Originally published in Manufacturer, ARB’s Manufacturing Industry newsletter.
Economic volatility and supply chain disruptions during the COVID-19 pandemic strained the usefulness of traditional budgeting and forecasting methods. Fast-changing economic and market conditions can make a traditional static forecast obsolete. Manufacturers that haven’t already adopted a rolling forecast model may want to make the move.
The Differences
The problem with static forecasts is that management tends to view it as a once-a-year event. Once the annual budget is set, managers may not compare actual to forecasted performance until year end. Even if they do recognize midyear that changed conditions have caused the company to fall short of its goals, they may not have the wherewithal to redo the budget.
With a rolling forecast, rather than setting a one-year budget and forgetting about it, management revisits the budget periodically — quarterly or monthly, for example — and adjusts the numbers to reflect changing circumstances. Let’s say you created your budget on January 1, 2025, and your rolling forecast calls for you to budget four quarters ahead. At the end of the first quarter of 2025, you’d revisit your budget, tack on a new fourth quarter (the first quarter of 2026) and adjust the numbers based on current conditions.
3 Benefits
Three benefits of a rolling forecast include:
- Improved accuracy. By comparing actual to forecasted performance more frequently, and updating the numbers in real time, your forecast becomes more reliable and valuable as a planning tool.
- Increased agility. Updating your forecast regularly allows you to spot trends early and make necessary adjustments for unexpected events or evolving market conditions before it’s too late.
- Contingency planning. Some manufacturing processes rely heavily on a particular raw material or component part. Creating “what if” scenarios allows you to see how a sudden price increase or shortage would affect your performance. You can then implement contingency plans to mitigate the impact.
Time to Get Rolling
Generally, rolling forecasts don’t increase budgeting process costs. In fact, once manufacturers begin using them, the process is usually less disruptive than static annual budgeting. In fact, you can automate the process by using budget and forecasting software. Contact your financial advisor to determine if a rolling forecast is right for your manufacturing business.
This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and, accordingly, assume no liability whatsoever in connection with its use. ©2025
Manufacturing Team Spotlight
Gisèle Couturier is a senior manager at ARB. She specializes in providing audit, accounting, compliance, and advisory services and primarily works with manufacturing companies, nonprofit organizations, credit unions, construction companies, and employee benefit plans.
