Rolling Forecast Best Practices

What is a Rolling Forecast?

A rolling forecast or continuous forecast is a financial forecast which is continually updated so that your business is always looking ahead for a fixed period, normally the next twelve months.

Financial forecasts are a map of where a business is going. They are a guide, not a manifesto to be stuck to come what may. They are not trying to predict the future, they are there to help you shape the future. To make them useful and to get the best out of the investment in them, forecasts need to be updated on a monthly basis and used to manage.

12 Month Rolling Forecast

Here is a simple way to produce a rolling forecast.

The rolling forecast is based around a 5 year forecast, with a 12 month period being monitored and amended on a rolling forecast basis.

1. Original Five Year Forecast

Start with the original five year forecast (blue). First two years on a monthly basis and the remaining three years shown annually.

rolling forecast 1

2. Add Monthly Actual Results

At the end of each month replace the original forecast with the actual figures (green) for that month.

Add Monthly Actual Results to rolling forecast

3. Revise the Rest of the Forecast

Each month revise the rest of the forecast whenever it is apparent from the emerging pattern of actual results that the original forecast is wrong. Spend the majority of the time on the next twelve months, producing a 12 month rolling forecast, with a quick review of the remaining years.

Revise the Rest of the Rolling Forecast

4. Actual Results for First Year

At the end of twelve months, the forecast will show actual figures for the first year and projected figures for the remaining four.

Actual Results for First Year

5. Expand Year 3 to a Monthly Forecast

Remove the first year of actual results, and use the remaining four years forecast figures as the starting point for a new five year forecast by expanding year 3 into a monthly plan.

Expand Year 3 to a Monthly Forecast

6. Add a New Year 5

6. Add a new fifth year at the end to complete.

Add a New Year 5

7. Repeat

Repeat steps 2 to 4.

Using this method, the business always has a 12 month rolling forecast as a map of where the business is going, but the route changes (hopefully only slightly) each month from the original. It now has a dynamic tool which enables the business to refocus as and when necessary.

Last modified January 17th, 2020 by Michael Brown

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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