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Are rolling forecasts a better management tool than budgets

Don Rudd's Profile


Robert Meybohm
Title: Owner
Company: Meybohm & Bodell, LLC
LinkedIn Profile
(Owner, Meybohm & Bodell, LLC) |

I guess it depends on what you are trying to accomplish and what numbers you plan to re-visit? Sales only? The entire budget? There is a real cost associated with constantly updating and recasting figures. That cost, IMO, should be compared to the supposed benefits to be gained from the process. Once you think about that, then you are better positioned to go forward. The question I would ask is how is the organization going to act differently with a different set of numbers? Will it change anything that matters? If not, then the process is a waste of time.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

I would say they are two different things. The budget should be set for the year based on anticipated targets the business expects to achieve. The rolling forecast model remains constant to allow one to constantly see future outcomes.

Lyle Newkirk
Title: CFO
Company: Corrigo Incorporated
(CFO, Corrigo Incorporated) |

The rolling forecast may be more relevant but I would always show management how they are performing against budget so they at least will take the budgeting process seriously the next time around.

Topic Expert
Alan Hart
Title: Consultant
Company: Pacific Shine Group
(Consultant, Pacific Shine Group) |

Rolling forecasts are dynamic views of the budget as adjusted in response to actual events and past period performance.

It is important to note that the real value of maintaining a rolling forecast is when you are able to have a complete forecast of your balance sheet in addition to the traditional focus on income statement accounts (revenue and expense items only).

By doing this you will be able to intelligently predict the future financial health of the organization, especially if you continually monitor actual results as each accounting period is closed and analyze them against the forecast.

The traditional budget, especially if only done to obtain a forecasted income statement is of lesser value, particularly if no periodic and timely analysis is performed.

Erin Palmer
Title: CFO
Company: Leppo Group, Inc
LinkedIn Profile
(CFO, Leppo Group, Inc) |

Like many of the others, I like to use both. The budgeting process is important, and is especially helpful for department heads for capex planning. The rolling forecast allows us to see how we are measuring up, and really have a better understanding of our current situation when it is time to actually plan for those purchases. The rolling forecast seems to be more impactful to illustrate hiring decisions, equipment purchases, the use of LOCs, etc. It also allows me to help direct the sales team as to decisions on payment plan options and illustrates the impact of attrition.

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