2020 was an eye-opener for many CFOs and CIOs. Not only did they have to tightly monitor their cashflow, but they also had to pivot their forecasting to dramatically reduce costs. What has been most significant in the past year for finance teams, is the need to be agile, and more digitally enabled.
Reimagine Finance in 2021: A Comprehensive Guide To Budgeting & Planning
Date posted
2 February 2021
Reading time
8 Minutes
Read on to discover the adjustments you can make to improve operational agility in your department, which will enable you to respond quickly and efficiently in a changing world.
Remodel the Finances
First, survey and assess the landscape. We've experienced shifts in how we do business, and only agile organisations, which can pivot, and re-position will prosper. Examine your budgets, look at scenario planning, review your forecasting and determine how you can reshape it for the way businesses are operating now and, in the months to come. Traditional budgeting is too slow and too rigid to keep up with today's rapidly changing market conditions. COVID-19 and Brexit are creating significant volatility, complexity and uncertainty in the future. Gone are the days when budgets could be done at the start of the year and left until the following year. They have to be flexible to adjust to business opportunities and challenges that are continually changing.
Say no to one fixed annual budget
Now more than ever, December's year-end budget numbers often bear little resemblance to July's realities requiring more streamlined, accurate, and responsive budgets and forecasts. Annual budgeting won't go away but spending weeks and months processing data and reconciling spreadsheets that are out of date soon after the consolidated master budget is published doesn't cut it anymore. The solution? Increase the frequency of budgets and forecasts to reflect shifting business conditions. Make decisions and plans based on data insights rather than old and stale information. Change how resources are allocated throughout the year and how it incorporates real-time opportunities and challenges.
Focus on business drivers, not cost centres
Traditional budgeting focuses on allocating resources to cost centres, but business objectives (e.g. projects, products, services) are cross-functional with end-to-end business processes. By assigning resources to projects and processes, budgets and forecasts reflect company-wide versus cost-centre specific performance. We'd recommend enabling organisation-wide access to reports and data that allows everyone to have visibility into project-level and process-level performance. Review forecasts against project and process budgets to eliminate confusion among competing departments and provide real-time information for the much-needed insights to support better decision-making at all levels of the organisation.
Create rolling forecasts
More than ever, fluctuating market conditions make accurate forecasts extremely challenging. Rolling financial forecasts help manage funds and provide visibility into a business performance that reflect the speed of your business. To do this, generate rolling financial forecasts that accommodate real-time shifts in market conditions. Enable self-service reporting so everyone in the organisation can measure their performance against companywide KPIs and help everyone understand the effects of their resource allocation decisions.
Look forward, not back
Most budgets and forecasts are outdated before you push "publish" or soon afterwards. And some factors are impossible to take into account (take 2020 as an example, and the uncertainty for 2021). The rear-view mirror orientation of traditional budgeting (last year's actuals create this year's budgets) can't keep up with the speed of modern business. Respond faster to shifts in market conditions with real-time access to financials, so consider moving from static, labour intensive Excel spreadsheets. Adjust outdated budgets and forecasts as soon as change occurs and move leadership discussions toward insight, planning, and action, rather than using the budget as a cost control mechanism.
Use the right tools for the job
Creating a budget process that keeps up with the pace of today's business requires a comprehensive, collaborative, and continuous planning platform. One that gives you robust, accessible reporting and modelling capabilities. Dashboards can provide real-time visibility into overall company performance; and automated tools can streamline budgeting and forecasting processes. Enable comprehensive planning that aligns the priorities and actions of everyone across the company around common KPIs. In addition, create opportunities for collaboration by giving everyone access to the data they need. And lastly, adjust and update budgets and forecasts continuously so you can navigate volatile market conditions. - Don't let traditional budgeting lock you into outdated assumptions and fixed targets. Some managers view the fiscal year budget as a "contract" which they cannot get out of to reduce unfavourable variances from their allotted cost centre budget expenses. This short-term focus jeopardises the 2021 view, and beyond. The modern finance professional knows the truth, aligning budgets and forecasts with comprehensive plans lays the groundwork for proactive rather than reactive planning. Which is a significant strategic advantage in today's highly competitive and changing environment.
Learn more about financial planning
If you 're interested in learning about a platform that enables you to upgrade your planning, modelling, budgeting, and forecasting operations, check out Workday Adaptive Planning. Perfect for organisations large and small to make better decisions, faster.