What is the rolling forecast and how do I use it?

What is a rolling forecast?

The annual budget for year N is often drawn up by several months in advance, sometimes in June of year N-1 . In other words, it relies on data and estimates based on current knowledge. However, if there are upheavals such that the estimates are completely distorted, as was the case in 2020, there is a good chance that the budget will be distorted. It is against this backdrop that the concept of rolling forecast shows its relevance.

This term first appeared in the 90s, with the French translations of "sliding forecast or "permanent revisions . It's easy to see that this is a process that involves constantly revise forecasts and budgets in line with actual results . In other words, the rolling forecast is a tool that makes it possible to update forecasts in real time in line with developments.

It therefore makes up for the shortcomings and rigidity of the budget.

Rolling forecast vs. balance sheet forecast

In troubled times such as the 2020 pandemic, the traditional budget quickly shows its limitations. limites . Many corporate finance managers testify to the difficulties they had adapting to this environment, and above all to the ineffectiveness of their efforts. A Deloitte study shows that 60% of CFOs found it difficult to adapt their budgets in 2020.

The problem lay in the budget adoption process itself. Predicting the financial upheavals of 2020 in 2019 was virtually impossible.

Le rolling forecast, lui, est a more flexible tool which requires constant planning and updating. It is carried out based on the latest data and thus enables the company to be more reactive to any economic fluctuations. The rolling forecast is therefore a tool better adapted to a constantly changing business environment .

Combining the balance sheet forecast with the rolling forecast is the ideal solution. This solution provides a broader vision on the company's actual performance, taking into account the economic context.

What are the benefits of rolling forecasts for your company?

The rolling forecast offers many advantages:

A flexible tool for adjusting budget forecasts in line with economic realities

The rolling forecast is a flexible tool that allows you to adjust budget forecasts . In a rolling forecast process, we carry out regular reporting which provide up-to-date data on which to base updates.

A tool that facilitates decision-making

Le rolling forecast est a steering tool which enables company directors to make informed decisions adapted to realities. It enables them to be more reactive and better direct the use of resources, for example. In this sense, rolling forecasts enable companies to be more efficient and more effective.

A real-time forecast update tool

Information is the lifeblood of business management. The rolling forecast makes it possible to more accurate, up-to-date information on the company's financial performance.

A tool to make up for budget shortfalls

While the budget is drawn up once a year, the rolling forecast makes it possible to continuous monitoring and updating according to pre-established deadlines.

How to produce a successful rolling forecast?

Are you now convinced of the benefits of rolling forecasts? If you'd like to put it into practice, here's a step-by-step guide to rolling forecasts. rolling forecast réussi :

Use the right indicators

The key to an effective rolling forecast is, above all use precise, relevant data . The more precise your data, the more refined the decisions based on it will be. In particular, you can base your decisions on indicators such as the quantity and price of raw materials, the price of materials sold, etc.

It all depends on your company and your industry .

Setting a goal

One of the prerequisites for implementing a rolling forecast is to determine the target objective. What is the ultimate objective, and who should benefit from this process? In particular, you need to identify the employees who will need to use it . It is also important to determine from the outset the expected impact of the process on the organization .

Determining the frequency of updates

We need to define in advance update chronology . This must be a function of several parameters:

• Your company's objectives and needs

• Your sales cycle

• The impact of external events on company operations, etc.

Generally speaking, rolling forecasts are produced by over a period of 12 to 24 months with an update every 6 months.

Select the managers responsible for implementing the rolling forecast

Although the rolling forecast process is supposed to involve everyone in the company, it is necessary to a specific entity to take charge of its follow-up and implementation .

In practice, it's often finance department .

Defining value factors

Value factors are precise data to identify the company's key performance drivers . They can be qualitative as well as quantitative . These may include :

• Number of products sold ;

• The cost of raw materials ;

• Product pricing.

Consider possible scenarios

The rolling forecast involves measuring the state's financial results at different points in the financial year. By considering different possibilities, we can anticipate possible actions .

Monitoring the rolling forecast

It is essential to monitor rolling forecast performance to give employees the opportunity to assess whether or not the provisions have been effective.

Exemple concret de rolling forecast

Here's a concrete example of a rolling forecast to help you see things more clearly.

The table below shows the data for a sliding 12-month company forecast . This process requires prior collection of data relating to the financial results for the year 2022 between January and December.

This data is then compared with the forecast data. Any discrepancies must be identified and analyzed.

How can you improve your cash flow to optimize your rolling forecast?

We've seen that one of the keys to an effective rolling forecast is the use of accurate, relevant data. The more accurate and reliable your data, the more accurate your forecasts will be. This means tight control over cash flow.

To do this, you can use our Hero . It is a payment platform entirely dedicated to B2B VSEs and SMEs . It offers deferred payment and payment in instalments two effective tools for optimizing cash flow. With Hero, you can allow more time to pay your suppliers (between 30 and 60 days). With such a payment term, you can optimize your cash flow and avoid any significant payment lag.

The split-payment feature also lets you pay in 3 or 4 instalments . As with deferred payment, this is an opportunity to better control costs by not exceeding a large sum in one go. As a result, the company doesn't have to go into debt to finance its working capital requirements. The result is better control and optimization of cash flow.

On the other hand, these two functions are also excellent selling points for your customers. You don't have to suffer the consequences, since the platform makes you a cash advance to avoid any shortfall in your cash flow .

Hero is an efficient, flexible tool which you may find useful in setting up your rolling forecast.

In conclusion, the rolling forecast is an effective tool that enables companies to react more effectively to economic fluctuations. It's a flexible tool that simplifies decision-making and makes up for the shortcomings of balance sheet forecasts. With Hero, you can optimize your cash flow for a rolling forecast efficace.

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