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  • Budgeting Tips and Tricks – Part One

  • Budgeting is likely not high on your list of favourite things to do – or anyone else’s, for that matter. Nonetheless, budget time comes around each year like clockwork. Business units complain about the amount of time the process will take and managers grumble over conflicting goals.

    Meanwhile, it’s up to you to ensure that the budgets are submitted and approved on time.

    All you can hope for is that this exercise will be of some value to somebody, for some amount of time.

    Simplify your budgeting process

    It doesn’t have to be like this. It’s time to stop and look at your budgeting process.
    The following are suggestions on how you can simplify your budgeting cycle, make the process less painful, and ensure that your organization gets the most out of its budgeting, planning and forecasting activities.

    #1 Align the Budget to a Strategic Plan

    In many organizations, the budgeting process is often completed in a silo – independent of the strategic plan – which can create a disconnect at the operational level. The budget may communicate targets and focus energy and resources on areas in the near term that are not aligned with the organization’s long-term strategy. A budgeting process that is aligned with the strategic plan can better focus the allocation energy and resources towards delivering on business objectives, tracking progress at an operational level and identifying and closing performance gaps.

    #2 Create a Clear Process and Workflow

    Many times, Excel workbooks are sent out to all the different managers that are involved in the budgeting process to be completed and submitted. Then the finance team consolidates all of the numbers in an effort to push out the budget for that year. In other words, there is typically a lot of time lost to administering the budgeting process.

    The next tip is to have a process that is clear, transparent, and also visual. With budgeting technology available today you are able to deliver a visual workflow. This gives people a clear understanding of the steps in the budgeting process, when those steps are due, and whether or not they are complete. Having an automated workflow and progress reporting allows a budget supervisor or someone involved in the approval process to see how many contributors are in progress, how many have submitted their numbers, how many submissions have been rejected or approved, and whether there is anyone having challenges who may require assistance.

    With a visual workflow, processes are more transparent and flow more smoothly with less need for manual checks and interventions along the way. Budget contributors and the finance team spend less time on the budget administration, leaving more time for analyzing the data and taking action.

    #3 Improve Accessibility

    A major challenge that many organizations face is making it easy for contributors to complete the budget regardless of where they happen to be physically located.

    There are solutions today that provide flexibility to budget contributors, offering them a variety of tools whereby they can access the budget application and submit their entries on time. Whether they are using a laptop or a workstation in the office, or if they are out of the office with access to a tablet, phone or other mobile device, there are modern budgeting solutions that give the ability to enter budgets on time using whatever device is most convenient. Even if contributors are out of range for the Internet or on a plane, they have the ability to enter data offline and upload the data to the budget when they have connectivity at a later time.

    #4 Driver-based Planning

    Have you ever wondered how meaningful a budget is if the input required is not controllable or meaningful to the budget contributors?

    Using driver-based budgeting – an approach that bases financial forecasts on operational drivers – data can be broken down beyond the financial values into sub-components and drivers that the contributors are more familiar with and have more control over. For example, the rates can be established up front and then the business unit managers simply input the units or values they control. The budgeting application then uses business logic to calculate the output automatically.

    For example, on the sales side, you may ask a sales manager to enter the number of product units they are planning to ship, or the number of service hours they are planning to bill. The standard prices may be fixed in the system but they are given the ability to add a discount if required.

    On the payroll side, HR would set up the various employee pay grades in the application with appropriate benefits, taxes, fringe benefits, pension rates, etc. This means that the cost centre managers need only consider the headcount and work schedule for the people who work within their cost centre. They key in the date of hire and the pay grade (or employee class if that’s relevant) and everything else is calculated automatically using business logic.

    With capital expenditures, the different asset classes and depreciation rates would be set up in the system so that cost centre managers need only enter the type and number of units, and perhaps the price of the asset they are buying. Other calculations such as depreciation would update automatically.

    Setting up a driver-based plan provides a more dynamic platform for testing scenarios and simulations using the different drivers. This leads into the next tip, “Test Scenarios and Simulations” – it will appear in our next blog article in a couple of weeks time.

    Corporate Renaissance Group (CRGroup) and Mastermind Solutions recently announced a strategic alliance to bring a full suite of complementary services to the mid-market business client.

    These are just four of many tips we have to make the budgeting process more streamlined and effective. Be sure to check the Mastermind blog for four more budgeting tips & tricks. In the meantime, please sign up for ongoing communications from CRGroup and consider attending our upcoming webinar entitled, Automate Strategic Management with BOARD – Balanced Scorecards, Strategy Maps, and Executive Dashboards. Click here to learn more or register.