What do you do if your budgeting system is not efficient enough?

Solution to any problem is to define the problem. When we are concluding that there are flaws in the budgeting system, what is the basis on which we are concluding which would lead us to identify inefficiency. I would classify the problems into 4 categories. 1. Our deep understanding of both Micro and Macro economics which has an impact on our forecasting process. 2. Our analysis on industry that we operate. Mainly the entire supply chain, the way it works. 3. Our skill in anticipating our customers future needs. 4. The last one is our understanding of our plant capabilities,Plant KPI, Cost both variable and fixed and product portfolio. If the problem falls under any of the above categories, it would be possible to take remedial measures.

As a past CFO/FC/COO I have spent many months and long nights preparing budgets that are out of date on day FYE+1day. In my experience the only practical purpose for a fixed annual budget is for setting sales targets and sales commission structures. For all other areas of the business there should be a rolling monthly or if not practical, quarterly forecast where upon decisions can be made with the most up-to-date information and business trends. To achieve this all businesses need a robust platform to allow for immediate access to up-to-date reconciled actuals from your GL and Operational systems, cater for multiple scenarios, easy collaboration and simple reporting. There also need to be a champion who drives adoption internally.

The budget preparation process needs to be reviewed thoroughly to find out the loopholes . Clear perspective of the economic environment viz government policies , demand outlook needs to be considered to get the correct assessment of the market condition. As per the internal environment of the company is concerned , there has to be deep dive into the budgetary requirements for various maintenance activities . If these are not undertaken timely , it may seriously jeopardise the production schedules thus impacting the profitability. In many instances , the cost savings initiatives considered in the budget and netted off from the expenditure are grossly misleading which goes haywire in actuality which also effects the efficacy of Budget.

1. Identify the Gap: First need to identify GAP between our assumptions for preparing the budget and actual financial figures. 2. Rectify the flaws: Re-consider all the assumptions align with Economic moment, Industry potential, Company's Objective and capabilities. 3. Forecast the figures: Start with revenue projection, and analyze the historic trend, inflation, Time value of money to forecast the variable expense and get contribution. Ensure to make closest realistic numbers to make it more effective. 4. Clear Communication and Accountability: Important to include concerned department while freezing the figures 5. Regular Monitoring: Conduct variance Analysis and identify the reasons 6. Seek Feedback & Incorporate the updates

It's crucial to identify the root causes of its inefficiency. Start by assessing the current processes, tools, and resources being utilised. Look for bottlenecks, redundancies, or manual tasks that could be automated or streamlined. Engage with stakeholders across departments to gather feedback and insights on pain points and areas for improvement. Consider investing in modern budgeting software or tools that offer features such as automation, real-time collaboration, and advanced reporting capabilities. Train your team on best practices for budgeting and forecasting to optimise their use of the system. Regularly review and refine your budgeting processes to adapt to changing business needs and ensure ongoing efficiency and effectiveness.

Determine what you want to achieve with your budgeting system. Whether it's saving more money, reducing debt, or simply having better financial visibility, having clear goals will help you refine your approach.

Categorize your expenses into different categories such as groceries, utilities, entertainment, etc. This will give you a clearer picture of where your money is going and where you might need to make adjustments.

Horses for Courses as they say! There are so many tools to choose from these days with many new 3rd and 4th generation platforms promising all the colourful bells and whistles. For more established companies with complexity in GL Systems, varying data sources, complex calculations, modelling, consolidation and complex workforce planning, the more traditional cloud solutions have more depth in their databases, calculations engines, scalability and of course global support and customer communities to provide the best solution. It also helps broad adoption if the solutions integrate with and work seamlessly with MS office suite which is embedding itself more and more within the finance and operations of business.

Em um cenário onde o sistema or?amentário falha na eficiência, é crucial explorar ferramentas específicas de or?amento. Softwares como o Hyperion, PlanGuru, e QuickBooks, por exemplo, automatizam a entrada de dados e oferecem análises financeiras instantaneas, facilitando ajustes rápidos em seus or?amentos. Essas ferramentas permitem um planejamento de cenários flexível, adaptando-se às mudan?as sem esfor?o. A escolha certa n?o só economiza tempo mas também aprimora a precis?o das suas previs?es or?amentárias.

Explore budgeting and forecasting software solutions that offer features such as automation, collaboration, and real-time reporting. Investing in technology can significantly improve the efficiency and effectiveness of the budgeting process.

If my budget system fails short, I would start by identifying pain points and areas for improvement. Then implement changes such as simplifying categories, automating transactions and regularly reviewing the budget to ensure it aligns with my financial goals. Finally I would monitor the impact of these adjustments and make further improvements as needed for a more efficient budgeting process.

Establish KPIs to monitor the performance of the budgeting process. Track metrics such as budget cycle time, accuracy of forecasts, and variance analysis to identify areas for further optimization.

Your budget is not a static document. Your income and expenses may change over time, so review your budget regularly (monthly or quarterly) and adjust categories or amounts as needed.

Know your business. Your assumptions are a key part of this process, and knowing what drives costs and generates revenue is a basic starting point

There are many budgeting apps and tools available that can automate tasks, and provide helpful insights into your spending habits.

Involve business unit managers and department heads in the budgeting process. Provide them with training and resources to understand financial concepts and effectively manage their budgets. Encourage ownership and accountability for budget targets.