Did Rolling Forecast kill Traditional Budget ?

2TRADITIONAL BUDGETINGPrepared for a 12 months period

Iterations x assumptions gathering

Budget Approval

Forecast and Estimates

3QUOTES“The budget is the bane of corporate America. It should never have existed. Making a budget is

an exercise in minimization, i.e., showing how little you can do.”— Jack Welch, former CEO, General Electric (February 2006)

“The budget evolved from a management tool into an obstacle to management . Charles Edwards

“If companies would invest as much time in their strategy cascade as they do in their budgeting process, most would perform a lot better”

4INDUSTRYPULSE-Accuracy

2/3

28%

70%

Our Budget would be obsolete within 6 months of

the fiscal year

We cannot forecast more that a single quarter out

Our Budget is irrelevant before the year even begin

Most conventional budgets are not as

accurate as perceived. Many budgets become

obsolete before the fiscal year begins.

5INDUSTRYPULSE - Process

4

17%

44%

32%

We are very satisfied with our budgeting process

The company budgeting process is aligned with the actual performance

Linking budget and strategy needs strong improvement

6

COSTLY AND TIME CONSUMING

12M$

60%

12%

annual budget cycle in less than two months

budget cycle exceeding three months

annually for organizations with $10 billion or more in revenue

7

CHANGING ENVIRONNEMENT

• Annual budgets cannot keep pace with the constantly evolving business environment, making annual budgets obsolete.

• Tendency to leverage N-1 numbers.

• Rapid change is the new norm

8

WRONG FOCUS & BARRIERS

Compensation

Sponsorship

Technology

Compensation should be linked to how employees contribute to the bottom line rather than how they perform against budget

Significant change requires strong corporate and business-unit sponsorship

Technology can either impede or enable progress

9TRANSITION TO BEYOND BUDGETFive Core Components

5

4

3

1EXTENDUPDATES

EMPHASIZES

RAPID FORECAST

BLENDS PERFORMANCE

2

• Extends beyond the calendar/fiscal year and covers a standard number of periods

• Updated on a regular and pre-determined basis

• Emphasizing on key business drivers

• Enables Rapid forecast creation

• Blends actual performance along with the updated forecast

10

Implement a driver base model

Retain prior-period forecasts for back testing

Ensure cultural shift

Technology support

Select the accurate forecast horizon

RECOMMENDATIONS

11

• Resources availability

Select the accurate forecast horizonRECOMMENDATIONS

No need to go the extra mile

• Lead time Align your forecasting horizon with lead times associated with the business

12

Implement a driver base modelRECOMMENDATIONS

Leading vs Lagging

Alternative scenarios

Improve with time

Allows ressources allocation

13

Retain prior-period forecasts for back testingRECOMMENDATIONS

Prior period forecasts vs actual

14

Ensure cultural shiftRECOMMENDATIONS

Participation

Behavior Change

Positioning

15

Profitability and cost management

Financial Close

Reporting and analytics

Budgeting and forecasting

Strategic planning

TECHNOLOGYEnsure complete technology support

Collaboration

Workflow

Storage

16TRAPS TO AVOID

Beware of Rolling Budget

17

THANK YOU

18

Annex

19TRANSITION

20TRANSITION

21CALENDAR