Here's how you can enhance budgeting and forecasting accuracy using innovative techniques.

Data Analytics: Utilize data analytics tools and techniques to analyze historical financial data, identify patterns, and make more accurate predictions. Explore predictive analytics models, regression analysis, and machine learning algorithms to forecast future trends and outcomes. Scenario Planning: Implement scenario planning techniques to account for various potential outcomes and uncertainties. Develop multiple scenarios based on different assumptions, market conditions, and business variables to assess potential impacts on budgeting and forecasting accuracy.

Most budgets and forecasts are built around actual historical costs and expenses. They get adjusted using inflation factors, cost element variable costing analysis and inflation forecasts, and other factors such as discretionary costs per employee. Some targets are established using industry or other benchmarking. Some cost elements are pegged to revenues, others to business unit structure. Data analytics give you the tools and horsepower to perform the analysis and use its results in improving your budgets and accuracy for the recurring and known activities.

I don't encourage rolling budgets, but fully support rolling forecasts (indicated finals or IF) against the budgets and project plans. Keep them at the material levels. Use them to identify where funding may come available for overruns or other management decided opportunities (including margin enhancements). If something pops up with great urgency and priority, use its business case against the monies identified from the IF exercise to support management discussions and decisions.

Scenario planning is a useful tool to play out the what-if stories for projects and initiatives that are already identified and for pop-up situations during the year. Have the people who are going to have to respond to the new threats as to identifying the steps needed and timing for those steps. Have them help identify decision points and what happens afterwards. Ask them for input on resource requirements along the way and for any possible relief from insurance or other sources. Time phase the resource costs to match the efforts and decision points. Understand when go-no-go or appeal or other possible throw-in-the-towel points will occur. Know what the payback is vs. the costs. In otherwards build the business case.

One thing I have found beneficial, review of projects for other departments is an important step in securing funding to support key initiatives. There will be contract review and negotiation, statutory requirements that must be met, and operational impact. The project scope will serve as a basis for active litigation search prompts. Prior precedents in conjunction with projected initiative scoping will facilitate building a strong well rounded forecast.

Getting input from various departments into budgeting can help and it can hinder the budgeting and forecasting process. It really depends on the people in the departments and the candor and motivations they bring to the process. They can help identify risks and opportunities and spell out the likely progression of how a project or initiative will unravel. This is helpful. What isn't helpful is their wanting reserves for what might happen and what it might cost at an extreme. Other thoughts they might bring is the belief that their expenses will go up in tandem with revenues. You need to facilitate the conversations so that the positive is being gathered, but not the absolute desires.