Using Hyperion to Go from a Yearly Budget to a Rolling Forecast

Like most companies, you roll out the budget once a year.  It’s a hassle to update it.  You’re hopefully reporting against actuals every month, but you’ve got to remind your users what to do.  Given the pain involved, why do it more often?  It’s actually less painful that way.  More finance organizations are doing it as best practice.  More frequent updates lead to better information going to your field, and more importantly, coming from them.  As a finance or operations group, you’re getting more detailed information from the front line on a timely basis.

Sounds great!  How do we do it?  Are you doing a forecast at all?  Start there.  Roll your budget as a starting point for your forecast and update it through the year.  When I was in finance, I would compare the forecasts made in the later part of the year to the budget at the beginning.  Who was sandbagging me?  If you’re a CFO, can you find a way to reward accuracy? Who knows their business well enough to make accurate predictions?

The best way to get started on rolling forecasts is by considering the level of detail.  Many organizations want to do their budgeting on the GL level.  This is not something I recommend.  As a statistician, I know that the perfect is the enemy of the good (But that’s a totally different blog post).  To make it easier and less time consuming to input, forecast at a higher level.  Start by creating holding accounts-places where you don’t need as much detail.  These can be allocated down if they need to be.

One method I’ve found very popular is to have different amounts of detail by time.  Say you’re doing this quarterly or even monthly.  For the first six months have as much detail as the budget.  For the six following that, less detail (like the forecast described above) and for the final six it’s best guess.  As it rolls forward, you have increased visibility into the future and therefore better information.  At this point it’s not a once a year process, but a continual look forward.  Less time consuming because once it’s established, you’re adding to what’s already there.

​Brass Tacks has used our financial knowledge to guide companies through this process.  Contact us to let us talk about how we can help you.