What is a Rolling Forecast
A Rolling Forecast is a business forecast which is updated on a regular basis. Forecasts are a map of where a business is going, they are a guide, not a manifesto to be stuck to come what may. To make them useful they need to be updated on a monthly basis and used to manage.
Here’s a simple way to create a rolling forecast each month.
- Start with an original five year forecast. First two years on a monthly basis and the remaining three years shown annually.
- At the end of each month replace the original forecast with the actual figures for that month.
- Each month revise the rest of the forecast whenever it is apparent from the emerging pattern of actuals that the original forecast is wrong. Spend the majority of the time on the next twelve months, with a quick review of the remaining years. At the end of twelve months, the forecast will show actual figures for the first year and projected figures for the remaining four.
- Use the remaining four years projected figures as the starting point for a new projection adding a new fifth year at the end to complete.
- Repeat steps 2 to 4.
Using this method to produce a rolling forecast, the business always has a map, but the route changes (hopefully only slightly) each month from the original. It now has a dynamic tool which enables it to refocus as and when necessary.