Budgeting best practices
So how do I stop waking up from this nightmare in pools of sweat, or better yet – stop having nightmares about the annual budget cycle altogether?
Unfortunately, there is no silver bullet and as with most process improvement exercises, it takes a combination of people, process and technology.
The good news is – there is a way. Top performing organisations understand these challenges and generally nail these 3 key best practice aspects for budgeting and planning:
1. Move away from the granular detail
Focus on what really matters, think about your subsequent variance analysis. Chances are, you won’t have the time to go down to the detail in your analysis anyway. The more detail, the more complexity and time taken to complete each cycle – particularly if using the wrong technology.
As an example, for a recent manufacturing client we have been working with, it made absolutely no sense for them to plan down to each of their individual 200+ customers when the top 20 made up 80% of their sales.
2. Empower through reporting
As with most goals, there is no point completing it and then putting it on the shelf. Empower and enable your budget holders/contributors with the information they need to prepare and review their performance. They need to be able to see how they are tracking so they can adjust their plans accordingly and buy into the process.
In most cases, this is already happening with actual data, whether it is done through manual extracts from source systems or via existing business intelligence (BI) applications. Unfortunately though, budgets and actuals usually sit in different systems, which makes this quite difficult – see the next point.
3. Leverage technology
Move away from spreadsheets and leverage an integrated online planning application. Part of the reason most organisations are hamstrung with their planning and reporting process is that they are going in battle armed with kitchen utensils.
Make things easier for your users and reduce the use of unwieldy error prone spreadsheets. Unless you are a small business without many budget contributors or have a very simplistic business model, it is almost impossible to conduct dynamic and active planning without leveraging technology.
As a consultancy that specialises in implementing budgeting and forecasting solutions
, we see a lot of organisations limping through using traditional spreadsheet tools for their enterprise planning. In the last decade, technology in this space has come in leaps and bounds to support FP&A teams and the finance team in general with better managing company performance.