Few businesses can truthfully say the budgeting process is one they anticipate with relish. Forecasting is generally time-consuming, resource-draining and often involves the repetition of previous mistakes as the same methods are hauled out year after year. Even once it’s completed it’s rare for everyone across the organisation to be satisfied with it. But why is creating a budget still so painful when it’s an operation businesses repeat each and every year?

Ideal vs reality

In theory (rarely seen in practice), a budget should achieve three goals:

  • Motivate your teams to perform and achieve at their highest levels
  • Direct investment of resources in the highest-priority projects without the interference of company politics dominating the decision making
  • Protect the business if things go wrong or unforeseen challenges arise.

The reality is that finance are mandated with producing the annual budget and subsequent forecasts for management scrutiny and this is often out of kilter with other parts of the organisation.

Traditional budgets are falling out of favour. The process is seen as a valueless and time-consuming bureaucratic exercise. One that produces a bunch of numbers that are often outdated as soon as they’re locked in place, instead of as it was originally intended: a financial plan designed to allocate corporate resources in support of strategic objectives.

This quote from a 2015 Association of Finance Professionals paper, although five years old, still holds true.

Bringing finance closer in to the business

At the end of the day, the finance team’s performance is just as important as the performance of the business. FP&A shouldn’t just be focused on pulling a set of numbers together and handing them up to management. The data and insights finance produce needs to be used to guide the business rather than merely being seen as a method of reporting on activity.

Once the finance team are no longer siloed but are actively participating in the wider process, they can engage other business units, building a sense of shared ownership of the forecast and its implications. FP&A can communicate with and educate the rest of the organisation, using the numbers to drive an improved knowledge of the economics of the business.

This communication has to be driven by an easy and fast process. Your finance team can’t be reliant on spreadsheets and spending all of their time manually updating the data and also engage the other business units. Technology needs to step in and take the strain to allow for easier scenario planning, rolling forecasts and the capability to ensure the budget remains reflective of the real-world situation rather than being stuck as a static, instantly outdated output. If the numbers are available at the speed of thought and iterations are easier and faster to achieve, there will inevitably be wider participation across the organisation as the process becomes significantly less painful and more engaging for all involved.

Refine the process

It’s time to think differently. With the technology in place to increase your finance team’s capability, you can tackle both the internal and external points of pain and focus your approach.

The initial gathering of the ‘fact-base’ of data can be simplified into a single version of the truth; no more web of spreadsheets with a multitude of potential weak points, all information instead held in a centralised system. If the gathering and consolidation of the information is streamlined, your data will then be much more readily manipulated and modelled, meaning your objective data is more easily available for analysis.

Next, focus on the drivers that truly matter and flex those when creating scenarios across core areas, such as:

  • Sales and marketing
  • Revenue budget / revenue forecast
  • Cash budget / cash forecast
  • External economic conditions

With increased involvement from across the company, your finance team can collaborate with the business owners of the crucial drivers in order to create truly meaningful models.

Still a budget, just less painful

We’re not saying that the budgeting process will ever be entirely pleasant for everyone – its function is still to create a set of numbers which measures performance inevitably leading to tension and some controversy. However, with everything moving faster and smoother than before and more engagement from the wider business, it doesn’t have to be the same painful annual chore it currently is.

To find out more about how Planning Analytics can help you arrive faster and more easily at the numbers behind your budget and present them in a format that’s readily accessible to the whole organisation, get in touch today. The budgeting process doesn’t have to be something you dread year in, year out.

Spitfire have a depth of understanding not only in Cognos/TM1 technologies, but also in finance and accounting. It is this combination of expertise and their ability to get to the heart of business problems that has resulted in such confidence in their delivery and capabilities. The insight and value-add they have brought is evident.

- Peter Smith, Head of Solution Delivery, Edrington

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The Path to Powering Profitable Decision-Making Reporting on the past, getting a grasp on current performance – or creating insights to drive a more profitable future. Read more