There are 7 well known challenges in financial budgeting and forecasting. While finance departments are fully aware of their own challenges, it is important to note these problems clearly so that decision makers drive the needed internal change and so that everyone impacted in the organization fully participate in the effective and immediate resolutions of these challenges.
- Delay in Outputs
The financial budgeting and forecasting process often takes too long to complete. Quarterly forecasts for example take weeks for most organizations to complete and producing each iteration of forecast or budget also takes too long.
In the end, all these and many other delays factored in, the outputs are almost always delayed and irrelevant by the time they are completed.
- Cost and Effort
In a survey conducted by Accenture and Cranfield University, it stated that for a 1 billion USD company, it takes them 25,000 man days to complete their budget.
This gives us an insight into how much staff effort and money goes into an ineffective process.
- Rigidity of Process and Systems
Majority of financial budgeting and forecasting processes and systems do not have the capability to accommodate reorganizations, mergers & acquisitions or divestitures. All of which are very common these days in business. Without the ability to take these things into consideration, a business cannot be effectively responsive and up to date.
When it comes to systems, majority of companies also use a system that does not allow them to see multiple views of forecasts and budgets, perform comparative analysis or even test the impacts of potential decisions to different aspects of the business.
An accountant that is responsible for budgets and forecasts spend a considerable amount of his time going back and forth trying to cross check that the information is correct. He then spends even more time trying to make sure everyone inputs data in the latest version and then more time trying to spot potential errors unintentionally made by his or her colleagues.
Despite these tremendous effort, mistakes still make it past the observant eye of an accountant and once these mistakes are made known, the integrity of the entire output then becomes compromised.
- Lack of Transparency
Organizations constantly battle with a lot of bottlenecks. Sadly, many are a bit uncertain exactly what is causing the delay, who, and how to address it. Especially for those that are working in excel spreadsheets, there is no transparency at all in the entire process. Mistakes usually are uncovered very late in the process that there is not much time to remedy it.
- Lack of Accountability
Another common challenge in financial budgeting and forecasting is the lack of accountability tied to the figures. Some people put in figures that serve their personal agenda but is detrimental to the overall company strategy. It is important that the process and the system used in financial budgeting and forecasting forces a sense of accountability to everyone involved in the budgeting process.
- Low Staff Morale
When the staff puts in tremendous amount of effort to make sure that they produce their deliverables on time but then it end sup just being ignored because of mistakes and integrity issues, it is a big blow to the morale of the staff.
On top of that, these intelligent people who were employed to analyze cannot analyze well enough simply because they are too caught up in menial tasks. It is not only a waste of talent and time, it is also very demotivating for the staff to perform these boring tasks.
Resolution to the most common challenges in Budgeting and Forecasting
It is not enough to articulate the issues. What is more important is that there is an attempt to resolve each issue.
One of the most effective ways is to resolve the most common challenges in budgeting and forecasting by adopting the leading best practices in the financial planning & analysis arena. These best practices are: Unified live forecasting, variance analysis, driver-based budgeting, workflow and business rules standardization, unlimited what-if analysis, drag and drop report creation, cause of change/commentary journalism and many more.
How can an organization effectively incorporate all these best practices?
The answer is through Performance Canvas Financials. Performance Canvas Financials is a complete and cloud-based FP&A solution that delivers best practices in financial budgeting and forecasting through prepackaged finance logic.
With this solution, not only will you be able to install and set it up in as fast as 5 minutes, you will get immediate value as your organization will instantly have access to live forecasts, budgets, and actuals.
This FP&A software is packed to the brim with leading best practices that first and foremost are designed to streamline your entire budgeting process before it automates it. Once it has streamlined and automated your process, you will realize the many more things you can do with your information.
What would you like to do next?