Every business strives for agility, to be able to respond to changing situations rapidly and effectively. Yet, their processes are anything but agile. Take budgeting and forecasting, for example: These processes rely upon stale information that won’t reflect the firm’s financial situation next quarter, let alone next year, and they’re not updated even as market conditions alter.
The way that many companies carry out their budgeting and planning processes now doesn’t allow them to be agile. However, adopting a rolling forecast enables you to be proactive as situations shift. Adopting rolling forecasting doesn’t have to be difficult, especially when you utilize financial analysis software.
Are You Putting out Fires or Weathering the Storm?
At some firms, it can take between three and six months to complete a budget. The reason it takes so long is because these companies rely upon inefficient methods such as manually entering data into spreadsheets. This error-prone, time-wasting method often involves multiple versions of spreadsheets. By the time the budget is finally approved, the numbers are so out of date as to be useless.
Using spreadsheets (especially when you’re importing and exporting data from an ERP system) also doesn’t allow you to react to new situations. What will happen to your firm’s profits if one of your major suppliers goes out of business? Many companies haven’t planned for such an eventuality because their budgeting and forecasting processes don’t allow for it.
Implementing Rolling Forecasting
(And How Financial Analysis Software Helps You Do It)
A rolling forecast is a forecast that is updated at set intervals (some businesses refresh them every three to six months). It’s not meant to replace your budget, it’s meant to complement it. A rolling forecast allows you to adapt your budget to the marketplace’s changing realities.
We’ll go back to the example of a supplier that has gone out of business. A traditional, static budget wouldn’t take such an event into account. In contrast, a rolling budget would give you the predictive capability to examine the effect of such a loss. You would be able to judge the impact on your business and prepare accordingly.
What tools do you need to put rolling forecasts into place at your firm? Financial analysis software should be top of mind. This solution draws real-time data from your ERP system and serves it up to the people who need it. They can easily and quickly adapt forecasts so that the company stays agile in the face of a rapidly shifting market.
Companies have two choices: They can respond to a situation, which costs time and money, or they can predict when something will happen and proactively strategize to ensure the best possible outcome. To be proactive, you need the most up-to-date information at the right time. Financial analysis software provides you with the data you need when you need it most.