Budgeting, Forecasting and Financial Planning: Critical Success Factors for your organization

An effective financial plan is the means by which an organization underlines their strategic business financial objectives. A well-thought and prepared financial budget creates the platform for effective decision-making during the performance period. And it also forms the basis for the forecast which enables organization to plan future goals based on recent actual performance. All best in class organizations today need to have the tools that provide highest visibility and maneuverability for balancing plans with real life. Just to measure, please ask questions to yourself:

• What is the overall budget accuracy level for your organization
• What is forecast accuracy level
• How much improvement, the organization achieved in profitability year over year
• How many times your budget was ready before next fiscal year
• What is the level of process standardization in the organization

These will give you a small idea on where are you placed currently. You will find that following actions will help you achieve Best-in-Class performance:

• Use technology to automate and assist in the budgeting process
• Have visibility into all factors and collaborate with all stakeholders
• Consider alternative scenarios and have the ability to change forecasts, plans, and budgets mid-stream

Cost controls have remained a significant driver of the financial planning and budgeting process throughout the past four years and have only intensified again this year. Efficiency of the process rounds out the top four challenges in spite of the fact that it typically happens only once a year. Yet it also happens at a time when the urgency of closing out a fiscal year is most intense. There is risk in focusing all the attention on the present at the expense of careful planning for the future.

Overall budget accuracy reflects the ratio of actual revenue and cost (bottom line) to budget, with 100% accuracy as the ideal. A budget which is 100% accurate is reflective of either an accurate prediction of revenue and costs, or good controls in place to manage against budget, or both. Because of the continued emphasis on the ability to respond to changing market conditions, forecast accuracy is also included in the Best-in-Class criteria, reflecting the rising importance placed on agility. Accuracy is tempered with improvement and / or preservation of profitability. While achieving budget and forecast accuracy is viewed as important, it cannot come at the expense of good business. An organization’s ability to finalize the budget prior to the beginning of the new fiscal period is indicative of the performance of the financial planning and budgeting process. The use of automation to assist in the planning process leads to an efficiency that is very hard to achieve only with manual processes and the ubiquitous spreadsheet. Automation of the process not only boosts efficiency, but also helps insure that standards, methodology and proper review cycles happen as planned. This automation is essential in analyzing driver based scenarios and providing "what if" analysis.

The steps to success as per us are:

• Use technology enablers to receive alerts triggered by internal and external events
• Increase the frequency with which forecasts are updated
• Perform "what-if" scenarios and change analysis before finalizing plans
• Use technology to be automatically guided through steps of the financial planning, budgeting, and forecasting process
• Establish enterprise-wide collaboration from the top-down and bottom-up as well as across departments
• Align sales forecasts with overall business revenue and cost forecasts

Go ahead and give them a try to check-out how much they benfit you.