The Financial Planning and Analysis (FP&A) annual planning process is bread and butter for most financial analysts. As such, most Finance professionals know the pain of investing a ton of time and effort putting together an annual plan that seems outdated before even being completed. In a world where change is inevitable and the speed of change increases exponentially, the rolling forecast is a better approach to the planning process than the traditional annual plan. The rolling forecast enables speed, agility and, most importantly, better and more actionable insights that drive better financial results ahead of the month end close.
Financial professionals know all too well about the pains of the annual planning process. The annual plan is developed to chart a course for what the company wants to achieve in the next year, whether in terms of growth, financial performance or other business metrics that drive business performance. A common pitfall in this process is either creating a plan that quickly becomes obsolete in the face of ever-changing business environments or holding the organization to outdated and obsolete projections and processes. To avoid stagnating and instead set an organization up for success in a rapidly changing world, the importance of implementing a dynamic, ongoing process to evaluate the plan against financial results as they are occurring cannot be understated.
What can Finance do to avoid the outdated annual plan? An ideal methodology to combat stale financial forecasts is rolling forecasting (see Figure 1). The rolling forecast approach to financial planning creates a framework for the continuous assessment of financial results as they pertain to business goals and objectives. By creating the structure and cadence of continuous assessment and collaboration, Finance can achieve the following:
The importance of moving away from a static annual forecasting model and to a more dynamic rolling forecasting process is clear. But what can be done to set up the rolling forecasting for success? Three key components of a good rolling forecasting process are a single source of truth, a driver-based approach and collaboration:
When looking to create a robust rolling forecast with a sustainable, repeatable process, organizations must seek out a unified platform that enables this vision with scenario modeling, workflow capabilities and predictive analytics. OneStream – a unified, Intelligent Finance platform – offers just that. The platform is designed to help increase the agility and effectiveness of not only planning, budgeting and forecasting, but also the financial close, consolidation and reporting processes. Not to mention, OneStream even dynamically updates reports and report books using the most current forecast. This functionality drastically cuts down the time and energy that FP&A teams spend generating reports, making monthly forecasts much easier.
Here’s a deeper look at the benefits OneStream brings in those three areas:
Rolling forecasts are a powerful tool for the timely, accurate management of financial forecasts. Gone are the days of obsolete and, frankly, unhelpful financial forecasts that take too much time and effort to prepare and become outdated the moment they’re completed. By switching to rolling forecasts, organizations can improve accuracy, efficiency and agility in their financial processes and functions – ultimately better managing the business and positioning Finance as a valued strategic business partner to stakeholders.
To learn more about how a rolling forecast enables an organization to make better financial decisions, check out our Rolling Forecasts eBook here.