The Agile Planner

Best Practices for Rolling Forecasts: Top 10 Considerations

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Recently, a CFO Magazine cover story grabbed the attention of the mainstream finance community. It was called "Let it Roll" and it detailed why CFOs are demanding that rolling forecasts be put in place immediately. Several attendees of Rolling Forecast training sessions recently asked me to summarize how best to implement a rolling forecast and quickly assess if the organization is really ready to make the move.

It turns out that before you dive into the rolling forecast at your organization, there are some key questions that must be addressed in order to ensure you are ready to take the plunge. Based on discussions with 100s of finance professionals who have purchased planning solutions and interviews with thought leaders on the topic of the rolling forecast, here are the top 10 key questions to consider:

1. Reforecast Frequency: How often should we update the forecast?  Should we update the forecast based on a calendar timeframe, on an “as needed basis” depending on events in the marketplace, or both?

2. How Far to Look: Should your forecast continuously be updated so you can see into the next fiscal year or should you update the forecast for current fiscal year only? Do we want to look out 12 months, 18 months, or more?

3. People Stuff: What can we do to de-politicize planning processes?

4. Strategy & Operations: How can we shore up the disconnect between strategy and operational financial models?

5. Level of Detail: If forecasting is not done at the same level of detail as the budget, how can we best compare the forecast to the budget or to actuals?

6. Who to Include: To what extent should forecasting involve personnel outside of finance? Are the same people that participate in the annual budget going to participate in a rolling forecast environment?

7. Versions: Is the traditional 3-forecast approach of “Best Estimate”, “Worst Case”, and “Best Case” going to be sufficient for your organization?

8. Incentive Compensation: Should “forecast accuracy” be included as part of an incentive package for the finance team?

9. What’s the Deliverable: will the executive team benefit from an interactive forecast model where they can change assumptions to see impacts on the forecast or are they content with a static forecast report?

10. Output Reports: Should we forecast cash flow and the balance sheet or just the income statement?

Special thanks to the thought leaders that helped shape this analysis:

• Steve Player of Beyond EPS Advisors and Co-Author of Future Ready

• Rand Heer, Creator of Pillar and CEO of Alight

• Sid Ghatak of Rolling Forecast Solutions

• Don Koenes, VP Alight Planning Solutions Group

• John Stretch, Financial Management & Training Consultant and author of Managing with Rolling Forecasts

• David Axson, Partner at Accenture and Author of The Management Mythbuster

Since the answers to the above questions depend on your planning situation, simply click here to request a free analysis with an Alight consultant.