A best practice is to forecast at least four to eight quarters past the current quarter’s actuals. But there’s no hard-and-fast guideline for the time interval included in a rolling forecast. It depends on your industry, your business needs, and how long it takes to make decisions.
But let’s say you aren’t convinced about the need for rolling forecasts in the first place. There are several compelling reasons for giving them a try:
- They enable agile responses to changing market conditions.
- They optimize decision-making for better planning.
- They identify future performance gaps.
- They help senior executives manage performance expectations.
- They shorten long planning cycles with a more efficient model—and direct the extra time toward more strategic activities.
That’s not to say that implementing this approach will be smooth sailing. Some people fear that they will take the focus away from company goals. But in fact, rolling forecasts ensure that these goals are realistic because you’re continually updating your plan and tracking performance against them.
For example, say your annual budget was $100 million. If rolling forecasts indicate that you’re going to fall short of that figure due to external headwinds, you can work to get management’s buy-in for a more realistic outcome and make decisions to change your investment levels or key priorities.
This article first appeared on the blog of Adaptive Insights, a Workday company. For more information on this topic, watch the webcast, “Rolling Forecasts: Your Guide to Success.”