As middle-market companies are coming off the budget cycle, it is a great time to evaluate what worked and what didn’t. Often times the processes are manual and employees feel it is time-consuming. Historically, budgeting is a comprehensive estimate of revenue and expenditures for the fiscal year. It summarizes estimated activity by way of a cash budget, budgeted income statement and budgeted balance sheet by department. It’s often top-down then bottom-up. Semi-annual and monthly forecasts utilize similar processes.
Today’s organization still needs a budget. It establishes/prioritizes the organization’s strategies, goals, objectives and tactics. Additionally, it sets operational and financial KPIs and accountability for employees. Chances are your organization has changed. Has your budgeting methodology kept up?
As you start thinking about your next budget cycle, here are some things to consider:
- What business are we in? How will we compete? Do we have new products?
- Will our current system meet our current and future needs?
- How will we align our resources with strategy? How will we measure progress?
- How will we ensure accountability? How do we encourage desired behaviors?
- Are we budgeting at the appropriate entity/account level?
- When we forecast, do we need to do “all” accounts or just measurable changes?
- How do we adjust for the changes in our customers, economy or business?
Corporate Performance Management (CPM) software applications allow you to automate your budgeting processes and enable companies to have a single version of the truth and be agile in the process.
Some typical benefits of CPM are listed below:
- Shortens planning, month and year-end cycles
- Defines and easily applies organization-wide factors (e.g. 3% increase on utilities)
- Rapidly consolidates information and multiple scenarios
- Eliminates reliance on Excel spreadsheets and associated formula errors
- Online access to multiple users, departments and simplifies processes
Modernizing your budgeting will allow you to create your budget and forecasts more quickly and accurately and will reduce the effort from a tedious annual process to a normal operating procedure. Utilizing technology such as CPM in lieu of manual keying is another step towards elevating the office of the CFO from recording and reporting to strategic advisor.