Quarterly forecasting updating revenue and expense models
We must be able to not only provide annual comparisons, (i.e. This requires access to roll the forecast periods but also roll the comparison periods, for not just actual, but also for prior year actual.Understand/analyze the dynamics of revenue and expense in your business and their related drivers.We think in terms of annual sales and annualized expenses.With rolling forecasts we need to also roll in the actual and shift the comparison periods. ) but we also need to provide how this 12/15/18 month rolling plan compares to the 12/15/18 actual results.I saw the companies that try the approach of monthly re-forecast where each month, one month of actual falls off and another month adds to the back end and there was considerable pushback by the forecast preparers.
This provides flexibility in the planning process and agility when you re-plan or create alternate plans.There are a number of questions: As a starting point, make sure your forecasting time frames are consistent with your business cycle and business needs.If sales 15 months from now are dependent on capital expenditures today, it is important to create rolling forecasts out past 15 months.It also helps them assess next steps in their execution of their plan, understand critical pivot points in the plan and better judge the impact the economy may have on their plan.I have seen rolling forecasts replace annual planning cycles with a continual planning process that results in more regular business reviews that look to the future.