Implementing Rolling Forecasts in FP&A: A Step-by-Step Guide

So you're ready to take your financial planning and analysis to the next level with rolling forecasts. Excellent - this is a game changer that will provide much more accurate projections and insights into your business performance. No more static annual budgeting here, folks. Rolling forecasts are where it's at.

The key is implementing this process efficiently while minimizing disruptions. Don't worry, we've got you covered. In this step-by-step guide, we'll walk you through how to transition from annual to quarterly budgeting and forecasts. We'll lay out best practices for data collection, modeling, and analysis so you can hit the ground running. By the end of this, you'll be rolling with the best of them and leveraging forecasts to drive strategic decisions.

Sound good? Then let's dive in and get rolling (see what we did there?). The future of FP&A is here - are you ready to embrace it? Of course you are. Read on, finance friend, your new and improved forecasting adventure awaits!

Understanding Rolling Forecasts and Why They Matter for FP&A

Rolling forecasts provide a dynamic view into your company’s future financial performance. Unlike static budgets that remain unchanged for a fixed period, rolling forecasts are continuously updated to reflect the latest business conditions. For FP&A teams, implementing rolling forecasts can be a game changer.

Why Rolling Forecasts Matter

Rolling forecasts allow you to spot trends early and make quick adjustments. You’ll gain insight into how revenues and expenses are tracking months in advance, rather than waiting until the end of a quarter to discover variances. This enhanced visibility means your team can be proactive instead of reactive.

Forecasts also facilitate scenario planning. You can model the potential impact of risks, opportunities, and strategic initiatives to determine the best path forward. Their continuous nature means you’re basing decisions on the latest projections, not outdated budgets.

The flexibility of rolling forecasts is key. They can adapt to change, unlike static budgets that lock in assumptions and expectations for 6-12 months. In today’s volatile world, agility and responsiveness are crucial. Rolling forecasts provide an accurate picture of where your business is headed so you can pivot as needed to optimize performance.

For FP&A teams, implementing rolling forecasts may require process changes and cross-functional collaboration. But the benefits to your company’s financial stewardship and strategic decision making can be huge. When done right, rolling forecasts become an essential tool for gaining control of your organization’s future.

Building the Case for Rolling Forecasts in Your Organization

To get buy-in for rolling forecasts, you’ll need to make a compelling case. Start by explaining how rolling forecasts differ from the static, annual budgeting process. With rolling forecasts, you'll update your financial projections regularly based on actual results and the latest assumptions. This agile approach provides a more accurate view of where the business is headed.

Walk through how rolling forecasts will benefit your company and specific departments. For example:

• Finance can provide insights into trends sooner and advise accordingly. No more waiting until year-end to discover you're off track!
• Sales can see how their pipeline and opportunities are shaping revenue projections and make needed adjustments.
• Operations has visibility into how volume changes impact costs so they can properly staff and source supplies.

Discuss how technology advancements have made the rolling forecast process efficient and collaborative. Many FP&A solutions offer driver-based models, dashboards, and workflows to streamline updates. Stakeholders across the organization can participate through user-friendly web interfaces and mobile apps.

To address any concerns, explain that rolling forecasts don’t replace the annual budget. They simply enhance it by enabling continuous monitoring and refinement based on the latest information. You'll still go through the annual budgeting exercise to establish targets and strategic plans. Rolling forecasts just help you track progress and make intelligent revisions to those targets and plans over time.

With a thoughtful case for how rolling forecasts can transform financial planning in a digital age, you'll gain leadership buy-in and start implementing a repeatable process that drives accuracy and business performance. After all, the future doesn't stand still, so why should your forecasting? Adopting a rolling forecast model may be one of the smartest moves your FP&A team can make.

Selecting the Right Rolling Forecast Software and Tools

Rolling forecasts require dedicated software and tools to help collect data, run scenarios, create reports and share information across your organization. Choosing the right solutions will make the implementation process much smoother.

Select a dedicated rolling forecasting tool

Using a tool built specifically for rolling forecasts will save you time and ensure you have the functionality you need. Look for a solution that allows for:

• Data import from multiple sources like your ERP, CRM and accounting software
• Scenario modeling to see the impact of different business assumptions
• Collaborative forecasting so your team can work together in one system
• Automated reporting and dashboarding for insights into risks and opportunities

Some leading options for rolling forecasting include Adaptive Insights, Anaplan, and Prophix. Evaluate a few tools to find one that meets your needs and budget.

Leverage your existing software

If budget is a concern, you may be able to use tools you already own to get started with rolling forecasts. For example:

• Use Excel or Google Sheets for data collection, modeling and reporting. This works for smaller teams but can be difficult to scale.
• Your ERP or accounting system may have basic forecasting functionality you can enable. The capabilities likely won’t be as robust as a dedicated solution but can work to get you started.
• Consider budgeting and planning solutions like Oracle Planning and Budgeting Cloud Service or SAP Analytics Cloud which also offer forecasting features.

The tools and software you choose will depend on your rolling forecasting needs and resources. Start with what you have, then evaluate dedicated solutions when you’re ready to scale. The most important thing is that you select options your team will actually use to provide value.

Provide training

Regardless of the solutions you select, make sure to provide training for your team. Rolling forecasts represent a new way of planning, so take time to educate everyone on the process and tools to gain adoption and engagement across the organization. Ongoing training and support will be key to success.

Developing a Rolling Forecast Process That Aligns With Workflows

Once you have the necessary tools and team in place, it’s time to develop your rolling forecast process. This is where the work really begins. Your process needs to align with your current budgeting and reporting workflows to minimize disruption.

Define Your Time Horizons

The first step is determining how far forward your rolling forecasts will extend. Most companies use a 6-18 month time horizon, updating forecasts every month. Start conservatively, with a 6-12 month horizon updating quarterly. You can always adjust as your team gets more comfortable.

Choose Your Update Frequency

Decide how often you will update and re-forecast. Monthly or quarterly are common. Updating too frequently can lead to “forecast fatigue,” reducing accuracy and buy-in. Updating too infrequently reduces agility and responsiveness. Find the right balance for your needs.

Set Your Reporting Cadence

Determine when and how often forecast reports will be shared with leadership and other stakeholders. This could be monthly, quarterly or aligned with your normal financial reporting. Reports should focus on key metrics, assumptions, risks and opportunities. Start with a simple one-page executive summary and build from there based on feedback.

Define Key Metrics and KPIs

Identify the 4-6 key metrics and KPIs you want to monitor and report on through your rolling forecasts. These may include revenue, profitability, cash flow, headcount, etc. Make sure your forecasts provide a view into how these metrics are trending and the assumptions driving the trends. This helps leadership make better decisions.

Review and Refine

Once your initial process is established, review and refine it regularly based on feedback from your team and key stakeholders. Look for opportunities to improve efficiency, reduce duplication of work, increase accuracy and provide more valuable insights. Rolling forecasting is an iterative process—don’t be afraid to make changes to better meet the needs of your organization.

With the process defined and initial forecasts developed, you’re ready to start putting your rolling forecasts into action. But remember, the work doesn’t stop here—review, refine and improve your process continually to gain maximum benefit.

Training Your Team and Establishing Ongoing Management for Success

Once you have the infrastructure and processes in place for rolling forecasts, training your team and establishing ongoing management is key to success.

Educate Your Team

Schedule a kickoff meeting to educate your team on the benefits of rolling forecasts and your new process. Walk through how data will flow from departments into the forecasts and how the rolling forecasts will be used for decision making. Answer any questions to ensure everyone understands the new approach.

Provide Training

Give your team hands-on training in the tools and templates you’ve developed. Have them enter sample data and go through the steps to build a forecast. This helps identify any areas of confusion and allows people to ask questions. Offer ongoing support as teams start building their first forecasts.

Review and Refine

Meet regularly with teams and leadership to review the accuracy and usefulness of the rolling forecasts. Make any needed refinements to the data, tools, templates or timelines to improve the process. It can take a few cycles to optimize, so continuous feedback and improvement is important.

Share Results and Successes

Share the successes and wins from using rolling forecasts to keep teams engaged. Discuss how key decisions were made based on the forecasts and the impacts. This demonstrates the value to your business and keeps momentum going. Provide recognition and positive reinforcement for teams meeting forecasting goals and timelines.

Revisit and Revise

Revisit your rolling forecast process at least once a year to determine if any major changes need to be made. You may need to adjust data inputs, templates, timelines or responsibilities based on changes in your business, systems, or other factors. Make revisions to keep the process as streamlined and useful as possible. With regular oversight and optimization, rolling forecasts can become second nature.

Conclusion

You now have all the steps to implement rolling forecasts in your FP&A process. While it may seem like a daunting task, by following the plan and starting with a pilot, you'll gain valuable experience to apply to a wider rollout. Remember, perfection isn't the goal - progress is. Roll out the rolling forecasts, review and revise, learn and improve. Before you know it, your finance team will be operating with increased agility and delivering more strategic value to your organization. Stay committed to continuous improvement and making the FP&A function the strategic partner your business leaders need. You've got this! Now get out there and start forecasting.