The interest for working with rolling forecasts have increased significantly over the years, yet many companies still haven’t let go of their traditional budgeting. Letting go of the traditional budget in favour of rolling and more dynamic budgeting and forecasting can bring some new challenges, but mostly a lot of new and more value creating possibilities.
To be able to make informed decisions and build stable forecasting processes, it’s important to be aware of the opportunities and challenges that exist. Therefore, we have interviewed our planning expert Emelie Svensson about the report The State of Corporate Financial Planning. Below, she presents 5 trends in forecasting that you should be aware of!
"The report showed that the need for a more continuously updated budget and forecast has increased over the past three years. This is certainly due in large part to the pandemic, but the need also seems to be since management, the board and owners generally place higher demands on updated forecasts. The world is changing rapidly and therefore, continuously updated data is needed to be able to make more proactive decisions”.
“In the survey, many of the respondents mentioned that they would like to work with rolling 12. This is interesting because at Planacy, we often see that the 12-month forecast horizon tends to be limiting and thus fail. This may be due, among other things, to the fact that the method does not contribute enough value to the business, and also that one's control models in general are not linked to rolling 12 months. Or that you simply miss calendar effects that arise when comparing 12 months against each other”.
Tip: Also read Opportunities (and problems) with rolling forecast where we present the different forecasting methods and which one we usually recommend!
“There has long been an increasing trend to work more dynamically with rolling forecasts. Of the companies that want to change their forecast horizon, almost 70% want to work with rolling or more dynamic financial planning. Only 31% actually work with a rolling or dynamic forecast horizon today. Many of the respondents within FP&A believe that history, culture and management are the reasons why the traditional budget remains, even though they themselves see an increasingly higher value of dynamic forecasting”.
”Only every fourth company update their financial forecast monthly or more often. What’s interesting here is that the frequency of the creation of new forecasts decreases as a company grows and that the slightly smaller companies are the ones that work most frequently with financial planning”.
”The survey shows a clear connection between frequent and dynamic financial planning and perceived quality. This connection becomes even more evident the larger a company is. Dynamic rolling forecasts are often preferable to rolling 12 as it allows you to always look at the current financial year as well as the upcoming year”.
Do you want to keep track of current trends within budgeting, forecasting and planning? Download our report The State of Corporate Financial Planning.
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