What is a rolling forecast?

Definition

A rolling forecast is a projection that always keeps the same number of periods in front of you. When a month closes, that month drops off the horizon and a new month is added at the far end.

On the books, it is a planning mechanic, not an account. Actuals still post to the general ledger; the horizon lives in the planning file.

The point is the constant window. You are not making a one-time update to the rest of this year and then stopping.

Where it shows up

P&L: Related to a projection that always extends the same number of periods ahead.

Balance sheet: Related to the same rolling view of assets and liabilities when those are forecasted.

Cash flow: Related to the same rolling view of cash when a cash forecast is included.

See also: Forecast · Cash Flow Forecast · Budget

When you look at your Income Statement, this mechanic keeps a fixed stretch of revenue and expense months in view. Twelve months ahead is a common window; some shops use six or eighteen.

The Balance Sheet can ride the same window when cash, receivables, and payables are projected too. The horizon rule does not change just because balances join income.

Cash is included only if receipts and payments sit in the same window. Dropping a closed month and adding a new far month applies there the same way.

Owners usually keep the window in a spreadsheet with one column per period. The live books stay the record of what already posted.

How it works

Pick a length, such as twelve months, and keep that many periods filled at all times. After June actuals land, June leaves the window and next June is added as a new projected month.

The window follows a drop-and-add rule:

• Pick a fixed length, such as twelve months
• After a month closes, that month leaves the window
• A new far month is added so the length stays the same

The remaining eleven months are not ignored. They get a fresh look with what you know now, and the new far month is built from the same current view.

The always-N-periods-ahead mechanic is the work. Revising the rest of this calendar year once, then stopping, is a different job.

The locked annual plan can sit beside the window without moving. The window is what keeps a full stretch of future months in sight as time passes.

Nothing posts to the books when you drop a closed month and add a new one. The general ledger still records actuals as they happen.

If the shop also projects operating expenses and cash, those lines follow the same drop-and-add. The window is the rule; the lines are the content.

A shorter window, such as thirteen weeks, uses the same idea on a weekly grid. The length changes; the always-ahead rule does not.

Example

An IT shop always keeps twelve months ahead. On June 1 the window runs through next May.

June actuals then land. June drops off the window, the remaining months are refreshed, and next June is added as a new projected month.

The shop still has twelve months in front of it. The calendar year-end is not the stop; the far edge just moved.

If June billings came in light, the new next-June column is built from that current view, not from last winter's locked plan. The drop-and-add is what keeps the window full.

The Financial Statement Package still shows closed June. The twelve-month window lives in the planning file beside it.

Next month the same thing happens again. July will drop off, and the following July will be added.

Common mix-ups

A rolling forecast is not the same as a one-time update to the rest of this year. The one-time update revises remaining months and then stops; this mechanic always adds a new far period so the window stays the same length.

A rolling forecast is not the same as the approved annual plan. The plan can stay frozen; the window keeps moving.

A rolling forecast is not the same as variance analysis. Variance work explains why a closed month missed the plan; this mechanic is about keeping a full stretch of future months in view.

Related terms

• Forecast: An updated projection of where the numbers are actually heading.
• Thirteen-Week Cash Flow Forecast: A rolling week-by-week cash projection covering the next quarter.
• Budget: The approved plan of revenue and spending for a coming period.
• Driver-Based Forecasting: Building projections from the underlying volume and rate assumptions.
• Scenario Planning: Modeling several plausible futures to see how the numbers hold up.
• Cash Flow Forecast: A forward projection of cash receipts and payments.
• Run Rate: Annualizing a recent period's results as a rough forward estimate.
• Budget Versus Actual: The comparison of planned amounts to what actually happened.