Dr. Forecast - XLerant

Rolling Forecast. Part 1 – What problems are we solving?

Before a doctor prescribes a course of treatment, she first will diagnose what your ailment is… or at least a good doctor will. Imagine how you’d react if you walked into your Doctor’s office with a backache and without asking you a single question she prescribed eye drops. I’m sure the eye drops are great for someone who has chronic dry eyes, but it won’t do much good for your backache. You’d probably wonder where that doctor got her MD.

So when it comes to the prescription of rolling forecast, we can’t really say it’s inherently good or bad. We can only look at the common problems of planning/budgeting and assess if it addresses them… or not.

As a consultant at Deloitte I was part of a worldwide practice focused on performance management. We had a research team that was second to none (they still do, by the way). And while every company or organization had their own unique circumstances and twists on the issue, there were recurring themes. See how many of these overarching themes you recognize:

  • The process takes too long.
  • Line managers are reluctant to participate in the process (“I’ve got better things to do”).
  • There’s a lack of buy-in and commitment to the numbers.
  • The process can devolve into a mechanical exercise, not a business process that drives results.
  • The world changes. Assumptions made in the budget turn out to be wrong or incomplete.
  • Stratgey is not reflected in the budget.

I recognize as well that there are also a lot of complaints about the sheer mechanics of getting a budget done. Common problems associated with broken links, over written formulas, inserted columns and rows, and other issues associated with using Excel for budgeting.

When we examine the efficacy of rolling forecast, it will be against the problems we just outlined. That’s not to say that there are not other problems as well, but these over issues are so common, if rolling forecast can address them we should all be happy. And if it can’t…

Part 2: What is a Rolling Forecast?

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