Hiring guide
Budget versus rolling forecast: what to ask your CFO to own
By CFO Index · Published
A budget records an agreed plan; a rolling forecast updates your current view as information changes. Keep both when they serve different decisions. Replacing the budget with the newest forecast can erase accountability, while refusing to update a forecast can leave management planning around assumptions it no longer believes.
Decide what each version is for
Label the approved budget, latest forecast and actual results separately. State who can approve spending and whether forecast changes alter that authority. This is a management design choice that needs agreement, not a software setting to leave to the model builder. Ask the CFO to show the same period against both the original plan and the latest expectation where that comparison is useful.
Forecast the drivers you can discuss
Select drivers such as customer renewals, staffing capacity, utilisation or order delivery rather than increasing every cost by a blanket percentage. Record the source and owner of each assumption. A driver model is only helpful if someone can explain how changing an input affects the output. Keep unsupported estimates visible and avoid adding precision that the underlying information cannot justify.
Connect the forecast to cash timing
A revised sales expectation does not say when money arrives. Include billing milestones, collection assumptions and committed payments in the cash view. British Business Bank's working-capital guidance notes that growth can create financing pressure; use the forecast to examine your own timing rather than assuming more sales will resolve a low balance. Ask the CFO to show which commitments are already difficult to change.
Use a small change log
Hypothetical case: the September forecast moves two contract starts from October to December. Record which contracts changed, who confirmed the delay and whether delivery staff can be reassigned. The next review can then distinguish an optimistic assumption from a new commercial development. A useful log records reasons, not every spreadsheet edit. Preserve the prior version so the comparison remains reproducible.
Set update frequency by decision speed
A seasonal business approaching a large inventory order may need more frequent cash updates than a stable annual planning process. Agree the cadence and the trigger for an exceptional update. Do not rebuild the whole model whenever a minor estimate changes. Ask the CFO which inputs require close monitoring and which can remain fixed until the next scheduled review.
Acceptance test for the CFO's work
Have an internal owner update one assumption and explain the resulting changes in profit and cash. Check that the approved budget remains intact and that the changed forecast is clearly labelled. Request a short list of decisions implied by the update. If the output is only a new set of numbers without an explanation, the forecasting process is not yet complete.