It’s Time to Reinvent the Budget Planning and Forecasting Process

If you’re anything like me, then the terms budgeting or forecasting will either send you directly to sleep or have you looking around eagerly for something else, anything else, to do. “What’s that? We need to plan next year’s budget? Not while there are windows that need cleaning, we don’t!”

Believe it or not, there are people within all organizations – generally people with the word “finance” in their job titles – who enjoy budget planning and forecasting. What’s even harder to believe is that these people are in the right. While it may be a substantial quarterly or annual inconvenience for many of us, robust budgeting and forecasting provide the framework for the future of all businesses. 

But what exactly do budget planning and forecasting (or BP&F as those financial types like to call it) involve? How does a budget differ from a plan or a forecast?

• Planning is the highest level of all these processes. It’s mostly a structured overview of an organization’s financial objectives for the next few years.

• The next level down is budgeting – a more detailed look at how the company will execute the plan over a shorter period. Companies tend to allocate budget annually, according to their fiscal year. However, budgets are often tracked and adjusted quarterly or even monthly, depending on how the company is performing against its goals. Budgets include items such as revenue, expenses, cash flow and debt reduction.

• Forecasting combines planning and budgeting with historical performance and the current economic and market conditions to provide a financial prediction of a company’s performance over the next few quarters of years.

The old ones aren’t always the best

Excel turns 35 this year. In the three-and-a-half decades since Microsoft first launched it for the Macintosh (Windows didn’t follow until two years later), Excel has undoubtedly established and cemented its reputation as one of the all-time great business tools and software. But that’s still no excuse for still using Excel for all your budgeting, planning and forecasting.

While cloud-based SAAS solutions have improved efficiencies right across organizations, 70 percent of companies still confess to relying heavily on spreadsheet reporting for BP&F, with 40% using spreadsheets exclusively. Substitute the monitor for ledger paper, and those companies are managing their financials in the same way as managers were doing it more than 100 years ago.

“If it ain’t broke, don’t fix it,” you might say. Just because something isn’t defective doesn’t mean that it can’t be vastly improved upon. The primary issue with doing BP&F on spreadsheets is that it’s enormously static and reactive. While reporting, planning and forecasting annually may have cut the mustard decades ago, it simply isn’t fit for purpose in today’s VUCA business landscape. Markets, competition, trends, and sociopolitical environments now shift rapidly and unpredictably.

Modern cloud-based systems allow organizations to update and review budgets, plans and forecasts in almost-real-time, rather than being reliant on reports generated several quarters earlier when the world looked very different. For an all-too-recent example, just think about organizations today, basing their plans and strategies on data generated pre-COVID and wondering why their predictions were so far off their current revenue. 

The advantages of modern BP&F software go beyond rolling forecasts, current budgets, and continuous planning; sprinkle in some other advanced solutions and watch as your entire financial management becomes more secure, flexible, and potentially even more economical.

• Apps such as Wave, Expensify, Spendesk or Rydoo speed up and automate the expense tracking and receipt scanning process for both employees and finance departments.

• Solutions like LivePlan and Aha! help users create better and more agile business plans

• BP&F are complicated multi-faceted projects – project management tools like Asana, Trello and Monday.com can help track and reduce friction.

• BP&F also tend to be meeting-heavy processes, as finance and strategy typically need to sit down with all budget holders or heads of the departments regularly. Using enterprise scheduling software like Doodle will save you hours on the legwork, plus Slack and Zoom integrations speed up the process even more. 

• There are also numerous industry-specific apps like Restaurateur or InventoryTracker that give BP&F professionals insight into inventory, supply chain and logistics.

Fail to plan and you plan to fail

Beyond speeding up the entire process, modern cloud-based BP&F solutions, teamed with other business applications, give organizations access to reams of data that can be analyzed to provide more accurate and more strategic decision-making capabilities. Processes become more collaborative and transparent, while there’s a clear audit trail should decisions or changes need revisiting.

From Kodak and Blockbuster to Toys R Us, business graveyards are haunted by great companies who were just a little too slow to realize that the current had changed direction. What steps can your company take to make sure you don’t join them? 

• BP&F must be an overwhelming priority at the board level, with the whole organization behind finding a sustainable and steady model for growth.

• Starting with senior leadership, the organization must also have clear agreements about decision-making in response to BP&F. All companies would do well to forge stronger ties between their operational, financial and strategic departments, but clear accountability and ownership also need to be established.

• Choose forecasting periods that suit your company’s and your industry’s specific business cycles. Plan analysis and updates around critical periods in the calendar.

• Think of BP&F as a company-wide competence and responsibility and incorporate other financial data, such as financial statements, annual reports and trickle-down KPIs.

• Select BP&F software that automates as many of the manual processes you’re currently using to save time and money, reduce resources, and get more relevant and actionable data.

• Use software to conduct more what-if analyses. While today’s business environment may be unpredictable, organizations can still go some way towards preparing for the unexpected.

Finally, businesses have traditionally treated budget planning and forecasting like the dark arts to be practiced by a select view behind closed doors. By increasing communication around BP&F and making reports more accessible, all stakeholders will buy into the process to a greater extent. Plus, with a clear explanation as to the importance of robust budgeting and planning to the organization’s future, financially-ignorant folk like me may even pay attention when next year’s budget needs submitting.

To understand how Doodle can make it seamless and effortless to schedule important board-level meetings, learn more about how our product works.