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Rolling Forecasts Webinar - New Ways of Looking into the Future

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Rolling Forecasts WebinarFor businesses, rolling forecasts built on driver-based and project-based planning create a framework that supports better decision making across the enterprise. The rolling forecasts webinar content focuses on how to define your company's objectives in creating a rolling forecast, best practices in analyzing the dynamics of revenues and expenses in your business, and how to access how external conditions impact your company's performance.


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This video is from the Proformative webinar "New Ways of Looking into the Future - Rolling Forecasts" webinar held on December 4, 2012. The webinar features presentations by Bryan Dehmler-Buckley, Host Analytics and Rick Odom, Welch Allyn.


Rolling Forecasts Webinar


Okay, great. Getting started, Today in this Rolling Forecasts webinar I'm going to be talking about a little bit of the theory that John referenced in his intro to this session, and then we'll transition to Rick where he'll talk about a more empirical example. At Host Analytics, we've had the privilege of working with thousands of finance professionals over the last decade as we've evolved our solution. In this time, we've had a chance to hear from a large number of CFOs and they've basically told that they focus on getting three pillars of success right.

Starting out in the bottom left-hand corner with accountability, they really focus on driving accountability throughout their organization. What this means is that every manager takes ownership of the budget in their area. This means a shift from kind of the old stage, centralized planning process where you have a lot of accountants sitting in the backroom plugging away on the numbers to more of a decentralized process where manager input, line level individuals that have accountability and responsibility for the data are involved as a key step in the process.

They've also focused on growth and putting systems into place that allow them to adapt to situations like merger and acquisitions, the globalization of the economy, to be able to really scale the organization and provide the results that not only their internal stakeholders but also external shareholders have come to expect. Lastly, they're looking to deliver the right data at the right time. The finance organization is enabling the better decision-making that are based upon facts, not just gut intuition.

There's more data that's out there. Everybody has heard of the concepts of big data, and capturing a lot of the information that traditionally just was not available because systems weren't able to capture that information. Now that is put at the fingertips of users, and as such folks have an opportunity to make much better decisions.

However, there are still challenges for the finance organization. Because of this, we've seen the traditional role of finance is of the accountant sitting in the backroom crunching the numbers and always looking backwards to figure out, "What were the trends? What happened in the past? Let's use those to apply to the future." They really were focused on financial metrics, not operational metrics.

Because all of this information was kind of captured in the backrooms, it really wasn't a buy-in across the organization. Folks didn't take ownership of the data that was being either given to them or reported out. Over the past couple years we've seen that finance organizations have really evolved to be more of a business partner. They're involved in the strategic discussions. They have a seat at the table with the other C-level executives, and really driving the performance of the company.

The reasons why they're able to do that is because they have data that is not just backwards looking, but is also forward-looking. There's a lot of predictive analytics that are happening within systems today. We've been able to combine operational data with financial data to help inform that much more significantly so that the decisions that are being made are much more holistic in nature.

Lastly, it's information that is at everybody's fingertips. It's not just in a select few, but it's distributed throughout the organization. There's that single version of the truth that is being utilized to allow folks to make those much more strategic decisions and also be accountable for those decisions moving forward.

As I've touched on in a few of those examples, technology is certainly a piece of this. It's not the only piece, but it's certainly the key enabler. As we put together processes such as rolling forecasts, you can leverage technology to make the processes much more efficient and effective.

Let's see how CFOs have responded to this evolution. The information that you'll see on this slide comes from a research study that was done of approximately 540 CFOs. As you can see, over the past five years, CFOs are really starting to get that seat at the table. They're much more involved in those strategy discussions because they have such incredible information at their fingertips.

Of course, that was born out in a second finding on the survey which is that almost 60% of their work really is around strategy and planning, looking forward. "Where are we going to take this company? How are we going to get there? What do we have to do as a company to really facilitate that?"

Because they're in such a central position in terms of defining the strategy, they need to have fantastic communication skills. CFOs maybe in the past were somewhat perceived as being kind of in the background and in the back office, and working through the information. Now they're out there espousing the benefits not only of technology and the systems that they're putting into place, but also the decisions that the company is making as a whole.

Ironically enough, only 10% site financial reporting and 4% site accounting as their most important skill. Kind of the main skill set that you would have expected to see in the CFO several years ago, those are certainly being replaced by much more of a business partner that has the skills to communicate vision across the organization.

Editor's Note; You may be interested in a wide variety of the many other recorded webinars Proformative offers, such as Corporate Finance Strategy Webinar, Coporate Financial Forecasting Webinar, Host Analytics Demo Webinar, Corporate Finance Productivity Technology Webinar and Recurring Revenue Webinar.

Now, with all of this, (inaudible 00:05:52) the evolution, we're also seeing that there are abilities in financial planning which are definitely noticed as being ways to have a competitive advantage and really take a stronger hold in the marketplace, but unfortunately they're not being widely adopted. Only a quarter of folks are actually doing kind of scenario modeling. That would be what-if modeling, Black Cloud scenarios.

Running those through and seeing what the results are so that they can make better decisions. Disaster planning and recovery, opportunity planning, so M&A activity, attacking competitors, taking additional market share, and really running those through the different analyses. Those are not being widely embraced. The question is why is this not happening?

This study gives us a bit of a background for where finance organizations are today. Now we're going to begin to talk about where they want to be and what  helps them get past some of these lower percentage items that they haven't had a chance to focus on.

One we're going to talk about today is rolling forecasts. If you consider this, everybody would love to have a crystal ball to really be able to peer into the future. For businesses, that desire becomes a necessity because having a vision of the future not only allows them for better and more strategic decision-making, but allows them to do that in the present.

Rolling forecasts are built on driver-based and project-based planning, and they allow for the creation of a framework that supports better decision-making. A rolling forecast simply means that, just kind of in its basic terms that each quarter a month, a company projects four to six quarters, or possibly 12 to 18 months ahead.

They're rolling actuals in as new periods close and chopping off those forecast periods that are then obsolete, and then re-forecasting the remaining periods within that forecasting cycle. Now, we'll get into a few more details in the best practices here shortly, which talk about specifically what the process is associated with a rolling forecast and how to most effectively go about doing that.

A little bit about the why before we jump into the how to, and the why companies use rolling forecasts is really about allowing finance executives and key decision makers to see not only a financial view, but also an operational vision into the future. It also helps them to assess next steps in their execution of the plan, understanding critical pivot points in the plan, and better judging the impact that the changing economy or competition may have on their plan.

What all of this really leads to is greater budget accuracy. There are fewer variances to explain and justify. There's less preparation time. We have users that are focused on actual analysis versus the data collection because we have these systems that are providing information in a much more streamlined, efficient manner.

Then, lastly, we have increased profitability because we're making better decisions. If we have better information going into the system, we're going to have better information coming out of the system. All of that leads to better decision-making and ultimately better performance for the company.

Let's look at a few examples of Host Analytics customers who have embraced the new planning practices as the finance world has evolved their role within the organization, and some of the successes that they've achieved. Now, we're going to talk specifically about rolling forecasts here shortly, but some of these are actual enhancements just to the budgeting process.

Let's look at the first one. Hours to run a what-if analysis. Before this company, (inaudible 00:09:56) Companies was taking eight hours.

End partial Rolling Forecasts Webinar

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