axionEPM, a leading provider of enterprise performance management software, have considerable experience of developing, maintaining and optimising rolling forecasts for finance professionals. They have found that rolling forecasts improve accuracy and optimise decisions. Accurate budgeting, planning and forecasting are essential for all levels within an organisation to have confidence when making decisions and investments. While forecasts will never predict the future with 100% accuracy, Finance teams can improve forecasts by updating them throughout the year, as opposed to annually. (According to a recent survey from Aberdeen Group, 71% of top performing organisations mitigate risks due to volatile business conditions by continuously updating forecasts to better reflect current business conditions.) 

axionEPM have found that, while there is no one best practice for creating the most accurate rolling forecasts, there are five key components commonly found amongst organisations who successfully use rolling forecasts to plan. Companies should:

1. select the forecast horizon that fits their business: this should be based on 1) the planning resource availability, i.e. make the forecast horizon as long as possible provided the planners can give proper attention throughout the period, and 2) align your forecasting horizon with lead times associated with the business (i.e. sales cycle, reimbursement cycle). [Overall axionEPM recommend that organizations have a strategic, long-range forecast spanning 3-5 years, updated annually, and a rolling forecast spanning the next 12-18 months, updated monthly.]
2. implement a driver-based planning model: axionEPM have found that forecasts should always be driver-based – incorporating critical operational data or drivers that ultimately influence financial outcomes. Drivers are, in modelling terms, the independent or predictor variables – the main causal factors that should be highlighted and leveraged in planning models. A well-constructed driver-based planning model captures the inter-dependencies of the business and mathematically aligns with corporate goals (e.g. growth factors). This ensures the process isn’t purely financial in nature, but rather provides a more well-rounded picture for the future of the business. 
3. retain prior period forecasts for back testing: Retention of prior period forecasts is critical to improve predictive accuracy. Prior period forecasts should be compared against actual results to identify trends and variances that can be used to improve the business logic for future period forecasts. 
4. ensure your company makes the cultural shift: axionEPM have found that it is critical that companies shift their culture from traditional annual budgeting and forecasting to rolling forecasts that are continuously or frequently updated. A good question to get people thinking in rolling forecast terms is: “What information has come to light in the last 30 days that change our view about the future and how do we plan for it?”
5. leverage technology to support the forecasting process: axionEPM argue that purpose-built technology is needed that: integrates all the operational sources of data, enables collaboration, provides an infrastructure to manage the process, and stores past forecasts.

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Clearly, axionEPM have developed this list of key components to promote their unified performance management solutions, nevertheless there are several useful and practical ideas here.