The annual budget and the rolling forecast are critical deliverables for Finance. Historically, executing these effectively has posed a considerable challenge for many organisations. Some businesses would take months to produce a budget without even attempting monthly rolling forecasts. However, with bespoke solutions and adept support, this daunting task transitions into an opportunity, amplifying business value and redefining finance department significance.
Brydens BI works with many organisations and has helped them transition to rolling forecasts and far less painful annual budget processes.
The annual budget and rolling forecasts serve distinct yet complementary purposes, offering organisations the benefits of stability and adaptability in a dynamic business environment.
The Annual Budget: Setting the Course for the Year Ahead
The annual budget acts as an organisation’s fiscal compass. It remains static, instils fiscal discipline, establishes benchmarks for performance assessment, and helps define critical capital allocation decisions.
For many enterprises, the annual budget only focuses on the Profit and loss (P&L) statement. Yet others adopt a comprehensive three-way methodology, incorporating Balance Sheet and Cash Flow. At Brydens BI, we champion both approaches and have developed methodologies to streamline and tailor them to each client.
The Monthly Rolling Forecast: Adapting and Looking Further Ahead
Contrasting the static nature of the annual budget, the monthly rolling forecast thrives on adaptability, continuously adjusting in response to internal shifts and external influences. Brydens BI recommends setting up core models around employees, revenues and direct costs and would typically leverage CALUMO and its underlying Finance Data Warehouse to achieve this.
Each model, uniquely crafted to fit individual business needs, syncs seamlessly with pivotal operational data. This synchronisation ensures that when a month “rolls,” updates to the models mirror both operational and financial realities, enhancing the forecast’s pertinence while eliminating redundant tasks like copying and pasting data or updating a range of Excel workbooks. Brydens BI has clients who have built various complex models, including within Funds Management (with all the complexities around costs and hurdles by Fund), Equipment Lease and Term Loan Models, and Construction and Development Models. Clients have full control in all cases and typically extend and modify models as their businesses evolve (always with our support, if needed). These models become central to forecasting, especially as they are linked to real operational data and automatically update monthly or in line with business needs.
The strength of the monthly rolling forecast is its continual evolution and ability to inform business strategy. In our experience, Rolling Forecasts typically extend for three to five financial years (although we manage some that extend further). When done well, Rolling Forecasts equip businesses to anticipate challenges and spot burgeoning opportunities. Importantly, Finance and the company can discuss these as they evolve.
Combining Annual Budgets and Rolling Forecasts
An effective and timely annual budget and monthly rolling forecast equips organisations to define, evaluate, and recalibrate their fiscal goals. This dynamic allows for a harmonious blend of setting foundational expectations and making agile, informed strategy modifications in response to live data and emerging trends.
Notably, a high-quality monthly Rolling Forecast is the starting point of the Annual Budget process. In some cases, Brydens BI has seen clients reduce time spent on Annual Budgets from close to three months to under two weeks. Finance teams, who start with a rolling forecast informed by up-to-date operational data that Executives are familiar with, effectively have a draft Annual Budget (even multi-year) when they start.
Equipped with the right tools and support, focusing on insightful analysis rather than mere execution elevates the finance function’s stature. Brydens BI partners with numerous finance teams to set up and support monthly rolling forecasts and annual budgets. This is achieved through years of experience designing, implementing and managing robust Finance Data Warehouses that support Finance in these and other related tasks. To learn more, simply reach out.