ROLLING
FORECASTS:
A Guide For Modern Finance Leaders

In recent years, business forecasts have had to become faster and more flexible-ready to be adjusted at a moment's notice. As earnings and product cycles accelerate, it has become clear that the business world is decisively moving towards treating rolling forecasts as standard. A slow process of budgeting and forecasting is no longer enough.

This digibook contains a step-by-step guide on how to meet stakeholders' expectations, with case studies and examples of how smart CFOs are adapting their processes to improve the quality and timeliness of their business forecasting.

Further reading

If we seem to be missing three big ticket items, it's because they're covered elsewhere in this series. Check out our three digibooks on Thriving in the Digital Age, Organizational Change and Reporting

Who will find this digibook useful?

This has been written with CFOs and finance VPs at international companies of all sizes in mind, but our research and case studies also include smaller businesses and public sector bodies, as well as larger multinationals, so any senior finance person will find it useful. It also has insights into the life of the CFO that other C-suite team members may find useful in understanding the challenges and changes taking place in forecasting and re-forecasting.

Introduction: The Business Forecasting Landscape Post-Crisis

Over 62% of organizations find that their budgets reflect a single point in time and quickly become irrelevant.

KPMG and ACCA survey1

The traditional process of annual budgeting and forecasting-compiled in the three months before its release, and based on static assumptions-started to look pretty silly in 2008. When the global financial system collapsed, business plans and cash flow forecasts ended up worthless, and many companies had no process for re-forecasting on the run.

Forecasting has changed dramatically since then, driven both by further financial shocks in Europe and China, and by the rapid rise of better technology and richer data.

CFOs are expected to be able to reforecast in a window of just a few days, all the while sifting through unprecedented levels of information. It's a big challenge-but it also comes with big rewards.

Companies good at forecasting saw overall share prices rise a third more than other companies.

EIU/KPMG: Forecasting with confidence2

Most CFOs are moving towards something very close to a true rolling forecast; that means they are able to create forecasts that are:

  1. Fast

    The average forecast cycle has fallen to just two weeks long; the smartest companies have driven this down to just three days.3

  2. Continuous

    Budgets are now understood to be flexible: torn up every few months, in response to an always-on forecasting process that constantly updates plans.

  3. Driver-based

    Forecasts are no longer based on past results: category growth, market share, human capital, customer satisfaction, and a range of other metrics are fed into the system, making it possible for a prediction to respond instantly to fluctuations in the marketplace or the workplace.

    That said, speed and new data are not magic wands that you can wave and instantly have all your problems solved. An astonishing 80% of companies believe their forecasts are unreliable.4 To put yourself in the 20% that are getting it right is the biggest challenge of all.

Figure 1: UNRELIABLE FORECASTS5

In this digibook, we'll look at how smart CFOs are building rolling forecasts and mitigating the dangers presented by complex data and quick processes. At the end, there's an opportunity to build a personal checklist for meeting these new challenges head-on.

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