Banish Budgets! - Lean Frontiers...Banish Budgets! Managing Your Organization Through Rolling...

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10/20/2017 1 #laslms17 Banish Budgets! Managing Your Organization Through Rolling Forecasts Tamara Koopman MBA, CPA, CGMA #laslms17 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

Transcript of Banish Budgets! - Lean Frontiers...Banish Budgets! Managing Your Organization Through Rolling...

Page 1: Banish Budgets! - Lean Frontiers...Banish Budgets! Managing Your Organization Through Rolling Forecasts Tamara Koopman MBA, CPA, CGMA #laslms17 2 Learning Objectives 1. Understand

10/20/2017

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#laslms17

Banish Budgets!

Managing Your Organization Through Rolling

Forecasts

Tamara Koopman

MBA, CPA, CGMA

#laslms17

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)

#laslms17

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

#laslms17

* 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

#laslms17

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

#laslms17

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

#laslms17

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

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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

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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

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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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

Page 18: Banish Budgets! - Lean Frontiers...Banish Budgets! Managing Your Organization Through Rolling Forecasts Tamara Koopman MBA, CPA, CGMA #laslms17 2 Learning Objectives 1. Understand

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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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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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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

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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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• 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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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

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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

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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

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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

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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!

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Rolling Forecasting

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Questions?

Contact Me: [email protected]