How Farcast Benefits Forecasting

When a business is forecasting its next moves, a rolling forecast can be an invaluable tool. It can help streamline budgets and provide flexibility for dynamic industries.

For example, weather information can be used to help reduce fuel consumption by air carriers. This can result in savings of $0.10 per person/year.

Benefits of a Rolling Forecast

Ultimately, the goal of rolling forecasts is to make your budgeting and planning processes more dynamic. This is done by moving away from static forecasts that are created at the beginning of the year and instead focusing on tracking operational data like revenue, churn, expenses and others.

When this happens, your FP&A team is provided with real-time insights well beyond the traditional annual budget time frame. And this is especially useful in today’s tumultuous business environment where changes can occur quickly and often.

But this is only possible if you’re using the right software to help automate and streamline your process. A software solution that can build forecasts, financial models and perform variance and sensitivity analysis with speed and precision is essential. And one that enables collaborative work across departments is even better. This helps ensure agility, alignment and a focus on what drives the organization. It is only then that a rolling forecast can truly transform your organization.

Accuracy

Forecasting is a complex process that requires a thorough knowledge of business variables to be effective. It also involves a degree of risk and uncertainty.

Accurate forecasts provide valuable insight to revenue operations. They help companies to identify high-selling products, times and markets, and make strategic decisions that align with company goals. They can even be used to predict the success of specific marketing campaigns, reducing waste and increasing return on investment.

The accuracy of forecasting models depends on the data and assumptions that go into them, and the level of aggregation. For example, a day-product-location level forecast is more accurate than an overall DC inventory forecast. However, no forecast method can ever be 100% accurate. There is always a point of diminishing returns on forecast accuracy, so it’s important to weigh this against other factors when assessing your needs.

Flexibility

Having a rolling forecast that updates on an ongoing basis is a good way to stay in tune with your company’s external market and align it with your business objectives. This process allows you to make business changes more quickly and reduces the amount of time spent creating an annual budget.

A convenience store in a small town used qualitative focus group data and base demand to improve its forecasting, which resulted in reduced stockouts. This incorporated national trends, weather patterns and seasonal sales trends at the product level, as well as local influences like nearby parades and expected community demand.

A specialized forecasting tool is ideal for this type of flexible planning and can help you make more active business decisions that drive your financial, operational and reputational position. The system should also allow you to easily update the underlying drivers, as well as enable easy reporting on actual cost versus forecast and planned vs. actual.

Timeliness

In order for a forecast to be useful it must be delivered in a timely manner. This has traditionally been accomplished through newspaper, radio and TV broadcasts. Government agencies also issue warnings and advisories to protect life, property and commerce.

Valuable weather data is collected at thousands of stations across the world as well as from planes, ships, buoys and satellites. These observations are gathered and put into a computer model at the same time (reference time). The computer does an enormous amount of computation and then outputs a forecast.

A rolling forecast is updated at predetermined intervals, allowing the latest information to be used in planning. This provides a far more accurate and reliable plan than one that is set once and static. A dynamic business must be able to adapt to its environment, so it is important to provide the most up-to-date data possible for the planning process. Moving the goal posts based on a forecast is inefficient and detrimental to morale, especially when performance rewards are tied to meeting those goals.