"Good plans shape good decisions. That's why good planning helps to make elusive dreams come true."
In the last posts, we discussed about new evolving roles of CFO as well as the general changing scales of the finance department in the road to success. However, no matter where the finance department is, planning and budgeting are still no doubt the most difficult challenge of CFO. Research shows that only technology-advanced organisation can have fully integrated financial planning processes which are flexible to the changes of business structure and turn them into realistic objectives.
Specifically, in recent survey by PwC, over 70% of responding organisations take over 2 months to complete their planning and budgeting process. Furthermore, forecasting accuracy is also a pain since almost all of these organisations struggle with forecasting process, with only 10% confident that the actual performance difference is about +/-2 from the forecasts.
There are many reasons that lead to this difficulty. Some biggest reasons are Limited Collaboration between Departments; Calculations Difficult to Audit; Data Accuracy; Long Processing Time and Labour Intensive. Among these reasons, Labour Intensive and Long Processing Time are 2 top ones, which stated by 76% and 75% of respondents, respectively. These are evidences that show that manual processes are still being used in planning and budgeting.
Therefore, CFOs cannot expand their roles and meet new expectations if the planning and budgeting process still relies on manual works, which eventually leads to volatility among CFOs and affects to the organisational direction.
One way that can solve this ongoing problem is technology.
Technology can help financial planning and budgeting support the execution of strategic initiatives by connecting the link between financial plans and budgets to organisational plans and strategies which increase the accuracy of financial forecasts and consolidates financial planning processes for better performance. A relevant performance management solution, which includes planning, budgeting and forecasting capabilities, can support CFOs to build a planning process that links with other line-managers and as a result helps increase accuracy and business insight.
This technological approach has brought fruitful results to organisations who applied it, according to an Aberdeen research report in 2012. These organisations have achieved 23% shorter time in their decision-making process, 54% more likely to update plans and forecasts on a monthly basis and had improved 3% in operating margin comparing to others.
However, technology by itself cannot cover all the above, but it needs a harmony combination of both CFOs – who play as the strategist and controller, and performance management solutions – which play as supporter and information provider in the process. The key to achieve these results are the implementation and maintenance of these solutions to support planning and budgeting process, specifically:
- Developing a collaborated planning and budgeting process to provide the foundation to reduce the planning lead time and increase forecasting accuracy.
- Building plans from both top down and bottom up to increase accuracy as well as attracting more stakeholders.
- Connecting planning and budgeting process to all activities to attract more stakeholders and ultimately, add strategic values and reflect the nature of the business.
In the next post, we will continue to discuss deeper about how technology can leverage accounting process and ultimately, the whole business as well as the two primary technological advancements that have great impact on both the CFO’s responsibilities in particular and the business world in general. Stay tuned!
Can’t wait? Download the full whitepaper here to find out more.