Friday, December 30, 2011

CFO Services – What Are Rolling Forecasts?

One of the more important CFO Services is Business and Cash Flow Forecasting. This CFO Service gives the business owner the foresight to take action. Many business owners operate their business on a day to day basis without any business and cash flow forecasting and without thinking about what is going to happen next month, next quarter or even next week! As a result they never understand the benefits of business and cash flow forecasting and guess what? Their competition does understand the benefits. Their competition understands that business and cash flow forecasting:

  • Reveals weaknesses and strengths in your organization.
  • Finds solutions to solve those weaknesses and improve on those strengths.
  • Helps you to learn more about your business.
  • Helps you to be proactive about addressing potential trouble down the road like for example, a cash flow problem.
  • Makes people in the organization accountable
  • Gives the business owner piece of mind
One of the problems with business and cash flow forecasting is that once the forecast becomes 30 days old it is stale, outdated and most times forgotten. To address this problem the state of the art CFO performs what are called rolling forecasts. Rolling forecast capability allows one to enter actual results for the most recent month and then the rest of the forecast rolls forward for the next 12 months. This is called a 12 month rolling forecast and should be done every month to keep the forecast current. I usually prepare a 24 month rolling forecast for my clients to get a longer range perspective of where the business is going. With these updates the CFO and business owner can make changes as needed as well as identify any other problems. The rolling forecast makes the forecasting process a monthly occurrence and a monthly planning process that adds tremendous value. With my clients I also combine the results of the rolling forecast with an analysis of the key performance indicators for the month.

With tools like the rolling forecast, the business owner can be on top of their game and gain a competitive advantage against the many business owners who do not do so!