Can rolling forecasting be your primary management tool?
Rolling Forecasts was the topic of last Fridays Blog, this got me thinking could rolling forecasts become your primary management tool. Most managers need to spend more time managing the future rather than dwelling on the past. So therefore the ability to help managers and business owners to prepare quality forecasts is fast becoming more of a requirement that a “nice to have”.
Forecasting Mistake
The mistake that most finance teams make is assuming that forecasts are about predicting and controlling future outcome of your business. The purpose of forecasting for your business is to help with decision making and not to predict the future. If we take it back to the basics of forecasting, forecasting is really only necessary because businesses cannot react instantly to changing events and circumstances. That's why sometimes fast reaction is actually more important than prediction, if we are honest to ourselves accuracy is rarely achieved. In fact you could go as far to say that the only certainty about your forecast is that it will be wrong. And now is the question is by how much and narrowing that variation comes from learning, experience, decent information systems, and ultimately, your judgment with your forecast.
Rolling forecasting is practice
Rolling Forecasting is like any sport out there, the more practice you have the better you will come. Hence the more practice you have at preparing short term forecasts, then the better they will become at preparing your forecast. With that in mind, there is a change in many companies to focus less on annual budget process and more on rolling forecasts. For these companies rolling forecasts, if well prepared soon form the backbone of a new and much more useful management pack that connects all the pieces of the business and gives senior management a continuous picture both of the current position and the short term outlook. For these companies rolling forecasts truly become the primary management tool?
Rolling forecasts. Are you missing something?
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