What is an IT Driver-Based Rolling Forecast?
Ron Bradley, Senior ITFM Consultant, Beyond EPS
These are edited excerpts from Ron Bradley’s presentation at the ITFMA World of IT Financial Management Conference June 2011
What is a rolling forecast?
- A driver-based rolling forecast is a management tool that enables a continuous planning process unencumbered by fiscal accounting periods.
- The focus for this tool is the ongoing planning for the resources required for optimal demand-driven solutions, and continuous "keep the lights on” services.
- This continuous planning process immediately reflects known changes in sales, capital requirements, deteriorating delivery infrastructure, economic conditions, external forces and/or anything else that will affect the future physical and financial condition of the company.
What is driver-based forecasting?
- Driver-based forecasting focuses first on planning for the work that drives the economics of the business, such as:
- Customer demand for existing and new products
- Investments/upgrades/maintenance in the production and delivery of products
- R&D/new product introductions
- Reliability of logistics
- The number and mix of customers as well as the propensity of those customers to contact the company
- Events that cause disruptions in the delivery of products
- Changes in regulation and rate-making tendencies (if a regulated company)
- Driver-based changes the nature of the dialog between Finance and the business: the conversation shifts to the driver metrics forecast and the impact on the financial results. The forecast is no longer a Finance exercise.
- The key is to get all of the participants in the planning effort focused on these drivers and the longer driver-based planning horizon and let the automated forecasting tool calculate the financial results of the planning scenarios.
Copyright © 2011 by the IT Financial Management Association.
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