A CFO’s Guide to Planning, Budgeting and Forecasting

Setting the Direction of Travel

Few finance professionals would question the value of planning, budgeting and forecasting. Together, these processes provide a roadmap for a business and give its workforce clear directions on how to reach the intended destination. And they identify important milestones along the way, in the form of key financial and performance targets.

What’s more questionable are the tools and approaches that many organisations use to get this work done—and the results they get back. In short, typical planning, budgeting and forecasting processes see finance teams mired in mundane administrative work, with little time left for analysis, strategy development and target setting.

There has to be a better way to create a roadmap for a business and set the direction of travel.

Spare Us the Spreadsheets

Much of the hassle associated with planning and budgeting can be laid squarely at the door of the humble spreadsheet. For many businesses, this is still their primary planning, budgeting and forecasting tool. But working with a collection of disconnected spreadsheets, errors quickly creep in, through poor version control, data-entry mistakes and formula errors.

This approach is also way too slow to meet the demands of a business. If it takes weeks or even months to put together a company-wide budget based on information spread across numerous, unconnected spreadsheets, by the time that work is complete, business conditions may have changed entirely. New opportunities—and threats—may well have emerged over the intervening period, but the business is ill-equipped to respond.

Finally, this approach cannot scale. For a business aiming to expand into new markets and new lines of business it’s a dead end.

High-End Planning and Budgeting for Midsized Companies

Until recently, midsized companies faced pretty limited choices when it came to planning and budgeting software. With an enterprise-class system out of reach, for reasons of price and a lack of implementation resources, many turned to ‘point’ solutions designed specifically for smaller companies—only to find these lacking in both functional sophistication and integration links to core financial systems. The cloud has changed that, opening up enterprise-class planning and budgeting tools to smaller organisations on a hosted, pay-as-you-go basis, offering a low barrier to entry, low total cost of ownership and rapid deployment.

How Does the Cloud Help?

Today, for many midsized companies, just like large enterprises, cloud-based planning and budgeting tools are a vital enabler, enabling them to stay agile and responsive to new business opportunities. The advantages of this kind of system include:

Increased collaboration: Relevant data is accessible in real-time to everyone who needs it. Accessibility boosts participation and accountability, making it easier to get line managers involved and engaged. Greater transparency promotes company-wide trust in these processes.

Increased agility: With the very latest data always available, any changes made to plans, budgets or targets are instantly reflected in reports and dashboards, so current business conditions are always clear to users. In turn, this helps the business respond in a timely, agile way to new threats and opportunities.

Better strategic execution: With modern, cloud-based systems, the connection between leadership expectations and workforce targets is more explicit. In other words, the workforce gets a better understanding of the direction in which the organisation should be heading and the way that their own efforts align with the wider goals of the business.

New Approaches: Flexible Modelling, Rolling Forecasts

For midmarket companies, modern planning and budgeting tools in a cloud-based ERP system can support new, more sophisticated approaches that create new opportunities for agile responses.

Flexible modelling tools, for example, enable companies to test ‘what-if’ scenarios based on different business assumptions in order to rapidly determine the best response to an event or set of circumstances. Rolling forecasts mean that a company is no longer tied to static assumptions, perhaps made months ago, about business performance. R

Rolling forecasts mean finance teams can re-evaluate plans regularly and, where necessary, create new ones based on newer information.

Moving Forwards With Confidence

A finance team adept at enterprise-class planning and budgeting has the opportunity to play a far more active role in business decision-making, helping the organisation to move forwards with confidence, even in periods of uncertainty.

After all, every business leadership team needs to understand the best way to allocate resources to achieve specific results. A business, meanwhile, needs to be able to make changes to these allocations as new opportunities arise.

Finance teams have much to offer here—but these capabilities come from sophisticated analysis and insight, not from collecting, consolidating and reconciling data held on multiple spreadsheets. It’s time to take a best practice approach.