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Last Updated : Jan 16, 2020 07:39 PM IST | Source: Moneycontrol.com

CFOs are increasingly favouring rolling forecasts, here's why

As business cycles have changed and the operating environment has become more dynamic, the method of planning with a 12-month budget is clearly becoming inadequate, if not obsolete.

Shalini Dagar
6. Growth Manager – This could be product roles and/or business development/marketing roles. The core focus is to use growth hacking techniques to get more buyers or users for their product at sale. The skills needed for this role include Business Development, Team Management, Growth Strategies, Market Research, Marketing Strategy and Digital Marketing. The cities where these jobs are – Bengaluru, Gurugram and Noida.
6. Growth Manager – This could be product roles and/or business development/marketing roles. The core focus is to use growth hacking techniques to get more buyers or users for their product at sale. The skills needed for this role include Business Development, Team Management, Growth Strategies, Market Research, Marketing Strategy and Digital Marketing. The cities where these jobs are – Bengaluru, Gurugram and Noida.

As the new calendar year, which coincides with the financial year for many companies, kicks off, there is much thought expended on the traditional budgeting process. In the last few years, there have been calls to ditch the once-a-year exercise of the budget in favour of the more nimble rolling forecasts.

As business cycles have changed and the operating environment has become more dynamic, the method of planning with a 12-month budget is clearly becoming inadequate, if not obsolete.

Moreover, a budget which encapsulates the goal of an organisation at one point in time i.e. at the end of the budgeting period, skews business behaviour in the organisation as the forecasting wall approaches.

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A rolling forecast, which works to similarly fixed time periods, presents more of an idea of the path that the organisation actually is taking over the forecasting period. Also, by incorporating the past trends on an ongoing basis, rolling forecasts offer a chance to course correct more intuitively.

For instance, one of the big chemical companies that is part of a large conglomerate in India, works with a five quarter rolling forecast. Every time a month of new data is added to the forecast, the plan rolls forward, spanning two Budget years at any given time. Such a forecast then becomes a living document that adapts to change in the market and in the organisation.

So a budget in that sense offers more of a countdown to specific targets while in a rolling forecast, each submission of fresh data provides a more insightful look into the future.

For rolling forecasts to be successfully adopted in a business, a few enablers are needed. Relevant financial data which is accurate must be readily available. The forecasting model should be structured in such a way that information is fed into the forecast engine at specific time gaps such that the pivots to strategy happen on a rolling basis. Standardisation of performance evaluation also helps.

The writer is a contributing author with Moneycontrol.

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First Published on Jan 16, 2020 07:30 pm

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