Agile budgeting in an uncertain 2023

Optimize your finance team’s use of technology to create a more agile budgeting process that streamlines your entire group.

We have just started 2023, and while uncertainties under Corona were high, it has been even higher after a year of war and high inflation. At least, during Corona, we could focus on business development and meeting the consumer where they were. However, it is almost obscure to believe we can predict how the year will turn out this year. Yet, most company procedures dictate that you must prepare a budget to be approved by the board and which you can operate by next year. Hence, you must still tackle the challenge of planning for 2023 and get the most out of the situation.

Divide between organizational planning and finance departments

A recent study from Mckinsey showed that we currently see a big divide between the planning for next year. Finance leaders want to focus on what we can change here and now, and organizational leaders are still focused on the future.

Read more about other CFOs’ prioritize in this piece: Into the storm: CFOs pivot to managing financial headwinds

Combine finance’s need for looking at the here and now with the management’s for long-term strategy

We must prepare ourselves for an iterative process where plans and numbers will change frequently. Some would say this is no different from usual. However, it should be more natural this time, and we can adjust our mindset going into the process. In addition, Finance must be able to combine the usual role of simply taking the management’s plan and translating it into numbers, becoming the driver to making the right strategic choices in the company. Options that are realistic with high inflation.

The challenge that most finance functions face, though, is a heavy reliance on Excel templates or inflexible systems. Especially in group finance departments, we often see the budget sent from every department across all subsidiaries. As a result, creating and updating numbers will take up most of the time, thereby taking time away from Finance to assess the plan and actions to assume critically. In worst cases, it is not even possible to edit and update as often as is needed in uncertain times to create a realistic budget and reach the organizational goals. 

Start a more agile budgeting process to support faster strategic decision-making

Technology already plays a more prominent enabling role in the group finance department but not in creating an agile budgeting process from input through consolidation to output.

Here are three ways that better tools can enable a more agile process:

Assumptions: They are typically discussed between business leaders and the strategy team and then distributed via Excel templates for the individual entities and units to use. However, imagine a simple change where they were inputted into a system and cascaded automatically to all users. This would help them build dynamic formulas linking them to their unique business drivers. Moreover, it would enable management to see the impact of assumption changes with the click of a button.

Business modeling: Very often, you see business leaders creating separate models in Excel where they can model their business. They do this to develop the input that needs to go into the system. However, this could quickly become a tool where each unit or entity would build its distinct business model linked to the financial drivers needed for budgeting.

Self-service reporting: Each time management decides on making changes to assumptions or just the numbers in general, this can easily be a lengthy process. The information is cascaded to units or entities to make the changes, consolidation needs to happen, and IT needs to run some jobs to get the data into the reporting system. Imagine if this instead was fully integrated. This way, management could simply make the changes they were discussing and see the impact immediately. 

The potential seems obvious, yet this remains a pipe dream for many companies!

However, Cloud is making more tools easily available even to small- and mid-sized companies. You may need to connect several tools to make this work, but it would still be obvious to start exploring the opportunities. Like the integration between the budgeting and planning software, Phocas, and the consolidation and reporting tool, Konsolidator. 

Break your habits and the barriers that act as obstacles to agile processes

Despite the apparent challenges, many companies continue to use the same planning process they have used for years. They fail to explore the potentiality of combining niche solutions in the market – departments can get capabilities they could only dream about before. This is an apparent mistake as a significant amount of corporate resources are wasted in a process that rarely produces valuable outcomes.

Hence, it is time to try something different. 

Try designing the ultimate planning process and start exploring how to make it happen. You will likely find that there are many digital tools available that can help you execute this new process

– How are you approaching the ongoing planning process?
– Are you doing what you have always done, or are you exploring new ways?
– What tools are you deploying into the process, and when was the last time you changed any of those tools?

You must resolve the paradox of huge uncertainty and decade-old planning processes. Start exploring new ways today, and your planning process will produce much better outcomes! It will also enable Finance to drive the right strategic choices rather than just producing numbers. 

You can see our software partners here, illustrating the possibility of building the best system for your department.