Business Intelligence Blog from arcplan
24Oct/110

Common Challenges That Undermine Your Budgeting, Planning and Forecasting

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For many financial planners out there, budgeting, planning and forecasting equals spreadsheets. Dozens or hundreds of them – that's just the reality. You've accepted the fact that come the end of the fiscal year, you and your cohorts will be chained to your desk piecing together various versions of spreadsheets from each department and hoping that after several weeks of this, you're able to consolidate the numbers into a workable budget for the next year. And then you hit a sales roadblock halfway through the year and have to forecast the impact…and go through all of this again.

The sheer amount of work this process takes is not the only challenge you face, and you're not alone. Let's take a closer look at 4 of the common challenges that are undermining your ability to be truly productive and add value when it comes to budgeting, planning, and forecasting.

Visibility
Have you ever tried driving at night without headlights? I haven't, but I can tell it's a bad idea. In the same vein, your visibility issues when it comes to budgeting and planning mean you might be driving blind and that's a bad idea for organizations that want accurate budgets and forecasts for the year/6 months/quarter ahead. Can you relate to these complaints?

  1. I’m unable to get real-time data from IT.
  2. The data I do get is siloed.
  3. We need to cut our sales plan back 10% and I have no way to see the financial impact, let alone quickly notify budget managers of the change.

Visibility issues might vary in complexity but they all mean the same thing: making decisions with inadequate or outdated information can inject serious error into every process at your organization. If you have old data to plan with, your budgets may be unrealistic. If you can't provide timely insight to your budget managers, they can't make good decisions (as would be the case with #3 above).

And if you're not providing value-added contributions to the budgeting and planning process, your role as a planner will be undermined.

Control
How many budget versions did you get from Marketing last year? 2 for the US, 1 from Europe, 3 from Asia? We have one hospital client who used to collect more than 200 spreadsheets during budgeting season and then had to make sense of them in about a month, which meant many sleepless nights for the finance team. It was not only difficult for them to consolidate the various versions of these spreadsheets, but imagine then trying to plan for various scenarios. Many years, they never got to that point.

So a lack of control means a headache-inducing number of spreadsheets, sure, but it also means never getting to the coveted "single version of the truth" – a single version of the truth that likely needs constant adjustment. What business sells and spends everything according to plan, on schedule and within budget every time? As a planner, you need to account for a constantly changing business environment, so you need to re-plan, re-forecast, and distribute the results in a way that holds budget managers accountable. With a spreadsheet-based model, that's often difficult, if not impossible.

Time
I hear this a lot: "our planning process takes 6-8 weeks, not accounting for sleep." It's likely that your process requires a lot of repetitive tasks that take up time – time you could be using to analyze data, plan for various scenarios, or perform what-if analysis…you know, time that could be better spent doing less manual work and more analysis that adds value.

To extend the example above about needing to forecast the impact of a sales deficit, take a moment to think about how this would go at your organization. If you work for an SMB, maybe it's not such a huge deal and you can talk to each budget manager about the impact. But if you work for a multi-location or multi-national organization, it might take a week of sleepless nights to manually work out the top-level budgets, and then realistically months to roll out the changes to each location and budget manager. And that's assuming no other changes happen at the same time, which you can't really assume, can you?

Cost
If we factor in three previous challenges – lack of visibility, limited or no version control, and wasted time piecing reports together – we have misused human resources and produced sub-par results. It's your job as a financial planner to actually plan, and if you're using a spreadsheet-based model for planning, undoubtedly some of your worth will be wasted on the manual work of managing those spreadsheets. It's a tough pill to swallow, but it honestly doesn’t have to be that way. In a previous post, I covered some quick tips for using business intelligence (BI) to improve budgeting and planning – check it out.

Sure, spreadsheet-based planning works for some companies, but a dedicated budgeting, planning and forecasting software solution often pays for itself pretty quickly and avoids the headaches and the grief that you may associate with this time of the year.

Are you in the midst of your budgeting process now? Any tips to share with our readers?

Dwight deVera

About Dwight deVera

I'm Senior VP responsible for Solutions Delivery at arcplan in North America. I also present on a lot of arcplan webinars, so you can sign up to hear me - the events listing on our website is located here: http://www.arcplan.com/en/company/events/. You can also follow me on Twitter: @dwightdevera.
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