Financial Decision Making

Question : What is the rolling forecast in budgeting process? Answer : Introducation This is a plan or budget which is updated continuously by adding an extra accounting where the initial accounting period is expired. It is continually updated in which individual time actual outcomes are reported. An additional forecast period is included and instant period forecasts are updated (Zeller and Metzger 2013). Forecast Both forecasting and budgeting can be perceived as a component of the process of planning that examines the future past the instant timeframe. Planning attempts to shape the future of an organization whereas forecasting and budgeting aim at predicting the value created as well as the resources utilized in a particular period. Embracing a rolling strategy is helpful in informing a more practical as well as timely process of planning. The figure below illustrates a rolling forecast. Source: https://www.cgma.org/resources/tools/essential-tools/pages/rolling-plans-and-forecasts.aspx Benefits of Rolling Approach The above strategy decreases uncertainties in forecasting and budgeting. It permits flexibilities with the firm. Additionally, it allows the organization to respond to the present event quickly. Do you have any other suggestions for business while the rolling forecast is applied? Before using this approach, the organization must determine whether it has time and resources for preparing plans on more successive terms. The organization should also determine where to buy-in from the entire organization. Actions to Take Engage budget holders in alterations to the process of planning Forecasting must be anchored on the key drivers of the organization. Management must be informed quickly in case of any modifications of such drivers to respond accordingly Actions to Avoid Organization must not take a top-top strategy by understanding and working closely with the business at all times and levels Organization must avoid time wastage in the preparation of comprehensive plans for the entire year. Focus primarily on the initial period as well as make outline plans for the next periods (Castellina 2013). References Castellina, N., 2013. Rolling Forecasts Enable Accuracy and Agile Business Planning. CGMA, 2016. Rolling Plans and Forecasts. Chartered Global Management Accouuntant Magazine , pp. 1-2. https://www.cgma.org/resources/tools/essential-tools/pages/rolling-plans-and-forecasts.aspx Zeller, T.L. and Metzger, L.M., 2013. Good Bye Traditional Budgeting, Hello Rolling Forecast: Has The Time Come?. American Journal of Business Education (Online), 6(3), p.299.