Quotes are from Google’s AI, Gemini and include the bold
- Relationship to the budget: “A true 12–18 month rolling forecast does not sit on top of or beyond the current budgeted year. Instead, it completely untethers itself from the traditional calendar year.”
- Analytics: “Independent of SIC codes, the universally accepted best practice among corporate finance and FP&A leaders is to track 3 to 7 key variables in a rolling forecast.” Further, “A rolling forecast is fundamentally a mathematical and structural model of the firm. “the rolling forecast itself is absolutely not an MILP model.Instead, a rolling forecast is a standard driver-based deterministic model (or a causal model). It relies on simple, linear algebraic equations…to project a baseline of what is likely to happen. It does not optimize, solve for variables, or search for the “best” outcome.”
- Success and failure characteristics among Fortune 1000 companies: “Across major research studies in corporate finance and financial planning and analysis (FP&A), the adoption rate of rolling forecasts among large corporations (like the Fortune 1000) typically hovers between 20% and 30%.”
- Why isn’t adoption higher? “The “Excel Trap: A shocking number of Fortune 1000 companies still rely on massively complex, fragile legacy spreadsheets for budgeting. Corporate Board Culture: Wall Street and traditional corporate boards operate on a fixed annual calendar. The High Failure Rate: Industry data shows that roughly 20% of companies that attempt to implement a rolling forecast fail to sustain it.”
- In fact, because of frustration with the traditional rolling forecast: “…a large chunk of the remaining Fortune 1000 uses a hybrid approach. They lock in a static annual budget for the board, but they layer a traditional quarterly re-forecasting cycle ($3+9$, $6+6$, $9+3$) on top of it. It’s not a true rolling forecast because the time horizon shrinks as the year goes on, but it gives them the agility they need without totally abandoning the traditional annual structure.” Better than nothing for sure…