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.
Jack Welch, former Chairman at GE once said: “The budgeting process…sucks the energy, time, fun, and big dream out of an organization”. Yes, everyone hates it! If there is an effective way to do it without trying too hard will you take its advantages to grow? What you need are just a good planning and budgeting process and the right technology!
Recent research by Anaplan, an expert on modelling and planning finance, sales and operations platforms, states that currently, Asia Pacific’s CFOs are still experiencing difficulties with spreadsheet usages in financial planning and budgeting. In addition, there was a relatively low satisfaction level with the accuracy, timeliness and ease of Excel use for planning and budgeting.
As the world is heading towards a slow recovery, businesses can expect some unexpected events along the way. Therefore, agility needs to be embedded in every business process, including corporate financial planning.
To effectively bridge the gap between strategy and execution, it is vital that companies address 4 areas: corporate goal clarification, process alignment, measuring and monitoring, integration and communication. The Balanced Scorecard, created by Robert Kaplan and David Norton, has emerged to be a powerful strategy management tool as it makes strategy become “everyone’s everyday job”.
In the last post, we outlined the alarming issue of a strategy gap in businesses nowadays and how it can be undesirably widened by failures in strategic planning and budgeting. To gain a competitive advantage and increase business resilience, companies need to bridge this gap between strategy and execution, the task that requires serious dedication from everyone in an organisation. There are four factors of an effective strategy and execution alignment, from conveying what corporate goals really mean to identifying how they should be achieved.
It is hard enough to come up with an effective corporate strategy. It is even harder to execute that strategy effectively to achieve desirable outcomes. A 2009 study on employees found that 70% of them were confused about what they needed to do to support their company’s strategy. The same study, published in Fake Work by Brent D. Peterson & Gaylan Nielson, Simon Schuste, “half of all the work people did had nothing to do with their company’s strategy”. For the last dose of alarm, 73% of surveyed workers did not think their company’s goals are translated into specific executable work.
“It’s an increasingly complex world” (Accenture, 2012)
Today, economic turmoil and volatility are dominant and the roles of CFOs and senior finance managers are changing. Thus, it’s critical that CFOs are able to: