Budgeting and forecasting using legacy systems take much time for many organizations and only grow more painful as the business grows. Outdated forecasts and incomplete data can derail plans and prevent business leaders from seeing real opportunities that can help shape the company’s future.
It is from these challenges that driver-based budgeting and planning have come into play. With driver-based budgeting, business leaders and their teams identify key drivers and then build models around them. These models are then connected to their operational plan, helping the company better predict the outcome and respond appropriately when faced with these drivers.
In this article, we’ll explore the top reasons why driver-based budgeting and planning can help your business move forward.
It Promotes Better Alignment in Teams
With driver-based budgeting, each department will need to identify its key indicators and drivers, which will need to be raised to the board, improving performance and tying the loose ends in the company’s operations from a granular level. Department heads also have a much more influential role in making sure they raise issues to the broader team, rather than just focusing on internal budgeting problems or work outflows.
Overall, when departments align with the company’s core business drivers, information can flow more smoothly, rather than being siloed from within the team.
With drivers identified, CFOs can then play an integral role in ensuring all the key players across teams and departments can work together and move towards the same goals.
It Can Empower Teams to Respond Quickly
Agile teams are far more equipped to respond to uncertainty. With driver-based planning, having a clearer picture of potential challenges and opportunities can help business leaders prepare for any possible disruption, whether specific to market changes, poor sales, or dealing with operational inefficiencies.
Using a more traditional budgeting and forecasting method can make agility harder to achieve as everything relies on the data at hand. It’s harder to act with incomplete information.
However, this will no longer cut it today. If there is anything businesses can take away from 2020, it’s that nothing ever goes according to plan. We always need to prepare for the unexpected. With so much turmoil around the pandemic and the uncertainty of when global economies can fully recover after COVID-19 vaccination rollouts, creating scenarios and predictive models can empower companies to prepare and plan for any change, so no one gets caught off guard.
Driver-based Budgeting and Planning Improves The Accuracy of Data and the Efficiency of Finance Teams
Today’s leading businesses are not only empowered by data; they have the means to harness it to get the insights needed to inform their strategy.
However, teams stuck using traditional budgeting methods often have to deal with the looming question at the back of their heads: Do I have the correct figures? Are these numbers updated? But with traditional budgeting, there’s no way to verify that.
To the organization, the lack of data integrity and the inability to ensure the accuracy of financial figures can have a massive effect on the bottom line and the decisions being made by business leaders.
A driver-based approach enables CFOs to focus on the data that matters explicitly to their organization. This removes unnecessary data and helps ensure the numbers can be trusted as the single source of truth.
Using a driver-based system can lift some weight off your finance teams as they no longer focus on data entry or preparing budgets. Instead, they can focus their efforts on running scenarios, analyzing different variables according to each driver, and helping the company put the strategy into action.
There are many more reasons why driver-based budgeting and planning are crucial to implementing your 2021 strategy. But more importantly, choosing the right financial solution as your foundation can mean all the difference.
SaaS PCF gives you financial reporting, budgeting, forecasting, and consolidation in a straightforward solution. It’s easy to set up and can integrate seamlessly with your existing ERP system. If you want to shift to a driver-based budgeting system, Saas PCF is the right step forward.
Depending on the features you need, and if you prefer to implement Saas PCF per module, our team can help tailor the right solution to strengthen your existing FP&A system.
