When it comes to FP&A forecasting, most companies base their long-range forecasts on static planning processes, rather than more relevant, dynamic plans that reflect the complexities of the business. Relying on a forecast that doesn’t enable continuous monitoring of company performance, instead of implementing a modern, rolling forecast approach, is like using an old-school road map to guide you on a cross-country trip. Why use a paper map when you can get to your destination worry-free with a car GPS system?
Rolling forecasts—forecasts typically updated on a quarterly or monthly basis—can be a game changer. They allow FP&A teams to be stronger business partners and help enable the overall enterprise to better align with their strategy, perform more-effective business analysis, and derive greater ongoing value from their management reporting, budgeting, and planning processes. Rolling forecasts make organizations more nimble, able to seize potential opportunities, and be better prepared for upcoming roadblocks based on headwinds.
Rolling toward a more strategic focus for FP&A
There is an increasing expectation that strategic guidance—which can be generated through rolling forecasts—emanates from the FP&A team. Furthermore, CFOs are looking for their teams to develop the technical and strategic capabilities that support executing approaches such as rolling forecasts. CFOs have continued to prioritize capabilities related to generating proactive, predictive insights and the ability to help the enterprise look at scenarios and modeling to support decision making across a broad range of functions and processes in an integrated manner.
FP&A … so little time
So rolling forecasts are a no-brainer? In theory, yes. Yet the near-universal challenge lies in freeing up finance teams to move toward this new approach. There is a significant gap between what CFOs want their teams to be doing and how they actually spend their days. Technology continues to evolve at a rapid pace but FP&A capabilities and processes continued to struggle at times with heavy manual, inconsistent processes with heavy data gymnastics absorbing the time they could be engaging with the business to drive performance.
Finding process areas that can be quickly leveraged to build incremental capabilities helps our clients more forward efficiently and effectively to see improvements early and often. We do this knowing of data and process challenges, but using the challenge as a catalyst for change and build agile, iterative solutions to address root cause issues such as data source challenges while releasing new FP&A capabilities on a consistent schedule. This approach allows FP&A to pivot to more of a business partner driving insights. While there are many process areas leveraged as a starting point including management reporting, rolling forecasts are often a great prototype or use case approach.
The clear benefits of rolling forecasts
APQC surveys show that organizations that use rolling forecasts are better aligned with unfolding business strategy, are more effective at business analysis, derive greater value from their management reporting, budgeting and planning processes, and have more reliable forecasts than those that do not use them. Setting surveys aside, the clients we see using rolling forecasts are engaging more often and more effectively with their business partners aligning early and often on drivers, metrics and KPIs to manage their business.
Finance leaders inherently see the many benefits of rolling forecasts and how they can directly impact business results. For instance, Integrated Business Planning (IBP) is often an aspirational goal for many FP&A functions, but with Rolling Forecasts you can begin the evolution to IBP by aligning processes, data and tools for a specific forecasting use case and then see how that can scale across the IBP ecosystem. To help with Corporate level consolidated planning, you can produce a cash flow forecast at the end of a rolling financial forecast process—resulting in a consolidated balance sheet and an accurate view of cash flow for the entire enterprise then trickle down and use scenarios to help businesses and regions manage accordingly.
Getting started with rolling forecasts takes many forms
Start Small & Scale: We have clients who start small with one business or region and one area of their forecasting domain (eg Sales Planning) and then build a rolling forecast process using owned technology or even Excel to learn the data challenges, pressure test the drivers, metrics, KPIs and outputs. Then then use this pilot to begin the requirements for a system enabled solution to better automate and scale data using consistent, standard processes that can be leveraged enterprise wide with transparency. This approach also can help with selection of new cloud EPM solutions, aligning processes and data and beginning the adoption and change journey.
Go Big & Adapt: We have other clients who have made the decision to move to Cloud EPM and they want the catalyst for change at a high velocity. Rolling forecasts is an area where you can move fast, start with available data and processes in early use cases and releases and then iterate accordingly as you scale to other businesses, regions and functions while doing it all in the new EPM tool.
Rolling forecasts enabled by OneStream Unified Finance Platform
While there are various EPM solution in the marketplace that can enable the rolling forecasts included here, OneStream has developed core functionality and features within it’s Extensible Finance (XF) Unified Platform that integrates process and data across consolidations, planning, analytics, data management and reporting.
OneStream’s solution immediately enables rolling forecasts by leveraging a standard, consistent set of dimensionality that aligns with how leaders run, manage and account for their businesses. Actuals are sourced in a consistent and transparent manner and the solution allows for robust logic and calculations to drive the rolling forecast process. This transparency enables stakeholders to see how they are being managed and understand the non-financial and financial metrics, KPIs and drivers that are flowing through the system to deliver financial and operational results.
The OneStream XF solution screenshot below illustrates capabilities inherent in the tool related to rolling forecast capabilities unlocked related to scenario planning, modeling and what-if analysis.
The solution has a user interface that is intuitive to many stakeholders and can be accessed via an Excel interface as well to further align with processes as improvements evolve.
In addition, to extend the value of rolling forecast output and insights, the OneStream XF solution provides a variety of robust, transparent management reporting outputs allowing slicing and dicing to various levels of detail. Stakeholders and power users are able to customize and optimize how they interact with the data so they keep focused on their areas of domain while maintaining a view of the overall impact to the enterprise.
Blending improvements to process, data, organization and change management with an enabling technology such as OneStream allows our clients the flexibility, velocity and scale needed to make the rolling forecast journey knowing they have opportunities to pivot and adapt based on industry, economic and academic impacts.
Conclusion
For many companies, the forecasting and estimating process is event or time based and does not accurately represent a consistent set of information across the entire organization. This leads to costly, ineffective planning processes which limits actionable decisions within the organization. What do you need to get to a more accurate, predictive rolling forecast process?
Our clients have provided feedback that having options to get started helped them with momentum, illustrating the concept to other stakeholders and helped them prioritize and structure their thinking around unlocking performance management capabilities for the organization.
For Rolling Forecasts we often see a rapid approach to complete process analysis, identify a use case, prototype what the process could look like and then determine options to implement with current data and tools or as part of a roadmap for transformation.
Please contact us for a demonstration of the OneStream XF platform.
