It is June and you are probably in the throes of the annual budgeting cycle. You may be on your third, fourth or fifth revision, knee deep in version control, and trying to keep on top of department heads who are yet to submit their budgets.

An annual budget is an integral part of your business and one of the primary responsibilities of the finance team. As such, it is critical that you put in place processes and technology that make the annual budgeting cycle simple, predictable, accurate and time efficient.

We have seen hundreds of organisations budgeting cycles, on average they are taking 3.5 – 6 months to complete. Each company is unique, but we can confidently say that by the time we leave, we have successfully streamlined the budgeting cycle down by 50% on average.  By streamlining the process, you improve the budgets effectiveness by accelerating the availability of information. Furthermore, you also reduce cost and inefficiencies of the process. With the benefit of automation and process improvement, your team will get back 1000s of hours to do more high-value activities.

Read our article to learn 4 new tips to incorporate into this year’s budget cycle.

1. Get clear on business drivers

Annual budgets can take months to complete if it is strategically disconnected. An annual budget needs to communicate your growth objectives and plans to internal stakeholders. Similarly, it also need to control activities such as revenue, expenses, and financing options.

An effective budget will drive the execution of the business strategy. It needs to be based on business drivers and it requires the alignment of strategic and financial objectives.  Once you have established a baseline, identify the strategies that will help you achieve these objectives, as well as how you will measure their impact. This is considered a mostly ‘top-down’ budgeting exercise, where Senior executives set budget parameters based on the strategic direction of the business.

Part two of your annual budgeting cycle should involve Department Heads and represents a more ‘bottom-up’ approach. Operational Managers should be responsible for developing the tactics that will deliver the strategies. Document assumptions used to develop the forecast, and ensure they’re aligned to a strategic goal.

With each iteration, you may find opportunities to standardise processes and systems. Put in place solutions that streamline, centralise and standardise data that is critical to planning. One way to remove complexities is through automation, which can help you  automate low-level, manual tasks and create a single source of truth for enterprise data and reporting. By automating time-intensive activities, your FP&A team can spend more time analysing insights – not aggregating data.

2. Look through a new lens

COVID has impacted every organisations annual budgeting cycle. In some scenarios, the return to a zero-based-budgeting strategy can help refocus spending on activities that support growth, or recovery.

Zero-based-budgeting (ZBB) is a method that starts from zero, rather than relying on data from previous years. ZBB requires all expenditures be justified, making you reconsider whether your budget is truly being informed by strategic business priorities. It considers the return on investment, as well as the potential ‘opportunity loss’. Therefore, it eliminates misaligned spend that does not support current objectives.

3. Be agile in your approach

At Minerva, we talk about being agile, and it is no different when it comes to your annual budgeting cycle. Creating an agile budget involves scenario planning and ‘what-if’ analysis models.  

By evaluating multiple outcomes, you give your company the ability to plan and prepare for variables. Although, you may struggle with this process if you do not have the right tools to handle planning for multiple scenarios. Employing a dedicated enterprise performance management (EPM) tool will let you change variables quickly and easily, without breaking formulas. By evaluating multiple assumptions and modelling potential outcomes you can better prepare your business for growth and success.

Similarly, predictive analytics and machine learning can provide you with forecasts for the short and long-term future. Predictive analytics will support your budget decision making. It gives you access to insights in your data based on identifying trends and patterns, as well as potential risks. As a result of incorporating this technology into your annual budgeting cycle you can better allocate resources and improve operational efficiencies.

4. Collaboration is key

One of the last components of improving your annual budgeting cycle is creating a collaborative environment. Ensure that the interests of each department have been represented during the decision-making process. This also allows you to hold team members accountable on delivery.

With a cloud-based enterprise performance management (EPM) tool, you can quickly and easily analyse data from multiple departments in minutes.

Remember that the point of a budget is to drive connected thinking and collaboration around the direction of the business. Ultimately a budget needs the support of each department for the business to work together to achieve a common goal.

We understand that developing a budget is demanding on the business and in particular, the finance team. However, the budgeting process is key to delivering the overall business strategy. If you are finding the budgeting process difficult, why not contact us at Minerva Partners?

Laser focussed on business transformation, we assist CFOs and transformation specialists every day to improve their data management, budgeting, forecasting, and planning. Our goal is to give you back time to focus on business growth and strategy.

Recent Posts

7 Significant Benefits of Using AI To Support Your FP&A Team 

In today’s fast-paced world, your ability to forecast both short and long-term...
Read More
Power BI

Can Power BI be used for planning?

We often hear from organisations that have hit a ‘data wall’ when...
Read More
AASB

How to turn AASB 16 Reporting from a burden into a beneficial business process

The introduction of the AASB 16 Leases Accounting Standard in FY2020 has...
Read More
Budget blog

It’s Budget Time: Is Excel Holding You Back?

Let’s set the scene. It’s the start of another budget season. As...
Read More
enterprise performance management system

What do you require from an enterprise performance management system?

So, your organisation has finally decided to invest in an enterprise performance...
Read More
Framework for digital transformation

A Framework for Digital Transformation

If you want to increase the pace of innovation and drive business...
Read More
Why digital transformation is important

Why digital transformation is important for business

By now you would have heard a lot about digital transformation and...
Read More
digital transformation team

Digital transformation team – who to involve?

If you are considering a digital transformation, one of the first questions...
Read More
data migration

Managing a data warehouse migration

Managing a data warehouse migration can seem like a daunting and overwhelming...
Read More
Cloud costs

Optimising cloud costs – alternate payment models in the SaaS industry

Optimising cloud costs and alternate payment models are top of mind for...
Read More
data cubes

Most data warehouse projects fail – avoid these mistakes

Data warehouse projects can accelerate revenue, reduce cost, increase operational efficiency, improve customer experience - plus more. However, improved efficiency is not a guarantee.
Read More
FP&A Model

How to develop FP&A models that adapt to your business

FP&A models need to adapt and change as your business grows. In...
Read More
Predictions for FP&A

5 Predictions for the FP&A Professional in 2022

For many, the first quarter of 2022 has not been the energised...
Read More
acceleration of digitisation

What the acceleration of digitisation means for FP&A professionals

The acceleration of digitisation is here and the office of finance can...
Read More
digital ecosystem

Reassess your digital ecosystem and drive business performance

Now is a critical time for finance professionals to reassess their digital...
Read More
Cloud data warehouse project - part 1

A successful cloud data warehouse project – part 1

If you want to implement a cloud data warehouse or have made...
Read More
Cloud Data warehouse - part 2

A Successful Cloud Data Warehouse Project – Part 2

A Successful Cloud Data Warehouse Project - Part 2 In part 1...
Read More
Finance of the future

Finance of the future relies on digital transformation

If you have read the recent research on finance of the future,...
Read More
data strategy

5 Questions to complete your data strategy

Your data strategy and action plan are critical in helping you maximise...
Read More
Data silos

Are data silos compounding your data visibility challenges?

In the age of information and technology, data silos are stopping organisations...
Read More
future of excel

Will Excel still be used by the FP&A team of the future?

FP&A teams strongly rely on Excel and are comfortable operating in this...
Read More
elevate the value of finance

How to ditch manual tasks and elevate the value of finance

Unfortunately, low-value, manual tasks dominate the day-to-day lives of many FP&A professionals....
Read More
budgeting cycle

4 Tips to improve your Annual Budgeting Cycle

It is June and you are probably in the throes of the...
Read More
improve forecasts

3 changes to help you improve forecasts and drive profitability

The last few years in business have changed much of the way...
Read More
strategic alignment

How CFOs can provide greater strategic alignment

The role of the CFO has changed and there is a greater...
Read More

Leave a Reply

Search here...

Leaders in Management Consultancy. Minerva Partners makes digital transformation simple, more effective, less time consuming and seamlessly integrated.

Contact Us