Like most companies, you roll out the budget once a year. It’s a hassle to update it. You’re hopefully reporting against actuals every month, but you’ve got to remind your users what to do. Given the pain involved, why do it more often? It’s actually less painful that way. More finance organizations are doing it as best practice. More frequent updates lead to better information going to your field, and more importantly, coming from them. As a finance or operations group, you’re getting more detailed information from the front line on a timely basis.
Sounds great! How do we do it? Are you doing a forecast at all? Start there. Roll your budget as a starting point for your forecast and update it through the year. When I was in finance, I would compare the forecasts made in the later part of the year to the budget at the beginning. Who was sandbagging me? If you’re a CFO, can you find a way to reward accuracy? Who knows their business well enough to make accurate predictions?
The best way to get started on rolling forecasts is by considering the level of detail. Many organizations want to do their budgeting on the GL level. This is not something I recommend. As a statistician, I know that the perfect is the enemy of the good (But that’s a totally different blog post). To make it easier and less time consuming to input, forecast at a higher level. Start by creating holding accounts-places where you don’t need as much detail. These can be allocated down if they need to be.
One method I’ve found very popular is to have different amounts of detail by time. Say you’re doing this quarterly or even monthly. For the first six months have as much detail as the budget. For the six following that, less detail (like the forecast described above) and for the final six it’s best guess. As it rolls forward, you have increased visibility into the future and therefore better information. At this point it’s not a once a year process, but a continual look forward. Less time consuming because once it’s established, you’re adding to what’s already there.
Brass Tacks has used our financial knowledge to guide companies through this process. Contact us to let us talk about how we can help you.
I’m going to start this by saying that this ends with a cliché: “You get out of things what you put into them”. Now that that’s out of my system and I’ve lost half of you, I’ll continue.
Everyone wants a fast, painless, process. Even with out of the box implementations, that’s not always the case. Building a good system takes time. Your time as well. You can minimize this by hiring the right consultants and having a clear vision (if you don’t have a vision, work with your consultants), but the investment I’m referring to is your time.
What’s the alternative? It is far easier to keep pumping out the same spreadsheets. They are unwieldy. Full of bad information. Spreadsheets provide limited communication to and from the field. Accumulating them for reporting takes time better spent on analysis. Anyone in a managerial role who is reading this; it is a poor use of highly skilled (and paid) resources time.
Many of you will think that your company isn’t organized enough for enterprise software. Or that your budget process is always changing. Change is a constant in life and in work. How much time do you have for spreadsheets? Can anyone disagree that time spent organizing pays dividends?
Getting back to out of the box solutions. The popular option these days is to have software that is largely pre-built. This works well for companies that will adjust their budgets to the process inherent in these systems (usually small or mid-sized companies willing to adjust). Hyperion and competitors both have these quick starters. They are fast to install, but not as fast as you think. The closer to complete they are, the less flexible and scalable. When it comes to installation, it’s easier to get a technician to do this. The software company is doing the functional side for you. Doing this is still better than a spreadsheet driven process. This is ideal for companies that don’t have a clear vision for their budget and forecasting process but want to move to an enterprise system.
Brass Tacks will be happy to do this type of installation quickly and inexpensively. If you’re looking for something further, we provide value to companies that are looking to get something greater out of the system. As I said at the beginning, you get more out if you put more in. We believe in the investment of a long term relationship with our clients. It’s a partnership and we provide a continuity of resources you can’t get at larger firms. We’re there when you need us, and gain a deeper understanding of your process.
Many of our clients have put in a basic system and call us when they are ready to upgrade to something more substantial. Often at this point, the enterprise system is paying dividends and the company wants to expand on it.