A major missed opportunity, repeated annually

For most organisations, annual budgeting is a stressful and frustrating time, full of unproductive meetings, decisions made on incomplete information and superficial analyses, vain efforts to establish a core set of assumptions that everyone can agree upon, and of course, plenty of turf battles. Participants end up determined just to get the budget done, and put the ordeal out of their minds until next year

How does the budgeting process turn into such a spectacle? A major reason is the habitual approach to annual budgeting as a cumbersome, finance- driven exercise, fixated on top-down initiatives to set income and cost targets, rather than a collaborative business exercise to establish corporate priorities and influence behaviours

At the core of this dysfunction are spreadsheets. Each spreadsheet represents a potential point of failure. As time elapses and data proliferates, errors accumulate, links break, and version control becomes an issue. Unscalable and inflexible, spreadsheets fail to support the level of quality and breadth of information that managers need to navigate business uncertainty, mitigate risks, and take advantage of opportunities in the marketplace.

A better way to manage the annual budgeting process for everyone

The most effective annual budgets are both operational and financial, crafted with the purpose of making the budget process transparent and accessible to everyone involved. Such inclusiveness fosters organisational alignment and ensures that departmental leaders assume ownership of their segments of the plan, understand how the overall budget affects them, and ultimately gain a clearer vision of both tactical and strategic goals.

In our handbook, we’ll explain to you a five-step annual budgeting process. At each step, we’ll first review the stress points of the legacy, manual, spreadsheet-driven way of budgeting. Then, we’ll contrast the old way with a new set of best practices of budgeting in a Connected Planning environment and offer guidance about how business leaders can make the most of a Connected Planning solution to improve the budgeting process, and, more importantly, its outcomes.

A business exercise, not simply a financial exercise

Budgeting is a time to reset, refresh, re-evaluate, and perhaps even transform. It is a time to determine what the business can do, the resources it needs to do it, and the mechanisms to correct itself along the way. It is a time to chart a budgetary course that sets the business up for success. Rather than a system where most contributors have no input into apparently arbitrary objectives, the best way to get buy-in, communication, and participation is a more collaborative environment where everyone works from a common set of high-quality information.

Combining finance best practices, and the power of Connected Planning technology, the role of numbers is elevated to reflect the true picture of the business in the context of the wider marketplace. Budgeting becomes a way for individual departments to communicate and influence the rest of the organisation, while giving senior leadership greater transparency into how business units use the resources allocated to them to create business value.

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Our next blog will explore how to align business unit budgets to strategic objectives. Follow us on our social channels for the next blog announcement.