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Modernizing Your Process: Budgeting Best Practices for Finance Teams

Modernizing Your Process: Budgeting Best Practices for Finance Teams, Centage

As many organizations begin to look to the months ahead, building a 2022 budget is at the top of many to-do lists. For most CFOs and their teams, it’s a time when they must do the impossible – pin down a budget and financial plan despite constant flux and uncertainty. Which is why implementing best practices now, will make for a less painful budgeting and planning process tomorrow. 

It’s Time to Improve the Budgeting  and Planning Process

Decision making, risk management, cash flow, sales and even human resources all depend on budgeting and planning processes, yet for most businesses, these processes are often time consuming and inaccurate, which CFOs and their teams know can lead to bad decisions and missed projections, at the very least.

While many organizations have moved to automate and streamline business processes, budgeting and planning are often left behind.

The good news is there are solutions—taking a critical eye to your organization’s entire budgeting and forecasting processes and implementing the right software can make all the difference.

Here are a few budgeting best practices that your business can use to improve your process in the months ahead:

Budgeting Best Practice #1: Take the 30,000-Foot View

When we’re in the midst of budgeting and forecasting throes, it can be hard to take a step back and analyze the processes. But doing so will identify bottlenecks or inefficiencies.

Once your current budgeting and forecasting cycle comes to a close (or during downtime if you use a rolling process), schedule time to document the entire process. It’s a good idea to get feedback from key stakeholders in other departments as well as other members of the accounting and finance department.

Note where problems most often occur, understand where personnel are spending the most time, and see what areas can be accelerated. Taking a hard, systematic look at the process as a whole can help you identify fixes.

By no means does this have to equate to a complete overhaul, but a few key tweaks in the process can dramatically improve performance over the long run.

Budgeting Best Practice #2: Focus on What Matters

From the largest of Fortune 500 corporations to the smallest shops, businesses today understand the amount of data available at their fingertips. All this information offers an incredible opportunity for organizations to analyze performance.

But while all this data can feel like a huge benefit, the sheer fire hose-like flow of information can prove to be a challenge as well. This is where CFOs and budget managers would be well-served to discern key performance indicators (KPIs) from the information that matters less.

Spend time with your firm’s major decision makers to determine the financial and non-financial KPIs crucial to your organization. The CFO can then use the KPIs with the management team to track business performance. The KPIs should be the primary focus moving forward.

While other information should be collected and used in the analysis, a tighter grip on the data used to measure business objectives should be the primary goal.

Budgeting Best Practice #3: Embrace Automation

Not everything in the budgeting and planning flow can be automated, nor should it. However, if you struggle during the budgeting and planning processes, it’s likely your business isn’t using employees effectively.

Much of this ineffectiveness can be attributed to data collection and consolidation. Many CFOs and budget managers report that their employees spend the vast majority of their time during the budgeting process manually entering data. While the ability to collect and process information is more important than ever, key employees should be focusing on analysis and identifying potential risks and opportunities, not spreadsheets.

Here’s where automation can help. Incorporate systems that can quickly collect the reams of big data organizations see every day. These systems can also provide up-to-date and accurate information at any moment.

Those ‘smart CFOs’ who insightfully implement this budgeting best practice and use automated systems as a vital tool in their arsenals do so to their advantage, using staff for analysis rather than data entry.

Budgeting Best Practice #4: Adopt a Modern FP&A Solution

As the budgeting best practice above alludes to – taking a look at what you are using is also a critical budgeting best practice. If you’re using spreadsheets to build the complex business models your budget requires you’re likely sacrificing time and accuracy. After spending months building business logic into spreadsheets, inputting collaborative data from teams, applying accounting rules and fixing sheets that might break during the process, it is then time to review for accuracy. The smallest change could put the budget at risk of further issues, and without validation, Excel budgets must be pored over by finance teams to ensure no bad entries or miscalculations have made their way into the planning.

With the right approach and with the help of a modern FP&A solution, you will not only shave hours, days and sometimes months off your budgeting process – you will be creating a solid,  accurate budget that can be relied on to lead our organization into the future. By moving beyond spreadsheets to a modern FP&A solution, you will gain:  

  1. Visibility

Business decisions need to be made quickly. An organization doesn’t have time to wait around for consolidation of data and reporting. Automated forward-looking financial statements provide immediately actionable insights and are critical for understanding what’s going on in the business and assessing the financial impact of decisions.

  1. Collaboration

With the change and the uncertain environment it’s impossible for finance to have visibility into every detail and every driver – a strong partnership and collaboration across the organization with business leaders is essential for a complete understanding of performance.

  1. Automation

With the proliferation of technical tools, machine learning, and automation that are available today, the finance team’s job has expanded and become a more critical part of the organization’s strategic planning. Through the adoption and use of technology and digital tools, organizations are experiencing better and more accurate forecasting, decision making and planning.

  1. Agility 

CEOs and their leadership teams ask tough questions daily. Investing in a collaborative and continuous planning process that equips your teams with the financial intelligence and agility needed to make the best decisions possible will carve a path for budgeting and planning success in the next normal. 

Make Your Budgeting and Forecasting Process Efficient

While budgeting and planning processes are known issues in many organizations, it doesn’t have to be frustrating and ineffective. By following these budgeting best practices, you can improve information collection, streamline operational flow and create a more efficient, less painful budgeting and planning process, providing more accurate data analysis and better decision making over the long run.

 

Centage Corporation’s Planning Maestro is a cloud-native planning & analytics platform that delivers year-round financial intelligence. With Planning Maestro, Centage offers the sophisticated features needed by small and mid-market organizations to integrate budgeting, forecasting, and deep data analysis within one easy-to-use, scalable SaaS solution. For more information on how to modernize your office of finance with intelligent planning, view our product demonstration video, or call 800-366-5111.