Rethinking Your Budgeting Process

For accountants, just like death and taxes, budgets will always be with us. But when our existing systems expand to match organisational growth and change, are we like a toad that just keeps getting bigger or like a snake that sheds its skin?

Jon Lindsay wrote an insightful article about this last year. We need to remember that the point of most Financial Planning & Analysis (FP&A), Business Intelligence (BI) or Corporate Performance Management (CPM) systems is to generate information which backs up meaningful decision making. While his article focuses more on drivers behind the traditional budget process and ‘What’ we could be doing differently, I want to focus on optimizing these processes and ‘How’ to manage the complexity involved.

The first step is always to identify and acknowledge the problem.

Whatever your business structure, you are faced with the annual cycles of revenue and cost projections.
Most of us started out with something simple – a spreadsheet or two to calculate the ins & outs, maybe a cashflow projection on the side. As businesses grow, our systems get more and more complicated. We add new sheets to bring in data from rosters (which are maybe run on their own spreadsheet) or motor vehicle usage.

As accountants, that’s fine, we can make spreadsheets dance, and sing, and even make pictures.
Still, these sheets get more and more unwieldy- as a CFO of mine used to say ‘We’ve grown like topsy…’.
Subsequently, we find ourselves with a few options in front of us:

Option 1:

We can stick our head in the sand and just let our system get ever more convoluted

OR

We can tell ourselves that it’s too expensive/difficult/time consuming/whatever other excuse we come up with to justify not doing anything about it, which amounts to the same thing.

Often, this build up is a journey in and of itself. Something more important/urgent is always going to take priority – up until the tipping point where it’s too late to fix the problem and then we go from prevention to damage control. During the journey, we may be able to see some signs of trouble ahead and they may be small to begin with. Things like:

  • Inconsistent info, manual processes, data validation and other minor errors that propagate through the model
  • Lack of systematic workflow and controls
  • Lack of collaboration and accountability, with time wasted with chasing up those required to approve inputs into your model (line managers, other corporate business units)
  • Multiple data sources, multiple contributors, compliance demands, mounting deadlines, long processing times
  • System validation challenges – i.e. is it a step in the process to ‘make sure the model works this year’?

Option 2: 

We can conduct a thorough review of our current available resources and identify if there are any inefficiencies we can address and go from there. The question is, how do we know where to start?

The next post will expand on the review process – check back here if you want to keep up with our updates on this topic

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