As accountants, we all know the value of rolling forecasts. Most of us have the vision, but quite often we’re lacking on the execution. So what are the top 5 tips for rolling forecast success?
1 Move beyond Excel. This one is first for a good reason – spreadsheets are static and one-dimensional. You can embrace applications to eliminate errors and drive automation, whilst still retaining flexibility.
2 Leverage Drivers. True rolling forecasts predict an organisations performance in response to economic change and growth. It’s not just about drivers of profitability – it’s about what drives your working capital and risk. Each of these components should be properly integrated, but rarely are.
3 Conduct Scenario Analysis. Most of us manage to unify the planning models across departments so scenario analysis can be undertaken, but quite often our models don’t enable scenario modelling with the sufficient flexibility or level of detail. This is usually because we all ‘cut corners’ to facilitate the forecast, which is generally due to inadequate tools (see point 1).
4 Choose the right time frame. Clearly, forecasting intervals and the time horizon should reflect the needs of the business. Work out how long your business takes to make key decisions about operations, capacity and capital spending and align your forecasting strategy accordingly.
5 Monitor Performance. It may seem obvious, but ultimately this is about the convergence of Planning and Analytics across departments within your business so that Sales, Finance, HR and Operations are continually in sync and Metrics and KPIs are constantly monitored and reviewed and fed back into plans.
So that’s my top 5 tips – so where are the points relating to tackling people and culture I here you ask? Well, you’re on your own there, but you’ll have much more success if you tackle systems and process first, of which I’ve alluded to in some of my points above. Processes should be fast, flexible and allow for collaboration, whilst reducing or eliminating non value-adding activities. Systems, by definition, should not centre on Excel spreadsheets, because they’re not capable in providing the process improvements necessary to drive change in the people and culture.
Brett Ruwoldt is a Director of QMetrix and has previously worked in a senior finance role for over 10 years, so he can appreciate the pains and pressures of budgeting and forecasting using Excel. Contact us for more information on the benefits of having a planning tool, as well as a free proof of concept trial.