As we navigate the ever-changing business environment of 2025, financial management strategies need to be more agile and responsive than ever. One of the most effective tools for achieving this agility is the rolling forecast. Unlike traditional annual budgets, rolling forecasts provide a dynamic, forward-looking view of your business’s financial future, allowing you to adapt quickly to market shifts and internal performance dynamics. In this article, we’ll explore how to build a dynamic quarterly rolling forecast that will help you make smarter, faster decisions and drive your business forward.
Building a rolling forecast is a bit like driving a car—once you start, you keep moving forward, always looking ahead to the next mile. This continuous planning process involves regularly updating your financial projections to reflect the latest results and market conditions. It’s a living model that evolves with your business, ensuring that your financial planning remains aligned with your strategic goals, even as they change. For instance, a retail company might use a rolling forecast to quickly adjust marketing spend or inventory allocation in response to a sudden increase in online sales during a specific quarter[3].
Let’s start with the basics. A rolling forecast typically extends over a period of 12 to 24 months, depending on your business needs and industry characteristics. It’s not uncommon to see a 3+9 forecast, where three months of actual financial results are combined with nine months of projections. This format is particularly useful for quarterly planning, as it allows you to continuously assess and adjust your financial performance over time[1].
Now, let’s dive deeper into the practical steps involved in building a dynamic quarterly rolling forecast.
Step 1: Define Your Planning Horizon and Objectives #
The first step in building a rolling forecast is to determine how far ahead you want to plan. This is known as your planning horizon. Common horizons include 12, 18, or 24 months, depending on your business needs and industry characteristics. For example, a startup in a rapidly evolving tech space might opt for a shorter horizon, while a more established company in a stable industry might choose a longer one[1].
Alongside your planning horizon, you need to clarify what you want to achieve with your rolling forecast. This could include cash flow monitoring, resource planning, performance tracking, or scenario analysis. Identifying these objectives helps ensure that your forecast is focused on the right metrics and provides actionable insights for decision-making[1].
For instance, if your objective is to improve cash flow management, you might focus on tracking monthly cash burn and runway. This allows you to make informed decisions about hiring, investments, and other resource allocations that impact your cash flow[1].
Step 2: Identify Value Drivers and KPIs #
Value drivers are the business metrics that directly influence your financial results. These could include monthly recurring revenue for a SaaS company, production volume for a manufacturing firm, or billable hours for a services business[1]. By focusing on these drivers, you can ensure that your forecast is tied to the factors that truly impact your bottom line.
KPIs (Key Performance Indicators) are also crucial. They measure progress toward your business objectives and appear on most dashboards. Common financial KPIs include revenue growth, EBITDA margin, and cash conversion cycle[1]. By regularly monitoring these KPIs, you can quickly identify areas for improvement and make adjustments to your forecast accordingly.
For example, a subscription-based business might focus on customer acquisition costs, renewal rates, and average revenue per user (ARPU). By adjusting these metrics in your forecast, you can model different business outcomes and make more informed decisions about resource allocation[3].
Step 3: Implement Driver-Based Planning #
Driver-based planning is at the heart of rolling forecasts. It involves focusing on key business drivers rather than static line items. This approach not only reduces the complexity of forecasting but also ensures that your projections are flexible and meaningful. By basing your forecast on metrics like human capital, sales, market share, and production rates, you can create a more accurate view of future performance[2][3].
For instance, a manufacturing company could prioritize production capacity, material costs, and inventory turnover rates. By adjusting these drivers in your forecast, you can quickly respond to changes in supply and demand, ensuring that your production levels remain aligned with market conditions[3].
Step 4: Establish a Regular Update Cadence #
One of the defining features of rolling forecasts is their regular update cadence. Unlike annual budgets, which are locked in for an entire fiscal year, rolling forecasts are typically refreshed monthly or quarterly. This frequency allows you to respond quickly to changes in customer demand, supply chain disruptions, or rising costs[3].
The update cadence you choose depends on your business volatility and decision frequency. For example, early-stage startups with high customer concentration might benefit from weekly updates, while later-stage companies with established unit economics might opt for quarterly revisions[4].
Step 5: Use Technology to Streamline Your Process #
Technology plays a crucial role in building and maintaining a dynamic rolling forecast. Tools like Workday Adaptive Planning or Abacum can help streamline your forecasting process by automating data collection, providing real-time insights, and facilitating collaboration across departments[5][6].
These platforms enable you to create a living model that continuously evolves with your business, ensuring that your financial planning remains aligned with your strategic goals. By leveraging these tools, you can confidently run scenarios, make more strategic decisions, and drive your business forward in a rapidly changing environment[5].
Step 6: Monitor and Adjust #
The final step in building a dynamic rolling forecast is to monitor its effectiveness and make adjustments as needed. This involves regularly reviewing your forecast against actual results and updating your projections to reflect any changes in market conditions or business performance.
By continuously monitoring your forecast and making timely adjustments, you can ensure that your financial planning remains agile and responsive to the needs of your business. This proactive approach allows you to stay ahead of challenges and capitalize on opportunities, ultimately driving growth and success[6].
Practical Examples and Actionable Advice #
Let’s consider a practical example to illustrate how a rolling forecast works in real-world scenarios. Suppose you’re the financial manager of a retail company experiencing a sudden increase in online sales during a specific quarter. With a rolling forecast, you can quickly adjust your marketing spend and inventory allocation to maximize profits. This might involve increasing your online advertising budget or optimizing your inventory levels to meet the increased demand[3].
Here’s some actionable advice to get you started:
- Start Small: Begin with a simple rolling forecast that covers a shorter planning horizon, such as 12 months. As you become more comfortable with the process, you can expand your horizon to 18 or 24 months[1].
- Focus on Key Drivers: Identify the value drivers that most impact your business and focus on these in your forecast. This will help ensure that your projections are meaningful and actionable[3].
- Use Technology: Leverage tools like Workday Adaptive Planning or Abacum to streamline your forecasting process and provide real-time insights[5][6].
- Regular Updates: Establish a regular update cadence that reflects your business volatility and decision frequency. This could be monthly for cash flow and revenue, and quarterly for longer-range planning[4].
Conclusion #
Building a dynamic quarterly rolling forecast is a powerful way to enhance your financial management capabilities in today’s fast-paced business environment. By focusing on key drivers, establishing a regular update cadence, and leveraging technology, you can create a living financial model that evolves with your business. This approach not only improves your decision-making agility but also ensures that your financial planning remains aligned with your strategic goals.
As you embark on this journey, remember that rolling forecasts are not a one-time task but a continuous process. They require ongoing effort and attention to ensure that your financial planning remains responsive to the changing needs of your business. With the right tools and mindset, you can harness the power of rolling forecasts to drive growth, improve decision-making, and stay ahead of the competition in 2025 and beyond.
Statistics show that companies using rolling forecasts see significant benefits, including increased agility and accuracy in financial planning. For instance, research indicates that rolling forecasts can lead to a 43% increase in revenue growth over 24 months compared to traditional static budgets[10]. By embracing this dynamic approach to financial management, you can unlock new opportunities for growth and success in a rapidly evolving business landscape.