24 Month Rolling – Resistance to 24 Month Rolling

Date: 26 November 2012
Category: 24 Month Rolling
Tags: 24 Month Rolling, 24 Month Rolling Forecasts

In my last blog on 24 Month Rolling I introduced you to the concepts of Trailing 12 Month Measurement (TTM) and 24 Month Rolling Forecasts.  Today we will be looking at areas of resistance to 24 Month Rolling.

I’ve implemented my 24 Month Rolling system on numerous occasions to businesses all around the world. Each time I’ve met with resistance from someone in the company.

 24 Month Rolling forecasting is a different approach to predicting and influencing the future. Our 24 Month Rolling software provides you with trailing twelve months (TTM) figures plus projections for the next twelve months, in the one statement. This gives you the best possible picture of your business performance, incorporating past, present and future. It’s not just a forecast mechanism; if adopted properly, this process can have a profound impact on your management culture and effectiveness. But because it’s so different, people are going to resist it because they don’t like change.

 Some of the more common areas of resistance are:

 1.     We don’t have a crystal ball to determine the future. What if our forecast is wrong?

I can deal with this quickly and take the pressure off them by saying that all forecasts are going to be wrong. Nobody has a crystal ball; nobody has a perfect view of the future. This process has never been about the forecast being right or wrong. It’s about the forecast being as accurate as it can be, given all of the information you have at your disposal. And then assessing what our risk profile is if reality is different from the forecast.

 2.    The idea that we’re moving the goalposts. If each month, we go in and change the numbers on our forecast, how will we ever know where we are?

There’s significant difference between forecasting your perception of the road ahead for the business and changing the targets that you want to achieve. 24 Month Rolling doesn’t change the targets, it simply tracks, as more information comes to light, whether or not you are above or below a target on a 12 month rolling basis.

 3.     Budgets take time to prepare and then they need to be signed off by the Board. The preparation and approval process takes more than a month so to try to do this each month would be impossible.

Let me address that very clearly. 24 Month Rolling does not replace the necessity, if the necessity exists, to report to external parties on an annual basis, whether that party is a board, a bank or any other external party. 24 Month Rolling is the internal management mechanism, which not only predicts but also influences the future ahead of the business. The real value here is that everything you’re doing in your once a year set period can be done using a rolling 12-month period. Once a year a rolling 12-month period will be identical to a fixed annual period.  So everything you’re doing in your fixed annual period, you can do with 24 Month Rolling. The only difference is that 24 Month Rolling will be useful twelve times a year. The fixed annual period will only be useful once a year. But there’s no reason why you can’t take a copy of the forecast from 24 Month Rolling, lock it down for twelve months and send it to the Board for signoff. That can happen as an adjunct to the 24 Month Rolling process.

 4.     Some transactions are only processed once a year e.g. depreciation.

As long as those transactions are processed in the same month each year then every 24 Month Rolling period will have one of those months. For example, if depreciation is processed in June (as it typically is in Australia) or December (as it typically is in the US) each year, then every rolling 12-month period has one June or one December. So you will always have those once a year transactions included.

 5.     This takes too much time and will cause more work than we’re currently doing.

The reality is that once the process is set up, 24 Month Rolling will be less work, not more. In fact, it will share the workload of predicting and influencing the future across all executives, not just the finance team.

 6.     People don’t like the word budgeting.

Quite right. Everywhere I go, people hate the word budgeting so we don’t use that word, we talk about forecasting or planning.

 7.     My accounting system will not handle this process.

Any limitations the accounting system may create are irrelevant because it’s not within the accounting system that we’re going to manage this process. In our next blog we’ll be talking about the some of the common pitfalls of 24 Month Rolling however, one of the more common pitfalls is to set up your forecast the same as your accounting system chart of accounts.  If you do this your forecasting process will not be as effective as it should be.   

8.      I already have a crowded management agenda, how am I going to fit an extra item into it?

We state and now have strong evidence from my experiences around the world, that the conversations coming out of 24 Month Rolling are some of the most valuable monthly conversations that executive teams can have. Our response is that one of the agenda items currently in your meeting is probably wasting time. Remove that item and put this one right at the top.

My final comment is not so much an area of resistance but an anecdote. At one of my presentations in the UK I was confronted by a somewhat angry Englishman who said (you’ll have to imagine the upper-class English accent), ‘This is blindingly obvious. Why haven’t my financial resources told me about this before?’  He was quite angry that he hadn’t been told something so powerful and something so obvious. I’m very glad that in the end he didn’t shoot the messenger but was able to benefit from our process when he saw how much it could do for his business.

Come back and join us next time when we’ll discuss the common pitfalls associated with implementing 24 Month Rolling.  Also, feel free to contact us to find out how we could help in your business.