A rolling forecast is a financial forecasting technique that involves continuously updating and revising financial projections for a business. It is often used to project a business's financial performance and position for the upcoming quarters / years, and is typically updated on a regular basis, such as monthly or quarterly.
In a rolling forecast, the forecasting period is divided into a series of fixed intervals, such as months or quarters. As each interval passes, the oldest interval is replaced by actuals and a new interval is added to the end of the forecast period. This allows the forecast to constantly adjust to changing market conditions and other variables, ensuring that the businesses' projections remain accurate and up-to-date.
Use of Actuals in a Rolling Forecast
Actuals are an essential component of a rolling forecast, as they provide a basis for comparison against the forecasted figures. The actual results for the most recent interval are added to the rolling forecast, which allows the forecast to be updated and adjusted based on the latest information. This helps ensure that the forecast is accurate and reflects the most current business conditions.
By incorporating actual results into a rolling forecast, busiensses can better identify trends and variances, and adjust their financial plans accordingly. This can help them more effectively manage their resources, make more informed business decisions, and improve their overall financial performance.
Key Benefits of a Rolling Forecast
One of the key benefits of rolling forecasts is that they provide more accurate financial projections by constantly updating and revising the forecast based on actual results and changing market conditions. This can help businesses avoid surprises and make more informed decisions. It also helps businesses become more agile and responsive to opportunities and threats.
Rolling forecasts can also help businesses manage their resources (such as capital, labour and inventory) better to optimize their operations and reduce waste. They can also play an important role in risk management by helping businesses identify potential risks and take proactive steps to mitigate them, reducing the likelihood of financial loss or other negative impacts.
In compiling a rolling forecast, businesses should be aware not to place too much reliance on historical data and also to reduce/avoid individual biases and subjective opinions which can lead to inaccurate forecasts.
Rolling Forecast Examples
The following video shows an example of a rolling forecast, using one of Projectify's 3-statement financial modelling templates. In this example the financial projection is being rolled forward from having 2 quarters of actuals and 18 forecast quarters to 3 quarters of actuals and 17 forecast quarters with the 3rd quarter forecast being replaced by actuals to reflect the most current business conditions.
Key Trends for Rolling Forecasts
Rolling forecasts are increasingly being integrated with artificial intelligence, machine learning technologies and real data to improve the accuracy and speed of the forecasting process and help identify patterns and trends in historical data. Businesses are also increasingly incorporating non-financial metrics, such as customer satisfaction and employee engagement, into their rolling forecast to provide a more holistic view of their performance.
Scenario analysis is also becoming more important in rolling forecasts as it helps businesses understand the potential impact of different scenarios on their financial performance and position and be better prepared for potential risks and opportunities.
Available Resources
Projectify's generic and industry-specific 3-statement financial projection model templates include a versatile timeline which allows for a mix of actual and forecast period. This functionality allows the user to compile a forecast/projection that can be easily and efficiently rolled forward from one projection period to another which is ideal for compiling and maintaining a rolling forecast.
The following are a sample of financial modelling templates offered by Projectify containing this functionality: