Rolling Forecasts

    How TeamQuest Tools Can Support Rolling Forecasts

    October 21, 2015

    By Dino Balafas

    Traditional budgeting processes are often redundant and inaccurate, as well as time  and capital — intensive. However, rolling forecasts offer an alternative, provided the appropriate tools are implemented.

    Historically, sudden economic shifts have posed an array of serious problems for budgeters. Because traditional budget projections aim to produce multiple-year forecasts, they are relatively inflexible and incapable of adapting to a dynamic financial landscape. Thus, when a company confronts economic forces well beyond its control, these structures must be entirely reevaluated  rendering the previous system useless.

    All that said, with the right tools in place, businesses can avoid the need for constant readjustment altogether.

    Traditional Processes

    Without those tools, however, IT finance management (ITFM) professionals face numerous compounding factors related to issues with forecasting  as recently outlined by ProvenIT Finance in its thorough description of a typical ITFM strategy.

    Many ITFM methods are grounded in the assumption that a company’s annual IT spend is unknowable, and that it should be handled on an individual basis by drawing from a pool of funds designated for that purpose. However, this leads to the adoption of an arbitrary IT spending cap within the context of your annual budget. While this is an effective way to control outgoing expenses, it has the effect of limiting IT buys to the point that they fail to meet a company’s actual needs.

    Often, finance managers prioritize spending to focus on immediate threats to a company’s economic health, allowing impactful systems to age and rot. This is a reactive strategy, and fails to account for IT expenditures that could actually increase a company’s output over time. The result is a company that no longer has the necessary infrastructure or software to deal with longer-term threats.

    Another popular solution is annual planning. By meticulously budgeting a financial calendar, a company can hope to keep their strategies in line with future goals. Unfortunately, these systems are notoriously inflexible and create uncertainty towards the end of the year.

    Moreover, months-long planning processes often produce inaccurate forecasts by the time they’re finally completed. Consequently, more and more companies are turning to forecast models that continuously update and self-petuate.

    Rolling Forecasts: A Better Option

    Unlike annual planning, rolling forecasts do not set a defined, end-of-year date. Instead, an extra month is commonly added one year out as a month passes, creating a continuously shifting and updated annual cycle. Of course, the timeframe can be adjusted depending on a company’s needs, as forecasts can organically adapt over time.

    As reported in CFO Magazine, Steve Player, CEO of Dallas-based consulting firm The Player Group, is one of many to publicly promote rolling forecasts: “In the old days, the CFO sat in the back of the ship recording what happened. Now, the CFO stands on the bridge looking forward and adjusting for variables.”

    With a rolling forecast, there’s no need to create multi-year predictions or retrain employees to use new systems or models  instead, companies simply need the right tools in place to continuously tweak their forecast models.

    But What Are the Right Tools?

    Without the right set of maintenance-led tools, any system will fail  and rolling forecasts are no different. TeamQuest offers industry-leading capacity management software and advanced analytic technology that automatically update your predictive systems to incorporate changing trends and future risk. With TeamQuest software, companies can use their historical data to accurately outline the most economical IT spends and optimize their long-term IT strategies to meet business goals.

    (Main image credit: NEC Corporation of American/flickr)