Mechanics of RealTime 24 Month Rolling Forecasts

Date: 15 November 2014
Category: 24 Month Rolling
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In our last blog, Forecasting the Future – Alternatives, we discussed the benefits of RealTime 24 Month Rolling forecasts. In this blog, we’ll give you more information about how RealTime 24 Month Rolling works.

The 24 Month view includes the actual figures for the past twelve months and the forecast figures for the next twelve months. For example if the current month is August 2013, we have twelve months of actual figures back to September 2012 and twelve months of projected figures to July 2014. As each month ends, you replace the projected figures for that month with actual ones. At the end of August, replace the August projected figures with the actual ones, drop off September 2013 and add August 2015 with the forecast figures for that month. This way, you’re always looking twelve months ahead.

Here’s an example –

Mechanics of 24 Month Rolling

Our forecasts provide the basis for a monthly conversation about the strategic, then the operational, then finally the numerical business landscape. It’s so easy to focus on the numbers but it’s really important to cover the strategic and operational issues before the numbers. Consider the journey before jumping straight to the solution. You can guide the conversation by asking three questions:

1.  What information has come to light in the last 30 days that changes our view of the future?

Some of the issues to consider for this question are:

• What is our proposed market strategy going forward?
• Are we opening up new markets?
• Are there new competitors in the market?
• Are we launching new products or services?
• Is our product/service mix changing?
• Have projects slipped back or come forward?
• What is happening in our supply chain – availability/ reliability/ price?

2.  How will we change our behaviour?
3.  What will be the numerical implementation of these changes?

As we illustrated in our Sensitivity Analysis, you can use the eight Fiscal Focus levers to determine the impact that small changes in the levers will have on the overall health of your business. The sensitivity analysis tells us which levers have the most dramatic impact and which have the least impact. So it makes sense to have a forecast that puts the most important levers first, to drive the conversation towards the more relevant topics.

When we forecast, what sort of model should we use? There’s the aspiration model, which is what you want to achieve or there’s the reality model, which is what you know you can achieve with the resources you have. The difference depends on which category your revenue belongs to. You can use the marriage/engagement/dating analogy to assess your revenue certainty levels. Marriage revenue – you have a contract or you are absolutely certain of getting the revenue. “Engagement” revenue – also known as pipeline; you can list the amounts but you’re not certain. “Dating” revenue – you can’t list the details and you have no certainty of getting it. The “engagement” and “dating” revenue becomes your sales risk profile.

For more information about how RealTime 24 Month Rolling can benefit your business, contact us. We’d love to help your business.