Planning and budgeting provides valuable insights for managing risk, boosting corporate performance and shareholder value and making strategic decisions. Using a business model as the basis of the planning process enables the development of: charts of accounts; time divided by years/quarters/months; version control to store actuals/budgets/forecasts and other important data segments, which can be used to create the plans. Organisations should look for planning solutions capable of delivering flexible business models that are mapped to their unique business requirements.
Following TRG's seminar entitled "Office of the CFO: Change the way work is done", Saigon Entrepreneurs (Doanh Nhan Sai Gon) magazine and Business Forum (Dien Dan Doanh Nghiep) published their articles on the event as well as on some of the topics discussed by our event speakers, including:
When it comes to budgeting, the traditional method used is spreadsheets. However, over the years, spreadsheets have demonstrated themselves to be insufficient to handle budgeting in the ever changing business world. Hence, dedicated corporate budgeting solutions were born to deliver the accuracy, agility and responsiveness that companies so desire. A powerful budgeting solution should help businesses adopt budgeting best practices, such as:
To many radical thinkers, the shortcomings of the traditional budgeting approach have made the process unviable. In reality, however, budgeting still plays a significant role. Therefore, to neutralise the arguments for and against traditional budgeting, companies should follow six budgeting best practices:
Most organisations have plans. There is, however, a huge difference between a good plan and a bad plan. A bad plan, for example, is one that consists only of costs and revenues. This plan provides no guidance for the organisation regarding how it is to achieve the revenue targets. There is no linkage between the high level goals and the day-to-day activities necessary to achieve them.
Traditional budgeting is argued to have begun about a century ago as a method of managing costs and cash flows. Typically, the process’s steps are as follow:
In battle, strategic ambiguity can sometimes lead to disastrous results. At Gettysburg, for example, on the first day of the epic US Civil War battle, General Robert E. Lee ordered General Richard Ewell to take Cemetery Hill “if practicable.”
In planning and budgeting, numbers do not always represent a complete or accurate picture. As a budget rolls up, small errors can snowball into major miscalculations, which ultimately have to be explained to senior managers or, even worse, investors.
Many companies rely on spreadsheets to prepare financial reports, do their planning, budgeting and consolidation. However, it is clear that this approach has shortcomings. Spreadsheets offer no reliable audit trail to ensure data integrity, not to mention they cause problems with version control. As a result, spreadsheets are difficult to audit, costing businesses more money. Hence, organisations should replace spreadsheet systems with planning solutions that eliminate the errors that may result from using spreadsheets and that have a familiar interface to ensure compliance, transparency and accuracy.