How to Make Your Budgeting and Planning Process a Winning One

Nick Nesbitt is Consulting Services Director at Tagetik UK

Nick Nesbitt

The annual budgeting process can either speed up or weigh down business responsiveness, and if your competitors have more agile systems in place and the processes to quickly model scenarios and reallocate resources, they are ahead of you and their next sale may be your loss.

According to Forrester Research, 74% of businesses require a few months to a year – and sometimes longer – to respond to changing market conditions.  So here are a few tips on how businesses can be more responsive.

1. Plan cross-functionally

Finance must be the champion of inclusivity and of a cross-functional planning process that spans the different lines of business, divisions, shared services, sales and operations. This establishes an alignment across functions that makes planning transparent, eliminates debates and finger pointing, minimises risk and gives a complete picture of spend, cash, production, investment and profitability.

If your staff is sceptical of corporate mandated planning tools, you can facilitate adoption and increase usability by providing interfaces that are accessible via mobile devices and the cloud and that they are familiar with, like for instance Excel, Word, web forms and more.

1. Communicate

There is more to planning than numbers. Communication of what is behind the numbers is required as part of a successful planning process. Yet, most organisations still rely on unstructured communications such as email or messaging systems which can result in misleading or lost data. According to Manchester Companies, miscommunications can actually cost companies from 25% to 40% of their annual budget.

From the beginning of the planning cycle, how accurately and efficiently you collect the data behind a number will either improve or drag down the planning process. Having a system that can collect this data at the cell, line item, or report level and make it available throughout the process, is essential.

Obviously it is just as essential to maintain audit and trail. Spreadsheet-based planning systems and many legacy systems lack the ability to audit data if it has undergone some kind of format change during its lifecycle. Having a full audit trail of all changes – including metadata – provides confidence that, if your analysis uncovers an unexpected outcome, you have visibility of every change and data from the start of the planning process to the end.

This is particularly relevant banking, where planning is part of the compliance process.

Bear in mind that, with the proper security measures, this information must be accessible and available to everyone, not just finance or executive management. When it comes to presenting the plan to other key stakeholders, including regulators, presentations are often made using Word documents or PowerPoint decks, which are prepared manually and under tight timeframes. Luckily some planning solutions now automate the collaborative development and distribution of these outputs with workflow and direct links to the data so you know the presentation is never outdated.

1. Rationalise and modernise

Some research companies including Forrester recommend rationalising, modernising and standardising budgeting and planning applications. The reasons are simple: rationalising reduces licensing and ongoing IT support costs; modernising makes applications easier to use and adds new functionalities and technologies like for instance cloud and mobile; standardising eliminates the risk of inconsistency, inaccuracy and redundancy.

1. Make your data actionable

Information is not insight unless it can be acted upon. However, actionable information doesn’t come in a one-size-fits-all package. Managing business performance means actively monitoring business metrics and adjusting as necessary. This means that information has to be accessed cross-functionally. But how can you make it happen?

• Communicate the business value of a great plan and the importance of each division’s contribution to it
• Define meaningful KPIs at each level or division and communicate them early in the process, making it clear that everybody is working towards corporate KPIs, i.e. a common goal
• Create reports so that they are consumable in a format your user is more comfortable with

1. Automate

Many companies are investing heavily in BI assets to deliver better insights, but much of the data remains siloed in business domains and requires significant hands-on support from skilled technology professionals. Your planning should be based on comparing actual performance and financial outcomes to modelling trends and business drivers and adjusting forecasts accordingly. This requires performance results to be constantly updated.

What you need is a flexible, dynamic planning approach that incorporates business modelling and delivers real-time access to the right information and to the right people at the right time.

Key to this approach are divisional autonomy, single-source data and speed.

To be agile, each of your lines of business needs to plan in a way that makes sense for its specific needs while adhering to global standards and calculations. However, being autonomous does not mean using separate planning systems. To eliminate risk and cost, a single application should be employed by all divisions. Separate spread sheets or applications make workflow, accuracy, consistency and auditability more difficult and time consuming. A single source ensures consistent definitions and calculations and also warrants that forecasts are based on the latest actuals guaranteeing reliable and accurate information, all the time.

In addition, an effective agile planning process has to be fast. Planners don’t have time to wait for new data to be loaded and for new accounts and projects to be added. They need to analyse and react quickly and therefore need the reassurance and confidence that any data that may impact their planning is automatically and promptly reflected and documented.

If you are using Excel as your default system, it is time to move to one that provides the flexibility of Excel but with added control, workflow, capability and security. If you are using a legacy system, or a new system you have already and quickly outgrown, you shouldn’t simply replace it.

Plan for the future and be ready taking into account today’s pressing needs and changing markets. Automate and turn your company’s budgeting and planning cycle into a winning one.