Traditional Budget vs Rolling Forecast model: Pros and Cons

October 3, 2022

In this fast-paced, digital day and age, time is a precious commodity. Trends and predictions are changing rapidly, and businesses worldwide are doing their best to keep up. But how can you truly stay ahead of the curve and achieve your company’s goals?

A rolling forecast is a management tool that organizations use to continuously plan their operations over a set period of time. When a Finance Department uses a rolling forecast model, financial planning and predictive analytics, it fosters more effective decision making.

A traditional budget is more static and rigid, which can be counterproductive to today’s ever-changing business world.

Forecasts can be made on a quarterly, monthly, weekly or daily basis, depending on your company’s needs. Regardless of how often finance departments need to make predictions, your team will have the flexibility and tools they need to perform the analysis by using a rolling forecast model.

Benefits of using a rolling forecast model

1. Anticipate industry trends

Rolling forecasts allow you to review your original budget and make adjustments to future periods.

They are particularly useful for fast-growing and dynamic businesses that may have difficulty nailing down future financial predictions. A traditional budget may be sufficient for small businesses. But not so for mid-cap and large corporations with constantly changing figures.

2. Navigate challenges

In addition to this, it’s also important to identify and work on overcoming challenges. To create a rolling forecast, you need to use a corporate performance management software. This technology allows you to draw financial figures from a single database and forecast scenarios that will have no effect on your company’s current data. Your team will be able to easily identify the challenges your business is facing. They can also play out different scenarios and learn the outcomes to arrive at a positive solution.

3. Improve communication

With the high-paced work environment many employees navigate today, a rolling forecast will help departments improve communication. It will primarily help your finance department obtain accurate and timely data on cash flows, consolidation and close and budget forecasting.

Talentia’s software offers a single repository, analyzes performance, reduces delays, makes financial communication more reliable and consolidated in compliance with regulatory requirements.

As a result, your company’s CFO will then be able to make accurate projections with 100% reliable data and confidently share them with other departments.

4. Save time and money overall

While a rolling forecast is more time-consuming to create than a traditional budget, it is much more agile and cost-effective. Because of their responsive nature, a major benefit of this financial planning tool is that they can respond to changing market conditions faster. When used effectively, rolling forecasts can determine the best decision for your bottom line by identifying performance gaps and shortening planning cycles.

5. Automation

Traditionally, finance departments have created Excel spreadsheets to upload into enterprise resource planning systems. This involves a lot of detailed documentation and recording of facts and figures, thus, wasting valuable company time. At Talentia, we help companies avoid difficulties, errors and labor-intensive work by automating and simplifying the forecasting process.

With Talentia CPM, teams will be able to effectively manage financial performance, quickly make decisions and obtain reliable data and forecasts.