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Using rolling forecasts to eliminate annual budgets

Many organizations are finding better ways to plan and control by eliminating budgets and replacing them with a series of more effective processes. Steve Player, Program Director, Beyond Budgeting Round Table, North America in an article on AFPonline examined one aspect of the movement—rolling forecasts.

He listed the keys to a successful forecast. It should be:

  • timely—in good time to take action
  • actionable—information about things we can change
  • reliable—unbiased, with an acceptable level of variation
  • aligned—pointing in the same direction. (In many organizations, confusion is the norm. The sales leadership has one direction in mind. The operation team does not believe in the sales objective, so it heads a different way. Finance doubts both and, therefore, plots for a different point. As a result, employees are confused and shift their efforts based on who they spoke to last.)
  • cost effective—right the first time; no rework or waste.

Just like a manufacturing process, forecasting begins with inputs (assumptions), moves through conversion (the application of techniques or judgments) and results in outputs (a forecast). And just like a manufacturing process, if the quality of the input is poor or the conversion process is poorly designed and controlled, the finished product will be substandard.

Read more in the full article - recommended - here.

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Cash Flow Management & Forecasting
Cash Flow Forecasting