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In practicing extended financial planning and analysis, construction companies should engage in rolling forecasting. With the help of rolling forecasting or continuous accounting, you can make more informed financial decisions that maximize profitability.
What is rolling forecasting?
Rolling forecasting entails a company projecting as much as a year or 18 months ahead every quarter or month. This practice gives teams a window into the future regarding their operations and finances. In the process, executives and others can better determine which steps to take to optimize efficiency and profits.
The benefits of rolling forecasting
If you integrate rolling forecasting into your construction company's planning, you'll enjoy many benefits as you prepare for the future. These advantages include:
1. Increased automation
Through rolling forecasts, you can benefit from automated accounting that collects and syncs data without delay. In the process, you can automatically generate audit trails for transactions instantly adding various data sets to records, including receipts, contracts, and invoices. Subsequently, construction companies benefit from more streamlined workflows and eliminate many tedious tasks. Increased automation of various processes also helps minimize the risk of human error.
2. Improved accessibility of current data
Updating finances in real-time can also make it easier for teams to access current data while avoiding the need to spend as much time making changes to outdated data or developing reports. Financial teams and others will reap the benefits of increased accessibility as everyone remains on the same page with the same data. Additionally, continuous closing allows for faster and simpler closing, with many companies taking as little as one week to close when implementing rolling forecasts.
3. Redirect funds for internal development
Keeping financial data consistently up-to-date can also help with tasks around internal development, such as establishing policies. Financial teams and others can make critical decisions more quickly with the help of measurable key performance indicators based on company goals. Depending on the company's performance, executives can determine which steps to take to continually improve and meet the goals they have in place. In turn, construction companies can experience true growth because of faster and better decisions.
How to implement rolling forecasting
If you want to use rolling forecasting to your advantage, there are certain best practices to keep in mind.
To start with, you will need to know what you want to achieve through rolling forecasting, which will give a direction for the rest of the process. You can then determine how frequently you want to forecast, whether you engage in forecasting every month or every quarter. You'll also want to decide how long you want to forecast for, which could be anywhere from 12 to 18 months.
Other steps involved in forecasting include identifying comparison periods to help gauge progress, planning projects, and capital separately, and starting small while increasing scope over time.
With the help of rolling forecasts, your construction company will ultimately have the chance to increase the cost-effectiveness and overall efficiency of operation, enabling you to expand and continually improve.
Briq is a financial platform that enables construction companies to be more efficient and profitable. Learn how we can help your business achieve rolling forecasts with a demo.