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May 2013
Nick Castellina
May 2013
Rolling Forecasts Enable Accuracy and Agile
Business Planning Analyst Insight
Accurate planning, budgeting, and forecasting is essential for enabling Aberdeens Insights provide the
executives, managers, and the line of business to have confidence when analysts perspective on the
making investments and make informed decisions. Unfortunately, achieving research as drawn from an
accuracy is easier said than done. The first rule of forecasts is that they are aggregated view of research
never 100% accurate. This margin of error is especially compounded in surveys, interviews, and
volatile business conditions where forecast accuracy can very quickly suffer data analysis
as a result of outdated data and scenarios. Seventy-one percent (71%) of top
performing organizations mitigate this risk by continuously updating
forecasts to reflect current business conditions. This can be referred to as a
rolling forecast. But to be able to do this effectively and efficiently, it
requires a combination of capabilities and technologies that Aberdeen has
identified in past research reports, such as Financial Planning, Budgeting, and
Forecasting: Removing the Hurdles. This Analyst Insight, based on a survey of
over 200 respondents, identifies the necessary tools needed to enable
rolling forecasts along with the benefits, such as increased profit margins, of
utilizing this strategy.
Two of the top pressures directly impact the amount of time it takes to
complete forecasts, as well as the likelihood that the results are accurate.
This document is the result of primary research performed by Aberdeen Group. Aberdeen Groups methodologies provide for objective fact-based research and
represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc.
and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.
Rolling Forecasts Enable Accuracy and Agile Business Planning
Page 2
Aberdeen Methodology
Forty-three percent (43%) indicated that market volatility creates a need to
The Aberdeen maturity class is
dynamically account for change. This means that budgets, forecasts, and comprised of three groups of
plans that are devised in January, for example, may be based on outdated survey respondents. Classified
business conditions by February. Therefore, as time goes on, it can become by their self-reported
less likely that forecasts are accurate. Additionally, 25% indicate that the performance across several key
current budgeting process is too long and resource intensive. On one hand, metrics, each respondent falls
this means that employees are being taken away from their day-to-day jobs. into one of three categories:
On another, employees do not necessarily know which role they play and Best-in-Class: Top 20% of
which actions they are responsible for in the process. But most importantly, respondents based on
the process simply takes too long, which leaves the organization increasingly performance
susceptible to volatility. Enabling accuracy in these conditions requires an Industry Average: Middle
ability to be agile by quickly changing forecasts and budgets. 50% of respondents based
on performance
Laggard: Bottom 30% of
The Value of Rolling Forecasts respondents based on
Since market volatility makes ongoing forecast accuracy difficult and performance
forecasting processes have been known to bring organizations to a stand-
Sometimes we refer to a fourth
still in the past, the majority of organizations have adopted a strategy of category, All Others, which is
rolling forecasts (Figure 2), which involves continuously reforecasting as Industry Average and Laggard
conditions change. These conditions could be anything from changes in gas combined.
prices to the departure of certain employees. This can occur even on a day-
to-day basis. The effect that this strategy can have on accuracy is evidenced
In the report, Financial Planning,
by the fact that Best-in-Class organizations (see sidebar), which have more Budgeting, and Forecasting:
accurate budgets and forecasts, are the most likely to have implemented this Removing the Hurdles,
strategy. Furthermore, the value of performing rolling forecasts is evident respondents were ranked on
due to the impact that the resulting accuracy has on the bottom line. the following criteria:
Organizations that perform rolling forecasts saw a 10% revenue growth
Percentage of financial
over the past 24 months in comparison to a 7% growth for organizations
reports delivered in the
that do not perform them. Additionally, organizations with rolling forecasts time needed for
saw an 8% increase in operating margins in comparison to a 6% increase for decision-making:
those without over the same time frame. Best-in-Class 94%,
Industry Average 76%,
Figure 2: Best-in-Class Organizations Continually Update Laggard 58%
But as with creating a traditional budget or forecast, it does not make sense
to simply come up with a plan without basing it on more than just a
standard increase or a hunch. In order to enable rolling forecasts,
employees need to have access to more accurate data and make quicker
decisions (Table 1). This can mean more software tools, or a greater ability
to use the tools that are already available. Organizations that perform
rolling forecasts provide more stakeholders with accurate data in the time
needed to make decisions. In order to update forecasts as quickly as
possible, this decision-making ability is essential. Of course, organizations
enable this visibility and agility through a series of capabilities and
technologies.
80% 71%
62% 61%
60%
47% 49%
40%
24%
18%
20% 14%
0%
Ability to perform Business users are Budget templates are Ability to assign
what if scenarios able to create reports used to communicate resources and
and change analysis / charts in a self- and manage input workflows for
service capacity budgeting and
forecasting activities
that do not to have the ability to perform what if scenarios and change
analysis. Not only does this allow them to mix and match different
possibilities and see how they will impact metrics (enabling accuracy), but it
also allows them to build contingency plans that enable them to react
immediately when conditions change. Decision-makers can also plan ahead
better if they can interact with the data available to them. As such,
organizations that perform rolling forecasts are 2.6-times as likely as those
that do not to allow business users to create their own reports and charts
without relying on IT. This also allows them quicker access to the data that
they need.
For rolling forecasts to work, the budgeting and forecasting process itself
needs to be streamlined. This can be done with budget templates that
instruct employees exactly which data they need to put where in order to
complete the forecast. Additionally, organizations that perform rolling
forecasts are 2.5-times as likely as those that do not to have the ability to
assign workflows and resources to the budgeting process. These combined
capabilities enable employees to compose the newest iterations of budgets
and forecasts as quickly as possible in response to business events.
Of course, to be able to provide this agility, employees need access to
relevant information (Figure 4). Aberdeens Financial Planning, Budgeting, and
Forecasting: Removing the Hurdles noted that 76% of Laggards do not have the
ability to incorporate business drivers into the forecasting process, but over
half of organizations that perform rolling forecasts have this capability. This
takes visibility, which can be provided by holistic reports that can then be
drilled down to individual details such as business unit, product line, or sales
person. Additionally, 56% of organizations that perform rolling forecasts Fast Facts
provide employees with a one stop shop for data by integrating their
business applications to provide one true repository. Finally, this data is only Organizations that perform
rolling forecasts are twice as
useful for rolling forecasts if it is up to date (see Fast Facts). Automated
likely as those without to
alerts enable instant reactions and changes to the forecast. have real-time updates to
financial metrics.
Figure 4: Visibility Enables Rolling Forecasts
Fifty percent (50%) of
Rolling Forecasts No Rolling Forecasts organizations that perform
Percentage of Respondents, n = 214
So how does using data to create accurate, agile forecasts work in practice
(Figure 5)? If one were to assume that a forecast is accurate as long as
conditions do not change, it would make sense that any variances between
the forecast and actual would necessitate changes. As such, 80% of
organizations that create rolling forecasts can create variance reports. This
is why these organizations are over twice as likely to be able to measure the Fast Facts
accuracy of forecasts, which allows them to learn from mistakes and alter Thirty percent (30%) of All
forecasts going forward. These organizations are more likely to be able to Others use spreadsheets as
identify performance from every angle and ensure that all relevant data is their only method of input
included, and they are more likely to be able to perform profitability analysis and communication in the
so that they can ensure that any investments made, or projects started, will forecasting process
impact the organization positively. While these capabilities are essential for compared to 23% of the
creating a forecast of any kind, it should be reiterated that the key to Best-in-Class.
creating a rolling forecast is utilizing available data as quickly as possible to
create plans that reflect current business conditions.
Related Research
Enabling More Accurate Forecasting Culture, Collaboration and Coordination:
through Agile EPM; April 2013 Driving High Performance with EPM;
Financial Planning, Budgeting, and January 2013
Forecasting: Removing the Hurdles; Improving S&OP with Planning and
March 2013 Forecasting Technology: An Integrated
Look at Financial and Business Planning;
October 2012
Author: Nick Castellina, Senior Research Analyst, Business Planning and
Execution (nick.castellina@aberdeen.com)
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This document is the result of primary research performed by Aberdeen Group. Aberdeen Groups methodologies
provide for objective fact-based research and represent the best analysis available at the time of publication. Unless
otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be
reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by
Aberdeen Group, Inc. (2013a)
2013 Aberdeen Group. Telephone: 617 854 5200
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