Rolling forecasts explained.

Rolling forecasts extend your business outlook by updating projections regularly, usually on a monthly or quarterly basis. Instead of being tied to a fixed period like a traditional fiscal year, a rolling forecast maintains a consistent time horizon—such as 12, 18, or 24 months—by adding on new periods as older ones close.

A continuous budget cycle ensures forecasts always reflect current business realities, providing a more accurate and dynamic view of the future. By replacing static and often quickly outdated assumptions with real-time data and forward-looking insights, rolling forecasts help businesses plan more effectively and respond proactively to changing conditions.

Key elements of a rolling forecast.

Rolling forecasts are powerful because they provide a dynamic, forward-looking view of your business’s financial future. Unlike static budgets, rolling forecasts continuously evolve by incorporating new data and focusing on the drivers that matter most. To effectively implement rolling forecasts, it’s essential to understand the key components that make them so valuable:

Driver-based planning.

Rolling forecasts prioritize key business drivers—the metrics that directly influence financial performance—rather than static line items. By focusing on these critical variables, organizations can ensure that their forecasts are flexible, meaningful, and aligned with real-world dynamics.

What it looks like in practice:

• A subscription-based business might focus on metrics such as customer acquisition costs, renewal rates, and average revenue per user (ARPU).

• A manufacturing company could prioritize production capacity, material costs, and inventory turnover rates.

Driver-based planning not only reduces the complexity of forecasting but also ensures that forecasts are tied directly to the factors that truly impact the bottom line. This focus enables better decision-making and faster responses to changes.

Frequent updates.

One of the defining features of rolling forecasts is their regular update cadence. Unlike annual budgets, which are locked in for an entire fiscal year, rolling forecasts are refreshed monthly or quarterly to reflect the most recent data and market conditions.

Benefits of frequent updates:

• Timely adjustments: Businesses can respond quickly to changes, such as shifts in customer demand, supply chain disruptions, or rising costs.

• Improved accuracy: Regular updates reduce the risk of relying on outdated assumptions, resulting in forecasts that align closely with reality.

For example, if a retail company notices a sharp increase in online sales during a specific quarter, a rolling forecast allows them to immediately adjust marketing spend or inventory allocation to maximize profits.

Real-time data integration.

Accurate and timely data is the lifeblood of rolling forecasts. Without reliable information, forecasts can quickly become irrelevant or misleading. Modern financial planning tools like Workday Adaptive Planning excel at integrating real-time financial and operational data, ensuring that forecasts are always based on the most current information.

How real-time integration helps:

• Streamlined data collection: Automatically pulls data from various systems, eliminating the need for manual updates.

• Holistic insights: Combines financial, operational, and external data to provide a comprehensive view of business performance.

• Error reduction: Automation minimizes the risk of human error, leading to more reliable forecasts.

Real-time integration ensures that decision-makers have access to the latest insights, empowering them to act quickly and confidently.

Scenario analysis.

One of the most powerful features of rolling forecasts is the ability to model what-if scenarios. These allow organizations to evaluate how different factors may affect their performance and plan accordingly.

Why scenario analysis is important:

• It prepares businesses for a range of potential outcomes, from best-case to worst-case scenarios.

• It enables proactive planning for unexpected events, such as economic downturns, regulatory changes, or competitive threats.

• It supports strategic decision-making by allowing businesses to test the impact of new initiatives, such as entering a new market or launching a product.

Example in action:

A logistics company might use scenario analysis to evaluate how rising fuel costs would impact profitability. By incorporating this analysis into its rolling forecast, it can adjust pricing strategies or explore alternative transportation methods to mitigate risks.

Collaborative input.

Rolling forecasts thrive when they involve collaboration across departments. Unlike static budgets, which are often siloed within the finance team, rolling forecasts rely on input from stakeholders across the organization.

Collaborative planning includes:

• Sales teams: Provide insights on market trends, customer demand, and upcoming deals

• Marketing teams: Share data on campaign performance, lead generation, and customer acquisition costs

• Operations teams: Offer data on capacity constraints, production schedules, and supply chain issues

• HR teams: Share workforce data, such as hiring plans or turnover rates, to inform labor cost projections

This cross-functional collaboration ensures that forecasts reflect a more accurate and holistic view of the business, fostering alignment between departments.

Rolling forecasts vs. static budgets.

Static budgets have been the backbone of financial planning for decades, but they come with significant limitations. While they offer a structured roadmap for the fiscal year, they often fail to account for the unexpected.

Challenges of static budgets.

1. Outdated assumptions: Static budgets are typically based on data available months before the fiscal year begins. This makes them ill-suited for responding to real-time changes.
2. Lack of flexibility: Once finalized, static budgets are difficult to adjust, even when priorities shift or unforeseen expenses arise.
3. Inefficiency: The process of creating a static budget is time-consuming, often requiring months of effort from multiple teams.

The benefits of rolling forecasts.

Rolling forecasts address these challenges by providing a continuous, adaptive approach to financial planning. Key advantages include:

• Timely adjustments: Regular updates allow for timely updates and changes to plans as needed.

• Increased accuracy: Incorporating real-time data reduces the risk of misaligned forecasts.

• Proactive decision-making: Businesses can respond quickly to emerging risks or opportunities, rather than being constrained by a static plan.

• Better resource allocation: By identifying where resources are most needed, rolling forecasts help organizations allocate budgets more effectively and align investments with current priorities and long-term objectives.

• Improved risk management: Scenario planning within rolling forecasts allows businesses to evaluate potential risks and prepare contingency plans, reducing the likelihood of being blindsided by unexpected events.

• Stronger strategic alignment: Rolling forecasts link short-term financial planning with long-term strategic goals, making certain that every decision supports broader business objectives.

How to create a rolling forecast with Workday Adaptive Planning.

Implementing rolling forecasts can seem daunting, but with the right approach and tools such as Workday Adaptive Planning, the process becomes both efficient and manageable. Here’s a detailed, step-by-step guide to help you create a rolling forecast tailored to your organization’s needs.

Step 1: Define your time horizon.

The first step in creating a rolling forecast is to determine the forecast’s length. The most common choice is a 12-month horizon, which keeps the focus on short-term operational goals while maintaining a strategic outlook. However, depending on your industry and planning requirements, you might consider 18- or 24-month horizons.

For example, retailers may use a 12-month horizon to reflect seasonal cycles, while manufacturers may prefer 24 months to align with longer production and sales cycles.

When choosing a time horizon:

1. Consult stakeholders: Collaborate with finance, operations, and leadership to understand how far ahead planning is useful for decision-making.
2. Align with strategic goals: Ensure the chosen horizon supports your organization’s broader objectives, such as growth initiatives or cost-cutting efforts.

Step 2: Collect historical data.

Accurate forecasting depends on understanding past performance. Historical data provides the foundation for identifying trends, seasonality, and patterns that influence future outcomes. Here’s how to approach this step effectively:

1. Gather key data sets: Revenue and expense data, operational metrics (such as production volumes or sales figures), and external factors such as market trends or economic indicators.
2. Normalize the data: Clean your data to remove anomalies such as one-time expenses or outlier sales events. This ensures that forecasts aren’t skewed by unusual past occurrences.
3. Use historical averages: Identify year-over-year trends, seasonal fluctuations, or recurring peaks and troughs in performance. For example, if you’re a subscription-based business, analyze how renewal rates vary throughout the year.
4. Leverage Workday: Import historical data into Workday Adaptive Planning to quickly generate baselines and automate trend analysis.

By analyzing historical data comprehensively, you’ll create a strong foundation for your forecast.

Step 3: Focus on key drivers.

Rather than building forecasts around every line item, focus on the key business drivers that have the greatest impact on your organization’s performance. Driver-based planning simplifies forecasting and ensures that projections are aligned with the factors that matter most.

Steps to identify key drivers:

1. Understand your business model: For a SaaS company, customer acquisition and churn rates might be critical, while a retail business might prioritize inventory turnover and seasonal sales trends.
2. Prioritize metrics that drive revenue or costs: Focus on metrics such as sales volumes, employee headcount and labor costs, operating expenses tied to production or delivery.
3. Collaborate across departments: Involve team leads from finance, operations, and sales to identify the variables they believe have the most influence on outcomes.

How Workday helps:
Workday Adaptive Planning allows you to build driver-based models by linking inputs (such as sales volume) to outputs (such as revenue or production costs). This enables forecasts to automatically adjust when key drivers change, saving time and ensuring accuracy.

Step 4: Use driver-based models.

Driver-based models are a hallmark of effective rolling forecasts. These models focus on high-impact variables and automatically adjust related metrics when key inputs change. Workday Adaptive Planning makes building and managing these models straightforward.

Steps to create driver-based models:

1. Define relationships between metrics: For example, link sales volume to revenue, cost of goods sold, and marketing spend.
2. Incorporate assumptions: Set assumptions for variables such as growth rates, pricing changes, or market conditions. For example, assume a 5% increase in raw material costs and model its impact on overall expenses.
3. Test sensitivity: Analyze how changes in one driver (such as customer acquisition costs) affect the overall forecast.

Workday features to use:

• Prebuilt templates: Start with templates designed for your industry or customize your own models.

• Automation: Once relationships between drivers are defined, Workday automatically updates all dependent metrics, saving time and ensuring consistency.

• Scenario planning: Build multiple driver-based scenarios to prepare for best-, worst-, and likely-case outcomes.

Driver-based modeling shifts your focus from individual line items to the broader dynamics driving your business, resulting in a more agile and responsive forecast.

Step 5: Update regularly.

Rolling forecasts are only effective if they are kept up to date. This requires a regular cadence of updates to ensure that your projections incorporate the latest data and reflect current business realities.

Steps for regular updates:

1. Establish a schedule: Most organizations update rolling forecasts monthly or quarterly. Choose a frequency that balances accuracy with operational bandwidth.
2. Streamline data collection: Use Workday integration capabilities to automatically pull data from operational and financial systems, eliminating manual data entry.
3. Involve key stakeholders: Schedule review meetings with department leads to validate assumptions and update inputs.
4. Analyze variances: Compare forecasts to actual performance for the preceding period. Identify areas where assumptions need adjustment and refine the model accordingly.

Using Workday for updates:
Workday Adaptive Planning automates the update process, ensuring forecasts are refreshed with real-time data. With customizable dashboards, stakeholders can easily view updated projections and assess their implications.

Step 6: Communicate and act on insights.

Once your rolling forecast is updated, it’s essential to ensure the insights are shared and acted upon across the organization. This step turns the numbers into actionable strategies that drive decision-making.

1. Use dashboards for clarity: Workday dashboards allow you to present complex data in a visually intuitive way, making it easier for nonfinancial stakeholders to understand.
2. Tailor reports for different audiences: Provide executives with high-level summaries while offering department heads more detailed breakdowns.
3. Encourage accountability: Assign action items based on forecast insights, ensuring teams take ownership of their role in achieving targets.

By communicating forecasts effectively, you can ensure they guide strategic decisions and operational adjustments.

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