Usually at the end of the year finance teams have a lot on their plate and in many cases their biggest challenge for the year is annual budgeting and planning. An accurate plan builds a solid foundation for next year’s finance functions. Inaccuracies that are often inherent in planning and budgeting are the processes and tools.
Static processes and tools put businesses at risk
At many companies planning and budgeting takes too long and consumes resources. Finance teams end up spending more time on administrative tasks regarding processes such as collecting, consolidating and reconciling data and not enough time for analysis, strategy development and target setting. Tools such as, spreadsheets and emails which are commonly used, leave too much room for error and are time consuming to update with the relevant data. As a result, accuracy can be patchy and unreliable.
This impacts the financial planning of businesses in many ways:
- Lost time collecting and updating data from multiple departments and validating assumptions.
- Bottlenecked collaboration between stakeholders.
- Slow response to market changes and new opportunities.
- An inability to make effective decisions quickly.
To avoid these issues, there are four practical tactics teams can take
1. Install rolling forecasts and budgets to avoid perils
Businesses can avoid the perils inherent in making static assumptions about business performance months ahead of time with rolling forecasts. This allows companies finance departments to revisit plans regularly and reforecast where or when necessary, based on new information.
More specifically, rolling forecasts support continuous planning for a set number of periods in advance.
2. Adopt an open-door policy
The most common assumption in budgeting is that finance teams pull numbers from thin air but this is not the case in reality. Finance teams often acquire vital information that is gained by building mutual understanding with departments around the organization.
When companies adopt an open-door policy, where finance teams work closely with department heads throughout the entire budgeting process they are bound to get more accurate data.
3. Be prepared for everything
Finance teams cannot be prepared for every negative (or positive) scenario. However, what they should possess is a general idea of which trends in the industry may cause changes in the quarters or months to come.
4. Leave spreadsheets in your past
The static spreadsheets teams use for budgeting and forecasting aren’t really built for that purpose.
Staria BI & Planning is a cloud-based business intelligence and planning solution that makes it easier to guide business through data.