexibility, user-friendliness and price – and for the first time ever, Rambøll has submitted its consolidated group budget on time”


Christiane Johansen
Christiane JohansenDirector Global Support
Ramboll
”We chose a partnership with Qbit in August 2016 based on using Jedox to upgrade our Group forecasts to more automatic and modern management. We see great opportunities. We see great opportunities in the collaboration in terms of eliminating / upgrading the group’s many complex and manual spreadsheets, with the more flexible and user-friendly Jedox.”
Anders Egeblad
Anders Egeblad Head of Corporate
Tryg Group Forecasting
Read all customer testimonials

Cases

You can’t do Rolling
forecast with Excel
Rikard Olsson, from the Beyond Budgeting Institute, said at the FP&A conference in Copenhagen, "You can't do Rolling forecast with Excel – I am not paid by Qbit but you need a system like Jedox to do this".
Read more
Tryg Group
Forecasting
It is essential for the Executive Board and the Group to have insight into the development of the business in a number of areas. For this, Tryg had over a number of years developed advanced and complex Excel and Access models to support the forecast.
Read more
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