Creating a budget is an essential piece of any company’s business plan. Or is it? In today’s fast-paced world, companies need to adjust and pivot as desired to not just survive, but thrive. Traditional budgeting is just not cutting it anymore. Many companies have embraced this philosophy and have added a rolling forecast in tandem with a yearly budget or replaced the budget completely.
A rolling forecast is an ongoing plan instead of a fixed budget. At first glance, it may seem more laborious to continue to update finances continuously, however, that is inaccurate. Instead, it creates a dynamic strategy that keeps up with your company’s needs. It allots more time to focus on business demands, grants faster adjustment time and builds increased accuracy.
Budgets serve their purpose. It’s important to set goals for the company and take the financial steps to get there. However, getting these figures situated is easier said than done. It’s common for department heads to turn in their budget worksheets, only for the finance department to have to wade through inflated spending projections or low-balled revenue projections.
It could take several months before a realistic budget is in place. And then a few months after that, it’s time to start the process all over again. This leaves little room to learn from the previous year and look for ways to improve for the future.
A rolling forecast sidesteps these issues. With this type of policy, business forecasting is the company’s primary plan, instead of a budget. It is a projection of the future that is regularly visited and changed throughout the year to adapt to current conditions.
Companies need to have the ability to adapt to current economic conditions. Whether it’s being proactive when a new competitor enters the market or weathering a tough sales period. As opposed to a traditional budget, a rolling forecast is not a fixed target. It has the ability to ebb and flow, just like your business does.
For instance, if your business is dependent on the seasons and winter is warmer than usual, when is it better to adapt: a month later or a year later? Having more options, sooner, allows you to be more proactive in your business.
Because of its ability to save time and be more agile, your business goals and objectives can be met more accurately. The efficiency of your business forecasting changes the game because it’s consistently changed. It’s no longer just something you dust off from time to time, but instead, it evolves with your business, in real time.
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