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Beyond the Budget

May 4, 2019
Formula-free FP&A

Eliminate human error, increase confidence, and shave hours (or more) off your FP&A process.

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Completing an annual budget is only the first step in ensuring corporate financial health

As a finance professional or finance executive you work very hard each year to complete a corporate budget that is assembled from several or many departmental budgets.  You receive input from department heads and use global and budget item specific assumptions and drivers to calculate the many budget lines that go into each budget record group (e.g., Revenue, OpEx, Personnel).Your company may be using a purpose-built application which means you have already migrated from a set of spreadsheets to database-oriented CPM (Corporate Performance Management), FP&A (Financial Planning and Analysis) or other system that allows many participants to collaborate on creating and approving the budget.Expectantly, your new system has built-in business logic and accounting rules, so you can perform accurate modeling without using spreadsheet-like formulas, functions or links.  Your chosen solution may even have forecasted financial statements synchronized to the P&L and its underlying budget, the latest in budget creation technology.If your organization is one of a growing number of companies that already implemented such advanced technology you’re off to a great start.As with every successful business software transformation or at least a solid commitment to making such a transformation, the implementation itself, initial testing, staff training and even taking the first annual budget to its successful conclusion is only the first step in a series of activities meant to transform a strategic, operational and financial plan into a corporate budget that can be continually monitored and maintained.Then, with the aid of integrated analytics there must always be assurance that plans are being executed correctly and the financial health of the organization is maintained and improved.A while back I interviewed people in various positions in the finance department of some of our clients. I was trying to gauge their understanding of the budget process, its expected outcome and the benefits it provides to the company.  I was surprised how many people, even in higher positions in finance and corporate reporting were under the impression that the budget was mainly to set the expectations for sales, expenses and employee headcount throughout the budget year.  Most understood that comparing actual results to budgets and forecasts was something prudent that had to be done periodically, and most of these organizations did.  However, many did not go beyond that.In the blog article “What does the Annual Business Budget Mean to you” I went into much detail on this topic.I think with the availability of software designed specifically for the creation, maintenance, analytics and financial reporting, there is no reason why those in charge of corporate finance, including senior management, should not embrace such an approach and the technology making it possible.It is this approach that is enabling corporate financial health to be forecasted using actual results and budget data and then continually monitored, giving management the tools and insight to make reasonable decisions when these decisions need to be made and never as a reaction to an often already late discovery that changes must be made.This approach is already available to the SMB (Small and Medium Size Business) market.  It is affordable, with implementations usually taking days or weeks, not months or years, and the benefits are too great to ignore.  Since the whole process usually does not put any extra drain on resources, you could say with confidence that there is life beyond the budget.

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