Here are some ways to prepare:

A current trend making its rounds through corporate finance departments is the adoption of 18 month rolling forecasts and movement away from the traditional 12 month budget cycle.  The theory behind this change is that a rolling forecast results in more frequent updating to projections which in turn results in a more adaptive organization.  Additionally, this encourages more iterative and strategic long term thinking and eliminates much of the effort required to prepare a budget that is often outdated at its completion.
Budget forecastA rolling forecast is a long standing tool for the finance department that is used between budget cycles to make sure that the company’s projected results evolve with the changing revenue and expense environment.  Traditionally forecast updates are contained within the current fiscal year and the finance department uses actual results and information from the field to update the current forecast vs. the annual budget.  The current movement is to decentralize the forecasting process and get the operational departments more keenly focused beyond the budget year and forward for the next 18 months.

Currently most organizations are entering the planning and budgeting time of the year.  If the concept of rolling forecasts is starting to emanate for your finance department, you should keep the following things in mind as you prepare for this change:

  • Break out of the 12 month budget paradigm – Integrate a more iterative approach to expense spending and planning and get away from timing spend for quarter and year ends to fit within established budget cycles
  • Expand the discussion time horizon for product managers that you support.  It is more important than ever that you truly understand product plans and life cycles beyond the next 12 months.
  • Cultivate a good relationship with finance – This is going to require much more frequent (and hopefully) timely communications with your finance team so make sure the relationship is ready for the added exposure
  • Prepare your team – This is a significant shift in the way that your team thinks about spending and planning.  Make sure they understand all implications of this change

Most importantly make sure that you embrace the change.  If done well this paradigm shift can be a competitive advantage for your organization in the long run.