November is not only meant for auditing the contents of your coat closet before the global online shopping festival, it likely means you’re well into next year’s budget planning process.
Finance teams have a lot on their to-do-lists at year-end and, frequently, their most difficult challenge is annual planning and budgeting. An accurate plan creates a confident finance function for the new year. At the heart of the inaccuracies that are so often inherent in planning and budgeting are the processes and tools.
Static Processes and Tools Put Business at Risk
At many companies, planning and budgeting takes too long and devours resources. Finance teams spend more time on administrative tasks relating to these processes – collecting, consolidating and reconciling data – and not enough time for analysis, strategy development, and target setting. And the tools that are commonly used, spreadsheets and emails, 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 business in many ways, the biggest being:
- 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.
- Install rolling forecasts and budgets
Rolling forecasts can help companies avoid the perils inherent in making static assumptions about business performance months ahead of time. These enable finance departments to revisit plans regularly and re-forecast where necessary, based on new information.
- Keep an open line of dialogue
More specifically, rolling forecasts support continuous planning for a set number of periods in advance. For example, if a company’s rolling forecast period stretches 12 months into the future, as each month ends, the numbers recorded that month will be used to add another month to the forecast. In this way, the forecast horizon continues to roll forward, based on the most current data available.
Budgeting isn’t the finance team pulling numbers from thin air. Often, it’s the team-building rapport with departments around the organization and acquiring vital information from them.
Accordingly, an open-door policy, where finance is staying in touch with department heads throughout the budgeting process, is bound to get more accurate data.
- Hope for the best, but plan for the worst
Finance teams can’t plan for every single negative (or positive) scenario. But they should have a general idea of what trends in the industry may cause waves in the quarters or months to come.
While there’s no crystal ball for budgeting, the one-two punch of rolling budgets and careful analysis of the market and industry trends should offer sage insight.
- Break up with spreadsheets
There’s no other way to put it: the static spreadsheets teams use for budgeting and forecasting aren’t really built for that purpose. Sure, a wrench can double as a hammer, but it’s not its best use.
With NetSuite Planning and Budgeting, teams can ditch the cycle of hoping for the best in Q1 and picking up the pieces in Q4. It’s possible to build the opposite— an active cycle and process where clear collaboration, greater control, and alignment of the organization builds accountability, reduces planning cycle times and improves visibility.
Before it’s time to break out the snow boots, get your budgeting processes in order. Your future self in Q1 2020 will thank you.
For more on planning and budgeting, request the ebook High Impact Planning and Budgeting for all Types of Growth.
By Rami Ali, Senior Product Marketing Manager, NetSuite Planning and Budgeting of Oracle NetSuite