10/20/2017 1 #laslms17 Banish Budgets! Managing Your Organization Through Rolling Forecasts Tamara Koopman MBA, CPA, CGMA #laslms17 Learning Objectives 1. Understand the benefits of rolling forecasting. 2. How to create a repeatable forecast process. 3. Maintaining a Rolling Forecast in a Continuous Improvement environment. 2
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Banish Budgets! - Lean Frontiers...Banish Budgets! Managing Your Organization Through Rolling Forecasts Tamara Koopman MBA, CPA, CGMA #laslms17 2 Learning Objectives 1. Understand
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10/20/2017
1
#laslms17
Banish Budgets!
Managing Your Organization Through Rolling
Forecasts
Tamara Koopman
MBA, CPA, CGMA
#laslms17
Learning Objectives
1. Understand the benefits of rolling
forecasting.
2. How to create a repeatable forecast
process.
3. Maintaining a Rolling Forecast in a
Continuous Improvement environment. 2
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2
#laslms17
• Global manufacturer of LED displays
• Publicly traded company
• Revenues $500M+
• 5 Business Units
• Lean Organization - 10+ years
• Standard “widgets” & Custom orders
• Order size < $5K to $50M+
• Sales cycle from 3 days to 2+ years
• Quarterly Rolling Forecast since 2008
Frame of Reference
3
#laslms17
• How does your organization align?
• How is your organization different?
• What can you learn from our experience?
• Can you identify your organization’s challenges?
• Can you identify how your organization could succeed?
Your Frame of Reference?
4
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• Requires A Major Time Investment
• Can become irrelevant at any point during
the budget period
• Is susceptible to “gaming”
Traditional Budgeting
5
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A Rolling Forecast
• Takes less time than traditional
budgeting
• Adjusts to retain relevancy
• Highlights areas of gaming
6
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A Rolling Forecast
• Is flexible with economic & operational
changes
• Gives each reporting period multiple
evaluations
• Stretches future visibility past the end of
the traditional budget period
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Sample Timeframe
A Rolling Forecast
8
Quarter FY 16 FY 17
Completed Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY 15 Q4 $ $ $ $
FY 16 Q1 $ $ $ $
Q2 $ $ $ $
Q3 $ $ $ $
Q4 $ $ $ $
FY 17 Q1 $ $ $
Q2 $ $
Q3 $
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The Rolling Forecast Process
9
Gather Data
SystematicInput
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
6 - 7 Months
(Every 13 Weeks)
#laslms17
Implementing Rolling Forecasting
Identify a Forecast Sponsor
10
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
10/20/2017
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#laslms17
Implementing Rolling Forecasting
• Acceptance at the executive level
• Acceptance within the finance team
• Impact if there are changes in the organization
Who will “sell” the process to your organization?
11
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Implementing Rolling Forecasting
• Finance Owns the Forecast Process
• Sales provides “Target” level of orders
• Personnel provides “Target” level of employees
• Organization provides “Target” level of Cap Ex
• Finance determines “Planned” levels
Who Owns The Process?
12
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
10/20/2017
7
#laslms17
Implementing Rolling Forecasting
• Leaders identify their impact on forecast
• Give us a “90% Forecast”
• The “Gap” between input & forecast
Can you gain shared understanding?
13
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
* Similar gaps in personnel and capital expenses
Implementing Rolling Forecasting
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Gap Between Organization Input & Forecast
Sales Order Forecast = Target Order Forecast
- Mutually Identified Areas of Risk/Opportunity
Finance Order Forecast = Planned Order Forecast
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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#laslms17
Implementing Rolling Forecasting
Engage Across Your Organization
15
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Implementing Rolling Forecasting
Engage Across Your Organization
16
• Identify who will be a part of the process
• Identify points of engagement
• Train for shared understanding Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
10/20/2017
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#laslms17
Implementing Rolling Forecasting
Identify Who Will Be a Part of the Process
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• Sales, Service, Engineering, Manufacturing
• IT, Personnel, Facilities
• Leadership in Remote Locations Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Implementing Rolling Forecasting
Identify Points of Engagement
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• Established Recurring Meetings
• Existing data sources
• Additional Resources Required Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
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#laslms17
Implementing Rolling Forecasting
Train for Shared Understanding
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• Continuous Need
• Changes in Planning and Process
• Common Terminology
• Double Loop Learning Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Training for Shared Understanding - Terminology
Implementing Rolling Forecasting
20
Quarter FY 16 FY 17
Completed Name Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY 15 Q4 Q1 Fcast $ $ $ $
FY 16 Q1 Q2 Fcast $ $ $ $
Q2 Q3 Fcast $ $ $ $
Q3 Q4 Fcast $ $ $ $
Q4 $ $ $ $
FY 17 Q1 $ $ $
Q2 $ $
Q3 $
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Implementing Rolling Forecasting
21
Selfleadership.com
#laslms17
Double Loop Learning Acknowledges:
• Rolling forecasting is not budgeting four
times a year
• Requires understanding the need for
minimal inputs to get maximum outputs
Implementing Rolling Forecasting
22
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
10/20/2017
12
#laslms17
Implementing Rolling Forecasting
Develop a Repeatable Process
23
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Implementing Rolling Forecasting
Develop a Repeatable Process
24
• ID System/Level of Entry & Reporting
• Determine Resources Required
• Determine Process Timeline Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
10/20/2017
13
#laslms17
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
Implementing Rolling Forecasting
• Orders (Product & Service)
• Revenue (Contract, Standard, Service)
• Gross Profit (Contract, Std, Svc, Other)
• Manufacturing Expenses (Variances)
• Selling Expense (All Line Items)
• G & A (Externally detailed)
• Cap Exp (FY & 5 yr)
Level of Entry & Reporting
25
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Implementing Rolling Forecasting
• Determine who will be involved in the process
• Time requirements of non-finance involvement
• Time requirement of finance involvement
Determine Resources Required
26
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
10/20/2017
14
#laslms17
Implementing Rolling Forecasting
• Target Completion
• Prevent Forecast Fatigue
• Identify Challenges
Determine Process Timeline
27
Gather Data
Systematic Input
Document
Internal Review
Review with Mgmt
Summary to Board
Retrospective
Roll Forward
Assumptions
Input Detail
Identify a Forecast Sponsor
Engage Across the
Organization
Develop a Repeatable
Process
Preliminary Steps
Repeatable Process
#laslms17
Implementing Rolling Forecasting
Process Timeline
Current Process Timeline
28
Sample Forecast Schedule
Week 1 - Review & Adjust Current Forecast
Week 2 - 8 - No Forecast Activity
Week 9 - Kickoff Meeting, Cap Ex Forecast Complete