Banish Budgets! - Lean Frontiers...Banish Budgets! Managing Your Organization Through Rolling...
Transcript of Banish Budgets! - Lean Frontiers...Banish Budgets! Managing Your Organization Through Rolling...
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Banish Budgets!
Managing Your Organization Through Rolling
Forecasts
Tamara Koopman
MBA, CPA, CGMA
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Learning Objectives
1. Understand the benefits of rolling
forecasting.
2. How to create a repeatable forecast
process.
3. Maintaining a Rolling Forecast in a
Continuous Improvement environment. 2
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• Global manufacturer of LED displays
• Publicly traded company
• Revenues $500M+
• 5 Business Units
• Lean Organization - 10+ years
• Standard “widgets” & Custom orders
• Order size < $5K to $50M+
• Sales cycle from 3 days to 2+ years
• Quarterly Rolling Forecast since 2008
Frame of Reference
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• How does your organization align?
• How is your organization different?
• What can you learn from our experience?
• Can you identify your organization’s challenges?
• Can you identify how your organization could succeed?
Your Frame of Reference?
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• Requires A Major Time Investment
• Can become irrelevant at any point during
the budget period
• Is susceptible to “gaming”
Traditional Budgeting
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A Rolling Forecast
• Takes less time than traditional
budgeting
• Adjusts to retain relevancy
• Highlights areas of gaming
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A Rolling Forecast
• Is flexible with economic & operational
changes
• Gives each reporting period multiple
evaluations
• Stretches future visibility past the end of
the traditional budget period
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Sample Timeframe
A Rolling Forecast
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Quarter FY 16 FY 17
Completed Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY 15 Q4 $ $ $ $
FY 16 Q1 $ $ $ $
Q2 $ $ $ $
Q3 $ $ $ $
Q4 $ $ $ $
FY 17 Q1 $ $ $
Q2 $ $
Q3 $
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The Rolling Forecast Process
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Gather Data
SystematicInput
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
6 - 7 Months
(Every 13 Weeks)
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Implementing Rolling Forecasting
Identify a Forecast Sponsor
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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Implementing Rolling Forecasting
• Acceptance at the executive level
• Acceptance within the finance team
• Impact if there are changes in the organization
Who will “sell” the process to your organization?
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Implementing Rolling Forecasting
• Finance Owns the Forecast Process
• Sales provides “Target” level of orders
• Personnel provides “Target” level of employees
• Organization provides “Target” level of Cap Ex
• Finance determines “Planned” levels
Who Owns The Process?
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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Implementing Rolling Forecasting
• Leaders identify their impact on forecast
• Give us a “90% Forecast”
• The “Gap” between input & forecast
Can you gain shared understanding?
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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* Similar gaps in personnel and capital expenses
Implementing Rolling Forecasting
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Gap Between Organization Input & Forecast
Sales Order Forecast = Target Order Forecast
- Mutually Identified Areas of Risk/Opportunity
Finance Order Forecast = Planned Order Forecast
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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Implementing Rolling Forecasting
Engage Across Your Organization
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Implementing Rolling Forecasting
Engage Across Your Organization
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• Identify who will be a part of the process
• Identify points of engagement
• Train for shared understanding Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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Implementing Rolling Forecasting
Identify Who Will Be a Part of the Process
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• Sales, Service, Engineering, Manufacturing
• IT, Personnel, Facilities
• Leadership in Remote Locations Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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Implementing Rolling Forecasting
Identify Points of Engagement
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• Established Recurring Meetings
• Existing data sources
• Additional Resources Required Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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Implementing Rolling Forecasting
Train for Shared Understanding
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• Continuous Need
• Changes in Planning and Process
• Common Terminology
• Double Loop Learning Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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Training for Shared Understanding - Terminology
Implementing Rolling Forecasting
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Quarter FY 16 FY 17
Completed Name Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY 15 Q4 Q1 Fcast $ $ $ $
FY 16 Q1 Q2 Fcast $ $ $ $
Q2 Q3 Fcast $ $ $ $
Q3 Q4 Fcast $ $ $ $
Q4 $ $ $ $
FY 17 Q1 $ $ $
Q2 $ $
Q3 $
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Implementing Rolling Forecasting
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Selfleadership.com
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Double Loop Learning Acknowledges:
• Rolling forecasting is not budgeting four
times a year
• Requires understanding the need for
minimal inputs to get maximum outputs
Implementing Rolling Forecasting
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
10/20/2017
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#laslms17
Implementing Rolling Forecasting
Develop a Repeatable Process
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Implementing Rolling Forecasting
Develop a Repeatable Process
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• ID System/Level of Entry & Reporting
• Determine Resources Required
• Determine Process Timeline Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
10/20/2017
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#laslms17
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
Implementing Rolling Forecasting
• Orders (Product & Service)
• Revenue (Contract, Standard, Service)
• Gross Profit (Contract, Std, Svc, Other)
• Manufacturing Expenses (Variances)
• Selling Expense (All Line Items)
• G & A (Externally detailed)
• Cap Exp (FY & 5 yr)
Level of Entry & Reporting
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Implementing Rolling Forecasting
• Determine who will be involved in the process
• Time requirements of non-finance involvement
• Time requirement of finance involvement
Determine Resources Required
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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Implementing Rolling Forecasting
• Target Completion
• Prevent Forecast Fatigue
• Identify Challenges
Determine Process Timeline
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Implementing Rolling Forecasting
Process Timeline
Current Process Timeline
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Sample Forecast Schedule
Week 1 - Review & Adjust Current Forecast
Week 2 - 8 - No Forecast Activity
Week 9 - Kickoff Meeting, Cap Ex Forecast Complete
Week 10 - Complete Manufacturing Forecast
Week 11 - 12 - Complete All Other Dept Forecasts
Week 13 - Review with ManagementGather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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#laslms17
The Rolling Forecast Process
Identify & Document Organization Assumptions
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
Implementing Rolling Forecast
• “Kickoff” meeting (finance team)
• Underlying critical factors
• Globally loaded information
Identify & Document Organization Assumptions
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Evaluate Input Detail
Implementing Rolling Forecast
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Implementing Rolling Forecasting
Evaluate Input Detail
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
• Inputs Limit Outputs
• Utilization of information
• Build in Flexibility
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Gather Data
Implementing Rolling Forecast
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Implementing Rolling Forecasting
Gather Data
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• Requires engagement of organization
• Utilize or expand existing sources
• Adapt to change Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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Implementing Rolling Forecasting
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Systematic Input
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
Implementing Rolling Forecasting
• Essential to time savings
• Key to repeatable process
• Should facilitate analysis
Systematic Input
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Document the Forecast
Implementing Rolling Forecasting
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
Implementing Rolling Forecasting
• Assumptions
• Risks/Opportunities
• What’s Changing & Why
Document the Forecast
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Complete Internal Review
Implementing Rolling Forecasting
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Implementing Rolling Forecasting
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
• Results reflect assumptions/input
• Analyze comparison to: Prior year actuals
Prior rolling forecast
• Staffing/Capital Expenditures/R & D
Complete Internal Review
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Implementing Rolling Forecasting
Complete Internal Review
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Report + Template = Forecast Replate
Last Last Current
Actuals Forecast Fcast Actuals Fcast
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 R4Q R4Q R4Q
Orders 12 14 16 12 12 12 18 12 54 55 54
Sales 10 14 15 14 10 15 14 14 53 52 53
COGS 6 8 10 8 6 9 8 8 31 30 32
GP 4 6 5 6 4 6 6 6 22 22 21
Expenses 3 2 2 4 3 3 3 4 13 14 11
Operating
Income 1 4 3 2 1 3 3 2 9 8 10
#laslms17
Review With Management
Implementing Rolling Forecasting
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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#laslms17
Implementing Rolling Forecasting
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
• Critical to Organization Buy-In
• Confirm interpretation of data
gathered from leadership team
• Communicate fiscal year & forward
Review With Upper Management
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#laslms17
Summary to Board
Implementing Rolling Forecasting
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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#laslms17
Implementing Rolling Forecasting
Summary to Board
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Total Q1
PY Actuals Actuals Forecast Act + Fcast Fcast
Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 R4Q R4Q
Orders 10 12 14 16 52 12 15 12 18 57 55
Sales 12 10 14 15 51 14 12 15 14 55 52
COGS 7 6 8 10 31 8 7 9 8 32 30
GP 5 4 6 5 20 6 5 6 6 23 22
GP % 42% 40% 43% 33% 39% 43% 42% 40% 43% 42% 42%
Expenses 3 2 4 2 11 3 3 3 3 12 14
Operating 2 2 2 3 9 3 2 3 3 11 8
Income 17% 20% 14% 20% 18% 21% 17% 20% 21% 20% 15%
#laslms17
Implementing Rolling Forecasting
Retrospective Evaluation
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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#laslms17
Implementing Rolling Forecasting
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
• Accuracy of prior quarter forecast
• Validation of base assumptions
• Improvements for next forecast
Retrospective Evaluation
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#laslms17
Continuous Improvement Cycle
Implementing Rolling Forecasting
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#laslms17
Maintaining The Rolling Forecast Process
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Repeatable Process
(Every 13 Weeks)
#laslms17
Implementing Rolling Forecasting
Roll Forward For Next Quarter
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Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
10/20/2017
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#laslms17
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
Implementing Rolling Forecasting
• Carry information from next three
quarters forward
• Carry last quarter forecast
forward to next quarter
• Facilitates next quarter forecast
by moving from full data input to
input “tweaking”
Roll Forward For Next Quarter
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#laslms17
Maintaining The Rolling Forecast Process
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Gather Data
SystematicInput
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
6 - 7 Months
(Every 13 Weeks)
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#laslms17
• Identify business changes and their impact on the rolling forecast process
• Identify and eliminate waste
• Evaluate effectiveness of output
Maintaining Rolling Forecasting
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#laslms17
Maintaining Rolling Forecasting
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• Utilize information already being produced
• Tie into other processes – Sales & Ops Planning
• Engage further with areas of the business
• Keep partners trained and informed
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#laslms17
Communicating Our Journey
• Our trials
• Our triumphs
• Our truths
In Retrospect
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Rolling Forecasting - Trials
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• Getting the right level of detail
• Keeping personnel engaged in the process
• Engaging with remote parts of the business
• Managing the time investment
• Staying disciplined to the schedule
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Rolling Forecasting - Triumphs
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• Flexibility during the economic downturn
• One source of data for operations & finance
• Continuous engagement
#laslms17
Rolling Forecasting - Triumphs
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• Week One Tweak
• Managing the time investment
• Forecast Information is Valued By Management
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Rolling Forecasting - Truths
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The Forecast is Always Wrong
• Know How Wrong You Can Afford To Be
• Understand How Wrong You Might Be
#laslms17
Rolling Forecasting - Truths
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The Only Thing Constant is Change
• What changes are within the forecast horizon? • Can the current forecast process adapt to those
changes?
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Rolling Forecasting - Truths
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Know Where To Invest Your Time • Level of Information = Level of Effort
• Concentrate on the Items That Make a Difference To Your Bottom Line
• High Level Estimate and Review of Other Items
#laslms17
Rolling Forecasting - Takeaways
• Providing flexibility
• Retaining relevancy over time
• Engaging across the organization
• Creating a shared outlook of expected
future results
Rolling Forecasting Impacts the
Management of Organizations by:
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Rolling Forecasting – Our Journey Continues
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• Lean Environment - Supports Continuous Improvement
• Downtime Evaluation
• Predictive Analytics
• 5 Day Close = 5 Day Forecast
#laslms17
Rolling Forecasting – Your Journey Starts
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• Preliminary work sets up future success
• Flexibility is Critical Process – Input – Documentation
• Plan for Continuous Improvement
• Just Start It!