Rolling Forecast

Intermediate

A rolling forecast is a forecast that is updated regularly, typically every month or quarter, by adding a new period at the end as each period passes, so it always looks a fixed time ahead.

A traditional annual budget covers a fixed financial year. As the year goes on, it looks less far ahead, and by the final quarter it says little about what comes next. A rolling forecast avoids this by always covering, for example, the next twelve or eighteen months.

For example, a company using a twelve-month rolling forecast would, at the end of January, drop January from its forecast and add the following January. Each month, it updates its expectations for the remaining periods based on the latest information.

Rolling forecasts help businesses respond quickly to changes in sales, costs, prices or economic conditions. They encourage managers to think continuously about the future rather than only during the annual budgeting process.

They also require effort. Updating forecasts regularly takes time and good data, and businesses must avoid spending so much time forecasting that it becomes a burden.

Many organisations use rolling forecasts alongside an annual budget. The budget sets targets and spending limits, while the rolling forecast provides an up-to-date view of where the business is heading.

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