The maker of business planning, financial planning and analysis (FP&A) and forecasting software solutions Jirav has published a blog post that discusses 5 best practices on how to create rolling forecasting, a type of model that allows virtually any business to predict its future growth.
The blog post begins by giving examples of two separate companies that differ in the way they build their models. The first company creates a traditional forecast for the coming year and is completely taken aback when a personnel problem arises, forcing management to scramble to maintain sustainable growth. The second activity, from the blog post example, relies on a fluid financial model such as a rolling forecast that is constantly updated based on a number of different factors. The model allows the management of the second company to look upside down and update the company’s priorities to meet their immediate needs.
According to Jirav, the rolling forecast is regularly updated as a living document that improves over time. Some distinct advantages of rolling forecasting include the early detection if a company’s forecast numbers are wrong (positive or negative), the ability to clearly see what is causing the increase / decrease by tracking key drivers of success and giving business leaders the ability to quickly pivot on the fly based on potential scenarios.
The first good practice for doing a rolling forecast, as recommended by the blog post, is to set achievable goals and targets such as revenue, profit margin, and improved cash flow. Forecasting can also include non-financial goals like adding new products / revenue streams, growing users / customers, increasing revenue per transaction, lifetime value, etc.
The second recommendation is to choose the right amount of time. This involves considering two things – how long to come to move forward, and then how often it will tip over. The forecast period can range from 12 to 24 months while the rollover period can be week to week, month to month or quarter to quarter depending on the size of the business and the speed at which it evolves. and swivel.
The blog post then offers the next best practice that recommends that businesses avoid precision in favor of being relatively precise. The blog post says it’s easy to fall into the trap of over-designing the forecasting problem to the point where it becomes a barrier to productivity. The end product, whether in the form of a spreadsheet or a software solution dedicated to rolling forecasting, must be light, easy to handle and understand.
The fourth best practice, according to Jirav, is to develop the main drivers of the business. A continuous forecast that uses key factors is more than just a predictive tool. It becomes a scenario planning tool that makes a business resilient to market forces beyond its control, as it gives it sufficient time to plan for contingencies and implement corrective strategies should they occur. For example, if a business wants to increase revenue, it is best to choose marketing and sales data as the key drivers. Companies that aim to spend investment capital wisely are wise to follow payroll and headcount numbers.
Finally, the blog post recommends using a custom software solution, such as the one offered by Jirav, as it is much more robust and flexible compared to patchwork solutions such as large Excel files which rely heavily on macros, which makes them temperamental and slow. to operate. Jirav’s custom software solution also enables data automation such as general ledger data, payroll data, etc. via software integrations. Readers can go to the Jirav website to read the blog post titled “How to Create Your Own Rolling Forecasts” in its entirety.
Jirav offers a three tier pricing model for its flagship software solution, with the starter tier also offering a 14 day free trial. Readers can also request a product demo on the company’s website for a personal and in-depth review of the product’s features and capabilities.
For more information about Jirav, contact the company here:
25 Taylor Street, San Francisco, CA 94102, United States