Easing the Struggles of the Annual Budgeting Process

What are some of the biggest problems with the annual budget, and how can teams improve budget planning?

Budgets Are Simple and Yet So Complex

Budgets can be strange. On the surface, they appear simple. After all, a budget is simply a financial plan for a set duration of the company, including the projected income and expenses of the business. It should be fairly straightforward to create, right?

However, the process is actually incredibly complex, due to the innumerable variables that can impact projected income and expenses. You need to consider all of the potential outcomes of scenarios, incorporate tax planning and capital expenditures, plan for potential alterations to the budget plan that could skew financial allocation, etc. When considering all of the variables involved, it becomes clear that budgeting is actually an incredibly complex endeavor.

 

The Biggest Problems with Budgeting

When it comes down to it, planning a business budget is not only complex, the process is also prone to inaccuracy. When relying on traditional budgeting methods, businesses often encounter a Planful of difficulties. Some of the key issues that businesses face with traditional budgeting include:

1. They’re inefficient. Between the need to create numerous iterations, the lengthy analysis cycles, and the resource-intensive nature, annual budgets are incredibly tedious and inefficient.
2. They’re not flexible. Annual budgets are very rigid, and they can’t adjust to fluctuations in business processes, assumptions, or data. This leads to inaccuracies and a budget plan that can’t support dynamic business models.
3. The data is unreliable. When relying on data that’s outdated or inaccurate, the budget becomes unreliable.
4. There is a lack of collaboration. Due to poor data integration and poor internal collaboration, budgets often fail to take into account the needs of each specific department.
5. They’re disjointed. With annual budgets, there is often difficulty arriving at common semantics, and data can become siloed within operational, financial, and strategic plans.

 

Budgeting Season Best Practices

The aforementioned difficulties make business budgeting challenging, while also reducing the accuracy of results. To create reliable budgets and plans, try implementing some of these best practices:

• Avoid spreadsheets as your primary budgeting tool
• Don’t rely on fixed forecast intervals
• Settle on a level of forecast granularity that fits your business
• Rely on benchmarks and external indicators to improve accuracy
• Automate menial tasks and data entry to improve efficiency
• And integrate operational, financial, and strategic planning together

 

Use Software to Improve Performance

Many financial planners are moving away from spreadsheets and adopting a system that promotes collaboration, encourages automation, and integrates operations, finance, and strategic planning. A cloud-based EPM software platform can do all of these things, while offering advanced data tools that allow businesses to include as much granularity as needed in their financial planning. When searching for an EPM solution, the key things to look for include reporting functions and dashboards, high data quality and governance, built-in automation functions, and a cloud-based platform that supports collaboration and data integration.

 

Businesses Thrive with Planful Cloud EPM Platform

Businesses across the world have been adopting cloud-based EPM software with exceptional results. Lee Johnston, the Senior Director of FP&A at LT Apparel, turned to Planful Cloud EPM platform in hopes of finding a financial planning solution that would improve efficiency and accuracy. Before adopting a cloud-based solution, their financial planning method was extremely inefficient.

It took a tremendous amount of time to update actuals. They had links stretched across multiple drives, which made compiling information tedious. His team started using Planful to conquer their budgeting and forecasting process. It’s enabled them to automate a lot of processes and improve efficiency, while accessing a cloud platform that unites operations and finance, and encourages collaboration across the enterprise.

Many enterprises are seeking to replace the annual budget with a more agile method. Cloud-Based EPM software makes it easier to implement rolling forecasts, which can improve the efficiency and agility of budgeting. It also comes equipped with data integration and analysis tools to improve data quality and increase analytic capabilities. With a cloud platform, businesses can achieve the collaboration and data consistency they need to thrive.