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Date Posted
01/11/21 11:18
Reading Time
3 minute read
Posted By
Formulate - A Kainos company

Prepare Your Business For 2022: A Guide To Budgeting & Planning

Some people thrive in chaos. Finance departments do not. They need a plan, a backup plan, and a backup plan for the backup plan. When a CFO walks into a building, they've already surveyed the street, studied the plans, and located the exits. When COVID hit, they checked their cash flow, pivoted their forecasting, and dramatically reduced costs. CFO's have been planning for 2022 since March 2021.

Since you can't function without a plan, we've mapped out a guide for 2022.

Step 1: Remodel the finances

Survey the landscape and pivot your budgeting and planning to keep pace with change.

First, assess the landscape: We've experienced shifts in how we do business, and only agile companies, which can pivot and re-position will survive. Examine your budgets, look at scenario planning, review your forecasting and determine how you can reshape it for the way businesses are operating now and in the months to come.  

Traditional budgeting is too slow and too rigid to keep up with today's rapidly changing market conditions. COVID and Brexit are creating significant volatility, complexity and uncertainty in the future. Gone are the days when budgets could be done at the start of the year and left until the following year. They have to be flexible to adjust to business opportunities and challenges that are continually changing. 

 

Step 2: Say no to one fixed annual budget

Now more than ever, December's year-end budget numbers often bear little resemblance to July's realities - requiring more streamlined, accurate, and responsive budgets and forecasts. Annual budgeting won't go away, but spending weeks and months processing data and reconciling spreadsheets that are out of date soon after the consolidated master budget is published doesn't cut it anymore.

Solution:-

  • Increase the frequency of budgets and forecasts to reflect shifting business conditions.
  • Make decisions and plans based on data insights rather than old and stale information.
  • Change how resources are allocated throughout the year and how it incorporates real-time opportunities and challenges.

 

Step 3: Focus on business drivers, not cost centres

Traditional budgeting focuses on allocating resources to cost centres, but business objectives (e.g. projects, products, services) are cross-functional with end-to-end business processes. By assigning resources to projects and processes, budgets and forecasts reflect company-wide versus cost-centre specific performance. 

Solution:-

Enable organisation-wide access to reports and data that allows everyone to have visibility into project-level and process-level performance. 

  • Review forecasts against project and process budgets to eliminate confusion among competing departments
  • Provide real-time information for the needed insights to support better decision-making at all levels of the organisation

 

Step 4: Create rolling forecasts

More than ever, fluctuating market conditions make accurate forecasts extremely challenging. Rolling financial forecasts help manage funds and provide visibility into business performance that reflect the speed of your business.

Solution:-

  • Generate rolling financial forecasts that accommodate real-time shifts in market conditions
  • Enable self-service reporting so everyone in the organisation can measure their performance against company-wide KPIs
  • Help everyone understand the effects of their resource allocation decisions

 

Step 5: Look forward, not back 

Most budgets and forecasts are outdated before you push "publish" or soon afterwards. And some factors are impossible to take into account (2020, for example, and there is still lots of uncertainty for 2021). The rear-view mirror orientation of traditional budgeting (last year's actuals create this year's budgets) can't keep up with the speed of modern business.

Solution:-

  • Respond faster to shifts in market conditions with real-time access to financials
  • Adjust outdated budgets and forecasts as change occurs
  • Move leadership discussions toward insight, planning, and action, rather than using the budget as a cost control mechanism

 

Step 6: Use the right tools for the job

Creating a budget process that keeps up with the pace of today's business requires a comprehensive, collaborative, and continuous planning platform. One that gives you robust, accessible reporting and modelling capabilities. Dashboards that provide visibility into overall company performance; and automated tools that streamline budgeting and forecasting processes.

Solution:-

  • Enable comprehensive planning that aligns the priorities and actions of everyone across the company around common KPIs
  • Create opportunities for collaboration by giving everyone access to the data they need 
  • Adjust and update budgets and forecasts continuously so you can navigate volatile market conditions

 

Finally

Don't let traditional budgeting lock you into outdated assumptions and fixed targets. Some managers view the fiscal year budget as a "contract" that they cannot get out of to reduce unfavourable variances from their allotted cost centre budget expenses. This short-term focus jeopardises the longer-term view. The modern finance professional knows the truth, aligning budgets and forecasts with comprehensive plans lays the groundwork for proactive rather than reactive planning, a significant strategic advantage in today's highly competitive environment.


Could you help identify, organise and implement the best cloud-based planning, budgeting, forecasting and analysis tool for your business?

 

Book A Discovery Call 

 

 

Topics: workday adaptive planning, Financial Planning