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Sir, I know it is very unacceptable to write a outsize paragraphs. I was really unclear about this. It is saying about Revised and Rolling Forecast but I can not get entire passage so can not point out my question. Please explain sir. Thanks in advance.
“As a financial year progresses, the actual cash flows for the past months could show large variances from budget, but a rolling forecast indicates that the original budget for the end-of-year cash balance will still be achieved. This could occur if the rolling forecast has been prepared by adjusting the forecast for the unexpired months of the year, in order to keep the annual budget (on paper at least) for the end-of-year cash position. Where this occurs, suspicion must arise that the rolling forecast has been prepared with little thought.
Unchanged figures over a number of months of revised forecast submissions are also an indication of a weak forecasting system. It could be that business expectations have not changed; however there are few businesses that do not fluctuate with market conditions. A more likely explanation is that the rolling cash forecast has been prepared by copying the figures from the previous forecast or that a new revised forecast has not been prepared at all.”
A rolling budget always looks 12 months ahead. For example, as June 2021 ends it will drop out of the budget and June 2022 will be added.
What they are trying to say (badly) is that if the cash balance originally forecast as at 31 December 2021 is unchanged in the rolling budget then that is suspicious because most businesses will not hit their cash budgets exactly. In a rolling budget you expect estimates of future amounts to be continually updated as you get nearer to each month and have to deal with less uncertainty. If amounts do not change it looks like a sloppy approach.
In a revised forecast, we change the amount of remaining period?
For example we had made budget from January to December 20×7. After January, Manager noticed the prediction were inaccurate so they will revise forecast for Feb to December 20×7.
Am I correct sir?You also yes, for a rolling budget always looking 12 months ahead, use the best information.
Another approach, but not a rolling budget, is to put actual figures in for months that have occurred, then best estimate for the remaining months for the period. This produces more and more accurate prediction for the period’s results.
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