Financial modelling terms explained

Rolling Forecast

A rolling forecast is an estimation of a company's future cash flows that is updated each period

What Is a Rolling Forecast?

A rolling forecast is a type of forecasting methodology that updates predictions as new information becomes available. Rather than creating a new forecast once a set period of time has elapsed, a rolling forecast takes into account new information as it arises in order to revise predictions as needed. This allows businesses to more accurately predict future outcomes.

How Do You Calculate a Rolling Forecast?

A rolling forecast is a financial forecasting technique that uses a fixed time interval, such as one month or one quarter, to generate a forecast for the next period. This technique is used to account for the uncertainty of future predictions, and to ensure that the forecast is always up-to-date.

To calculate a rolling forecast, first calculate the average of the previous N periods' actual results. Then, forecast the results for the next period using the average of the previous N periods' actual results and the current period's actual results. Finally, recalculate the average of the previous N periods' actual results using the new forecast for the next period.

How Often Should I Run My Rolling Forecast?

There is no one-size-fits-all answer to this question, as the frequency with which you should run your rolling forecast will vary depending on the specific business and its current stage of development. However, as a general rule, you should aim to run your rolling forecast at least once a quarter in order to ensure that you have the most up-to-date information possible to make informed business decisions. Additionally, if your business is experiencing rapid changes or is in a high-growth phase, you may need to run your rolling forecast more often in order to keep up.

What is the Difference Between a Rolling Forecast and a Cash Flow Forecast?

A rolling forecast is an updated forecast that takes into account new information as it becomes available. This information can be updated monthly, quarterly, or even daily, as needed. A rolling forecast is typically used when a company is in a high-growth phase and needs to be able to respond quickly to changes in the market.

A cash flow forecast is a projection of a company's expected cash inflows and outflows over a specific period of time. This forecast can be used to make decisions about future investments, loans, and other financial decisions.

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