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A rolling forecast is a financial management tool that uses historical data to continuously predict future numbers over a predetermined time horizon, typically the next 12 months. Updated on a monthly or quarterly basis, it enables businesses to plan, respond, and refocus their efforts quickly as market conditions change, providing more accurate estimates and supporting various business functions.
Implementing a rolling forecast system involves several notable steps.
Rolling forecasts offer several advantages over traditional budgeting. They enable businesses to respond more quickly to changing market conditions, identify performance gaps, and shorten planning cycles. This agility allows for continuous planning over a predetermined time horizon, making them particularly useful in today's fast-paced business environment.
On the other hand, traditional budgeting is often based on static forecasts, which project numbers for a single time frame. This approach can limit flexibility and hinder decision-making, as it does not account for the ever-changing nature of the business landscape. In summary, rolling forecasts provide a more dynamic and adaptable financial management tool compared to traditional budgeting methods.
When developing a rolling forecast, there are several essential components to consider:
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