If you work with traditional budgeting at a growing company where the planning processes are becoming increasingly complex, you’ve probably noticed quite a few flaws. Before I started at Planacy, I worked as a controller at several different companies and as per tradition we always worked with Excel and made a couple of budget and forecast updates per year. Even though the budget is necessary to get a clear image of the business’s future, it was perceived by both me and the rest of my colleagues as rigid, slow and incredibly time-consuming – but it doesn’t have miss these key factors.
It’s very common for the budget to be perceived in this way and that’s why the need for a more updated and continuous forecast continues to increase. In this article, I have summarized 10 simple key factors for how you can get a more value-creating and continuous planning process!
All employees with insights in the business should be involved with the budget and forecast to create an engaging process with a high level of accountability. As you know, the financial budget and forecast affect all parts and aspects of the business. Therefore, transparency and continuous communication with everyone involved is of utmost importance throughout the process. Both strategic and short-term objectives should be made visible.
Another important part of increasing engagement is to work data-driven with concepts, KPIs and dimensions that everyone in the business is familiar with. In this way, it becomes clear to everyone what drives revenue and expenses and what impact it has on the business's results. Also, the quality of the input and ownership of the forecast increases when looking at key figures instead of accounts in the income statement. Therefore, it’s important to invest time into identifying your key budget drivers and make input on that level.
As is well known, the purpose of forecasts is to predict the financial future of the business. Well-executed and reliable forecasts with clear frameworks and goals will not only help you make better business decisions, but also help you understand the impact of the decision. With a consistent driver-based process you also increase employees understanding of the business which allows them avoid guesswork and hypothetical assumptions.
If, on the other hand, there is a lack of clarity regarding what’s important, your ability to get a qualitative view of your financial future will falter. Then you’re more likely to get a budget and forecast of a political nature i.e., a budget that the business fulfils and then surpasses.
Dare to drop your focus on calendar years. Even if the board demands a budget, this doesn’t stop you from always looking 12, 15 or 18 months ahead, or even better – creating a rolling forecast with dynamic length. In this way, you always get a continuously updated view of the future. You’ll reduce the work effort required for each forecast or budget.
Read more about opportunities (and problems) with rolling forecast
Strictly treating the budget as the correct outcome that the reality must live up to is not only inhibiting for the business, but directly counterproductive if you strive to be as successful as possible. The world around us is changing faster and faster which places high demands on businesses to be flexible and to be able to act quickly based on as current and correct data as possible.
Many companies are taking this all the way and implementing a continuous and dynamic planning process and goal management based on the Beyond Budgeting concept.
Read more about Beyond Budgeting – Continuous and dynamic targeting
You can’t plan for everything, but you can have an idea or understanding of what’s most important. Constantly keeping this understanding up to date – taking external market trends or internal sales and delivery trends into account – contributes to your company getting better insights and thus creates better conditions for making good decisions.
Working with what-if assumptions (worst-case and best-case based on different assumptions and scenarios) to create the best possible basis for decision-making, contributes to the financial forecast becoming a more powerful tool for operational performance management.
The data you as a business have access to grows exceptionally with each passing year – make sure to use it, not only to be able to plan better but also to be able to make better decisions. By working data-driven with quality-assured data from your most important data sources (everything from the accounting system, time accounting, ERP, CRM and business intelligence platforms), you increase understanding and the quality of input and assumptions going forward. With quality data as a starting point you can use better distribution keys, algorithm calculations, and if you also have a system for financial and operational planning, you’ll receive automatic forecast proposals based on your data.
When you have minimized manual mistakes and ensured good data and smooth integrations, the administrative time you invest in the process is also reduced. Controllers can then instead further contribute to increased commitment by supporting the business in how they need to think and act to achieve their goals. Controllers can spend more time on value-creating activities such as optimizing the process, as well as analyzing the budget and forecast in more detail to, based on the results, make as qualitative decisions as possible.
For the budget and forecast work to be as qualitative as possible, you need to be able to analyze it in detail – therefore you should set up well-functioning analyzes for both outcomes and forecasts with clear KPIs and objectives, either in Excel or a business intelligence system. By integrating your planning process with existing analysis applications and spreadsheets, you can work seamlessly with financial planning and analysis.
One thing that’s important to keep in mind here is to avoid complex systems that try to solve all of your needs. Why? This often leads to expensive consulting hours and unused applications that require expensive management.
Read our article on the pros and cons of using CPM, best-of-breed or self-developed systems
Excel is an incredibly powerful tool that we at Planacy love, but it is not suitable for everything. If you want to set up different scenarios, work more frequently, increase commitment and accountability of the forecast, you need to reduce administrative time (as mentioned in point 8). In Excel, however, a lot of time is required to prepare, operate, and consolidate your processes and there is a great risk of getting inaccurate numbers due to human errors when many people are involved.
Use Excel for what Excel is good at, but to work more continuously and data-driven with your budget and forecasting process you should invest in a planning platform that can be adapted to your business and your unique processes.
More efficient, qualitative, and data-driven work is made possible through smart integrations and customized budget drivers when you invest in a modern planning platform – and Planacy's planning platform can be completely customized for your business, your regulations and needs.
Do you want to discuss your financial planning processes and conditions for starting to work more continuously, collaboratively, and data-driven? Contact me or one of my specialist colleagues for a free consultation.
Planacy's planning platform is fully customisable for your business, your processes and your needs – no matter your industry.
