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  • Writer's pictureViolet Maile

5 Best Practices to Perfect Rolling Forecasts


In short:

  • Economic volatility has put the shortcomings of traditional budgeting methodologies on full display.

  • The smart money is moving toward rolling forecasts as a better way to predict business performance — and get finance in line with sales, marketing and production.

  • Here’s why this more iterative planning style allows companies to react more quickly to both opportunities and disruptions, plus tips on how to get started.

Mike Tyson famously said, “Everybody has a plan until they get punched in the mouth.” The pandemic has been a solid uppercut worthy of Mike himself. And it doesn’t take a first-quarter TKO; financial plans get smacked around every year, especially for growing businesses. It could be an external event, like a new round of tariffs, wreaking havoc with suppliers. Maybe that product you introduced is a huge hit, or you make hand sanitizer and there’s suddenly an interest in cleanliness.

It’s usually not one punch but a series of small jabs that knock forecasts off track.

Meanwhile, finance teams really wish their line-of-business colleagues would pay more attention to budgets, but unless the budget is accurate to the moment, why would they? And yet the cycle persists.

Let’s face it: Distaste over budgeting and forecasting tedium isn’t new. Former GE CEO Jack Welsh made his feelings quite clear in his book on the topic, calling the process the “bane of corporate America.” Now, an increasing number of organizations are realizing that the “let’s just check the box” method of creating a politically agreeable financial plan isn’t benefiting the business.

If “static” isn’t working, then “dynamic” must be the solution. But a dynamic — aka rolling — forecasting methodology demands a very different approach.

What Are Rolling Forecasts?

The goal of budgeting is to create a financial plan and projections to evaluate business performance, guide resource allocation, inform investment strategies and make intelligent decisions quickly. What’s not to love?

Except that businesses — and on a more granular level, finance departments — don’t exist in a vacuum. A budget, and subsequent forecasts, are formulated based on a set of assumptions that are generally reflective of past operating conditions plus some educated guesses about the future.

Problem is, we’re really bad at predicting the future. In a 2015 study by KPMG and the Association of Chartered Certified Accountants (ACCA), 62% of respondents agreed that budgets are simply a “point in time” view and don’t even reflect what is happening externally in the market.

The other 38% may have a spreadsheet fetish. It’s hard to say.

“Think of when a business is starting out — it’s concentrating on increasing sales and improving delivery of goods and services,” said Thomas Sutter from NetSuite’s Global Solutions Centre of Excellence. “There are so many unknowns, they really have no idea of what’s going to happen in the next 12 months, so the budget rarely has any actual relation to the business outlook. But, of course, investors want to know what the business is expecting. So, the finance team and executives go through this whole tick-box exercise that’s time-consuming and manual — none of which is supporting the growth of the business — and the budget is created based on outdated assumptions and past data.”

It doesn’t help that, once planning is done, most C-suite executives put the budget in a virtual drawer until the end of the quarter, or worse, the next budgeting cycle. A notable exception is the finance department, and that puts the CFO at odds with peers.

The planning/budgeting/forecasting process is seen as an exercise imposed by finance and yielding little benefit to departments. That dynamic doesn’t seem to be changing; in fact, a majority of respondents to our Brainyard Summer 2020 Survey say planning and analysis are now somewhat or much more important functions for the finance team.



Sales, production and marketing teams argue that they constantly measure the effects of what they do and continually adjust to optimize results. Being pulled in to discuss why numbers aren’t following a forecast made six months ago is frustrating.

If those teams constitute the dog, finance is the tail. Rolling forecasts help everyone wag together.

“Rolling forecasts are a best-practice framework that helps organizations account for and dynamically adapt to market changes and competition,” said Rami Ali, senior product marketing manager of planning and budgeting at Oracle NetSuite. “Instead of using a static annual budget that is quickly obsolete, you use a rolling forecast to continuously update a plan and budget assumptions.”

This technique relies on an “add/drop” approach to forecasting that creates new periods on a rolling or continuous basis over a set duration. For example, if a company’s rolling forecast period stretches 12 months into the future, as each month ends, the numbers recorded that month will be used to add another month to the forecast — January 2020 ends and January 2021 is “added on.”

In this way, the forecast horizon continues to roll forward, based on the most current data available. The defined period can vary based on business preference and capabilities; common options include forecasting ahead by 12, 18 or 24 months or four, six or eight quarters. This helps companies more-reliably project future outcomes based on year-to-date results and actuals in relation to the original budget and previous forecasts. But the real focus is on getting the next quarter or two right and understanding that subsequent quarters come with the same uncertainty they always did.

Bottom Line

“If you’re good and your plan is working, somewhere in the duration of that, the outcome of the event you’re involved in, you’re going to get the wrath, the bad end of the stick,” he said. “Normally, people don’t deal with it that well ... it’s all about endurance.”

That endurance in the form of constant movement and evolving strategy that’s so important in boxing is just as essential in planning and budgeting. After all, the match isn’t over when you get punched — it’s over when you don’t get back up. Using spreadsheets can get the job done when you’re just getting started. However, it’s easy to get overwhelmed, especially if you’re collaborating with others in your organization.

Financial management software is worth the expense because it offers automated capabilities such as analysis, reporting and forecasting.

Whether you’re looking to secure outside funding or just monitor your business growth, understanding and creating a financial plan is crucial. Once you have an overview of your business’ finances, you can make strategic decisions to ensure its longevity.

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