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Rolling Forecast vs Budget?

There is no accidental success in business.

Planning to succeed means measuring progress - that's why budgets were invented!

Budgets are fixed: financial targets generally set on an annual basis help managers and staff work towards their fixed goal. Success is judged based on achievement against budget targets.

But budgets don't fit all businesses, all the time. The key limitation of an annual fixed budget is its inflexibility. In a rapidly changing business, being stuck with a year-long plan based on old assumptions can lead businesses to miss out on opportunities or fail to address emerging challenges swiftly.

Since measuring nothing results in achieving nothing, many businesses use an alternative - the Rolling Forecast. Rolling Forecasts adapt to changes as they happen, updating projections throughout the year to reflect new information.

They provide flexibility but do need to be linked to targets and goals in order to be useful. Without have the context of targets, rolling forecasts can become descriptive rather than active.

A businesswoman making a difficult decision
What's best: Fixed Budgets or Rolling Forecasts?


While rolling forecasts offer flexibility and adaptability, fixed budgets still play a crucial role in many organisations' financial planning strategies. Here are several benefits of maintaining a fixed budget, particularly in certain contexts:

Predictability and Stability

Fixed budgets provide a clear, predetermined framework for the financial year, allowing companies to plan with certainty. This predictability is especially beneficial for organizations with stable, predictable revenue streams, where major fluctuations are uncommon. Fixed budgets make it easier for these companies to set and adhere to financial targets, reducing the likelihood of overspending and ensuring financial discipline.

Simplified Planning

For many organisations, especially smaller ones or those in less volatile industries, the simplicity of budgets is a significant advantage. These budgets are easier to communicate and understand across all levels of the organization, making it straightforward for managers to align their departmental goals with the company’s financial objectives. The simplicity also extends to financial reporting and monitoring, as comparing actual spending against a static budget can quickly highlight variances that need attention.

Cost Control

A major strength of fixed budgets is their role in stringent cost control. By setting strict spending limits, fixed budgets compel managers to think carefully about resource allocation and prioritize spending, which can lead to more thoughtful and deliberate financial decisions. This can be particularly advantageous in environments where cost minimisation is critical to profitability.

Performance Evaluation

Fixed budgets are an effective tool for performance evaluation. By providing a clear benchmark against which to measure actual performance, they make it easier to assess individual and departmental performance. This can be crucial for annual reviews and decisions related to promotions, bonuses, and other HR actions. The clear targets set by fixed budgets mean that achievements and shortfalls are straightforward to identify.

Focus and Alignment

With fixed budgets, the entire business is aligned towards the same financial goals and objectives for the year. This alignment can enhance focus among teams, driving efforts towards achieving the set targets. Fixed budgets foster a sense of commitment and responsibility, as departments and their managers are aware of their limits and strive to work within them.

Funding Certainty for Projects

Fixed budgets ensure that once projects are approved, they have a guaranteed funding allocation, which can help in planning and executing long-term projects. This is particularly important for capital-intensive projects, where disruptions in funding can lead to delays or increased costs due to stopping and restarting work.

Rolling Forecast vs Budget?

For Companies in Volatile Industries/Markets

Companies operating in unpredictable environments, such as technology or commodities, benefit immensely from rolling forecasts. These tools allow businesses to respond dynamically to market volatility, regulatory changes, or economic shifts, rather than being constrained by a static budget set months prior.

For Rapidly Growing or Transforming Companies

Start-ups or companies undergoing significant transformations (like mergers or pivots in business models) find fixed budgets too constrictive. Rolling forecasts allow them to recalibrate their financial outlooks regularly, aligning closer with their current operational realities and growth trajectories.

For Companies with Fluctuating Revenues/Costs

Businesses that see seasonal variations or irregular revenue streams (like retail businesses around holiday seasons or agricultural businesses dependent on crop yields) need a financial planning tool that can adjust to these fluctuations rather than one that assumes consistent monthly incomes.

For Companies Making Frequent Strategic Course Corrections

Organisations that are fine-tuning their strategies or experimenting with new business models benefit from rolling forecasts. They can test and learn, adjusting their forecasts based on the outcomes of their initiatives without the need to wait for the next budgeting cycle.

Key Advantages of Rolling Forecasts

Increased Agility and Responsiveness: Rolling forecasts allow businesses to quickly adapt to changing conditions without the constraints of an annual budget cycle. This continuous planning and adjustment mean companies are always operating with the most current financial outlook, enabling timely decisions.

Improved Accuracy: These forecasts are updated regularly, integrating the latest data and refined assumptions. This frequent updating reduces the risk of significant variances between forecasted and actual figures, helping businesses avoid costly missteps.

Better Alignment with Continuous Planning: Rolling forecasts support a more frequent re-forecasting cadence (e.g., quarterly, monthly), facilitating integrated financial and operational planning. This promotes a proactive management style, with ongoing adjustments that reflect the latest business conditions.

Enhanced Strategic Decision-Making: With up-to-date and accurate forecasts, companies can make informed strategic decisions. They can model different scenarios to see potential outcomes and adjust their strategies accordingly, ensuring resources are allocated where they can generate the most value.

Implementing Rolling Forecasts

Budgets are easy - they're well understood by everybody in the business and often linked through to individual staff goals. Implementing them is pretty simple.

Implementing rolling forecasts on the other hand can seem daunting, especially for businesses entrenched in traditional budgeting practices. The shift from a fixed budget to a dynamic, rolling system requires not just changes in financial processes but also a cultural shift within the organisation.

Challenges in Moving from Annual Budgeting to Rolling Forecasts

  • Cultural Resistance: Shifting from a familiar, set-in-stone budget to a fluid forecasting model can meet resistance. Employees and managers accustomed to annual budgets may view rolling forecasts as an increase in workload or complexity without understanding the strategic benefits.

  • Lack of Skills: Effective rolling forecasts require financial acumen and familiarity with advanced forecasting tools and methods. Businesses may need to invest in training or hiring specialists with experience in dynamic financial modelling.

  • Data Integration Issues: Rolling forecasts can rely heavily on real-time data integration, depending on the size and complexity of your business. Robust IT systems will ensure data from various departments are integrated seamlessly and accurately.

Best Practices for an Effective Rolling Forecast Process

  • Start Small and Scale: Begin with a pilot program, focusing on a particular department or project. This allows the organisation to refine the process before rolling it out company-wide.

  • Regular Training and Development: Continually educate staff on the importance and use of rolling forecasts. Training should emphasise how these forecasts help in decision-making and the overall growth of the company.

  • Leverage Technology: Invest in the right technology that can handle complex data sets and integrate information from various sources. Automation tools can reduce the burden of manual updates and enhance the accuracy of forecasts.

  • Encourage Cross-departmental Collaboration: Ensure that all departments understand their role in the forecasting process. Finance teams should work closely with operations, sales, and marketing to gather accurate data and insights.

Importance of Technology, Data Integration, and Automation

The backbone of effective rolling forecasts is technology. ERP and BI tools enable real-time data analysis and integration, crucial for updating forecasts with the latest information. Automation reduces manual errors and frees up time for strategic analysis rather than data entry.


Rolling forecasts offer substantial advantages over fixed budgets by providing organisations with the agility to respond to market changes, improved accuracy in financial planning, and a framework for continuous strategic alignment. While the transition requires upfront investment in technology and training, the long-term benefits—enhanced decision-making capabilities and strategic adaptability—are invaluable.

In many businesses the shift towards rolling forecasts is more than a financial strategy—it’s a competitive necessity. Companies that embrace this approach will find themselves better equipped to navigate uncertainties and capitalise on opportunities as they arise.

Where to from here?

Consider the strategic benefits that rolling forecasts vs budgets could bring to your organisation. If you're looking to enhance financial agility and drive informed decision-making, now is the time to evaluate your current budgeting process and explore the potential of rolling forecasts. Start with a pilot project, gather insights, and scale as you gain confidence in the process. The right time to start is now—prepare your business to thrive in the dynamic market conditions of tomorrow.


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