Budgeting best practice step 4 summary:

• Budget pack is produced automatically, ready for presentation to senior leadership.
• Perform robust sensitivity and “what-if” scenario analyses for a fully rounded view.
• Pursue value-adding activities, such as a conducting a marketplace review, creating operational efficiencies, or maximising revenue generating opportunities.

The conventional way: A yearly last-minute dash for Finance

At this point, the burden shifts back to Finance. From the dozens—if not hundreds—of submissions from departments and lines of business, the Finance team must construct a budget pack (or deck) to present to the senior leadership team for approval. At a minimum, the pack consists of a summary balance sheet, income statement, and cash flow statement, and is often supplemented by divisional or departmental income statement submissions and reports that may include variance analyses for a 12-month outlook.

The Finance team spends massive amounts of time consolidating, reconciling, and ensuring formula accuracy across the pack, as well as manually cross-checking and consolidating multiple spreadsheets. It is an onerous, inefficient, and thankless task, but it is also mission critical. More time is spent producing the numbers than attempting to understand the underlying commercial drivers behind the numbers. As a result, there is little or no time for robust scenario analyses to assess best, worst, and most likely cases.

The best practice way of presenting bottom-up budgets back to senior leadership: Course of action

1. Consolidate the individual budgets. Automation eliminates time spent aggregating, consolidating, or reconciling budget spreadsheets from across the business. Errors have been resolved early on, and all materials are collated in their correct order, making it much easier for Finance to retrace steps, if needed.

2. Finalise the numbers. In a Connected Planning environment, this operation can take place significantly faster than the legacy spreadsheet method, typically delivering a 90% or greater time savings on finalising the budget. At this point, Finance can run specialised audit reports on the budget pack to assure completeness and accuracy.

3. Consume the big picture. In contrast to the myriad of offline spreadsheets, where it becomes nearly impossible to see the trees from the forest, the Connected Planning solution produces the budget pack automatically, complete with charts, graphs, and variance analyses, ready for presentation to senior leadership. Contributors and senior managers alike can study many visualisations at once, and begin working on the narratives that support their respective stakes in the budget.

4. Add depth and precision to the budget plan. Ample time is now available to perform robust sensitivity and “what-if” scenario analyses to present a fully rounded view of business opportunities and risks over the next 12 months. This is a point where budgeting can start providing strategic value to the organisation, and departments can determine whether they can make more ambitious requests from cost centre owners regarding aspects of their budgets.

5. Devote freed-up time to high-value activities, such as understanding the commercial drivers underpinning the budget assumptions, performing a competitive market analysis, or exploring opportunities for innovation.

Download our budgeting best practice guide.

Our next blog will discover how senior leaders approve the annual budget including scenarios and risks. Follow us on our social channels for the next blog on budgeting best practice.