Moving from Traditional to Rolling-Forecast

1. Introduction

Instituto Sócrates Guanaes is a social health organization that manages 8 health units, including hospitals and first care units, in different regions of Brazil. It has more than 6 thousand employees and an annual budget of R$700 million.

Previously, the company used a traditional budgeting process with a detailed budget by calendar year, a strategic capital plan for a three-year plan, and semi-annual budget reviews.

2. Shortcomings of the traditional budgeting process

o Mixing ambitious target setting with a realistic forecast.
o Slow adaptation to market conditions.
o Inconsistent visibility with a decreasing horizon.
o Lack of structure for investment decisions.

The company aimed to improve their process by achieving better visibility, agility, control, and simplicity.

3. New financial forecasting process

o A five-quarter forecast on a quarterly basis.
o Micro-assumptions to ensure consistency across different businesses.
o Internal forecasting process.
o Consolidation of financials and creation of management views through Power BI and reports.
o Quarterly reviews with action items.

4. Success criteria for implementing the new process

o A need for change, often driven by economic crises, competitive pressure, or macro environment changes.
o Executive sponsorship and management buy-in.
o Mindset change from a fixed number to a flexible process.
o Departments’ collaboration on quarterly budgeting and forecast validation.

5. Benefits

o Increased visibility with a five-quarter horizon.
o Improved performance discussions.
o Better decision-making and action on trends.
o Setting up targets and allocating capital more effectively.
o Increased autonomy and ownership among departments.