Budgeting and forecasting are essential tools for any business, but they can become challenging and irrelevant in an uncertain environment. How can you communicate your budgeting and forecasting effectively and adapt to changing circumstances? Here are some tips to help you keep your budgeting and forecasting communication relevant and useful.
The first step to communicate your budgeting and forecasting is to understand who your audience is and what they need to know. Different stakeholders may have different expectations, questions, and concerns about your budgeting and forecasting. For example, your senior management may want to see the big picture, your investors may want to see the return on investment, and your employees may want to see how their work contributes to the budget and forecast. You need to tailor your communication to suit your audience's needs and preferences, and use the appropriate language, format, and level of detail.
Do simulations, define your risk& opps, track and monitor all variables that might eventually impact your budget ( industry trends, economics, regulation, competition etc ) Collaborate and distribute ownership of the budget Train budget holders- basic finance acumen is vital Do root cause analysis
In an uncertain environment, it's essential to maintain relevant budgeting and forecasting communication for effective financial management. Key strategies include regular updates to align with changing conditions, scenario planning to prepare for multiple outcomes, sensitivity analysis to identify key financial drivers, clear communication of underlying assumptions, risk assessment and mitigation, real-time data utilization, a collaborative approach involving various stakeholders, technology for real-time adjustments and data visualization, scenario-based decision-making, stakeholder education, and ongoing learning from past forecasts. These strategies promote adaptability and informed decision-making in dynamic environments.
To keep forecasting relevant in uncertain times, the best thing to do is to have a monthly rolling forecast. This will help you consider the current happenings and include them in the forecast also risks and opportunities are very important and to be reviewed monthly. Communication to stakeholders is key and we need to understand the expectations of all stakeholders and build a report that can meet all their needs at once.
In my experience, understanding the audience is the key to get the most appropriate input which will help in building budget. When the environment is unstable, in that case scenario analysis becomes the key. And the inputs should be asked to the audience based on proper defining the scenarios.
Accounting, SEC reporting, audits and taxes are required functions by internal and external agencies, thus have to be completed in accurately and timely fashion. However, planning, budgeting and forecasting are generally not mandated. Perhaps SOX attestation may require basic budgets. Having said that the big question is why is FP&A important. A simple answer is while the first few deliverables are post action, i.e. after the fact, this function is pre-emptive in nature. A proper plan drives proper business judgement and disciplined actions. Accountability, decision-making, and optimizing resources, such objectives would not be possible without a formidable FP&A function. It serves as an essential tool for a successful company.
One of the challenges of budgeting and forecasting in an uncertain environment is that you have to deal with a lot of unknowns and risks. You can't rely on historical data or trends to predict the future, and you have to account for various factors that may affect your business performance. To communicate your budgeting and forecasting effectively, you need to use scenarios and assumptions to show how you arrived at your numbers and what factors may change them. Scenarios are alternative versions of the future that reflect different possibilities and outcomes. Assumptions are the underlying beliefs or conditions that support your scenarios. By using scenarios and assumptions, you can show your audience how flexible and realistic your budgeting and forecasting are, and how you can adjust them if needed.
When using assumptions, it is good practice to use at least 3 scenarios; optimistic, optimal, and suboptimal. This gives you forcasting boundaries on the highs and lows the future may hold.
I totally agree. I believe that to overcome the challenges of uncertainty of the assumptions: 1- Create a bit challenging but rather fairly realistic budget. Wishing for the stars to align with your goals is not always a good idea. 2- Being flexible: create different scenarios for different situations and possibilities and be flexible to move between them. You never know, you might be able to achieve bigger things, or avoid a disaster. 3- Make sure that every body in the company knows the importance of their contribution to the budget. 4- Be up to date with all the relevant facts about your business. Knowledge is a valuable power, Don’t underestimate it.
In uncertain environment, we need to be proactive and agile while creating solid tracking measures and clear alignment and transparency with all stakeholders. Plan various scenarios (best case, worst case), and some severe conditions would require Zero-Based Budget that starts with prioritizing operating and capital expenditures and aligning them with the company’s strategy. Identify budget priorities framework and ensure that our planning meets them well.
Developing contingency plans for different scenarios, and communicating these plans to relevant stakeholders are vital. Having predefined responses to certain conditions can help reduce uncertainty.
One can use historical data to budget/forecast revenues, but is also important to add assumptions on growth (and in that matter, sales and growth teams should be accountable for giving inputs). Regarding costs you should take into account inflation so your budget is more realistic. Again all teams should be involved to provide inputs. Setting scenarios is important, especially if you rely on growth to hire new employees. Also important when managing company’s runway.
Another challenge of budgeting and forecasting in an uncertain environment is that you have to deal with a lot of information and complexity. You may have multiple scenarios, assumptions, variables, and indicators to consider and explain. However, you don't want to overwhelm or confuse your audience with too much detail or technical jargon. You need to focus on the key messages that you want to convey and highlight the most important or relevant points. You can use visual aids, such as charts, graphs, tables, or dashboards, to summarize and illustrate your key messages and make them easier to understand and remember.
Budgeting and forecasting is a very detailed exercise. One needs to be clear on what needs to be communicated to the larger group. 1. Focus should be on the ASSUMPTIONS that have been taken. In a VUCA world, these assumptions might change drastically over the period of budget rendering the entire working irrelevant. 2. Cost factors need to be highlighted - splitting them into controllable and non-controllable. What controllable cost are taken and how to ensure there is no overrun. 3. Broader key outputs - like revenue growth, cost assumptions, profitability arrived from these assumptions will ensure that the team is fully aware of the goal and the objective of the organisation is achieved.
Agree. You can also define key metrics for your business and present them to each team in a more visual and easy to understand way.
Key here is to create a clear and understandable set of visuals for different stakeholders. Best way of conveying a message is adding a suggested resolution to an issue that the analysis underlines. PBI is a great tool to set up interactive visuals.
One of the most important aspects of budgeting and forecasting communication is to be transparent and honest with your audience. You need to acknowledge the uncertainty and volatility of the environment and the limitations and challenges of your budgeting and forecasting. You need to share the sources, methods, and data that you used to create your budgeting and forecasting, and explain any changes or revisions that you made along the way. You also need to disclose any risks, assumptions, or uncertainties that may affect your budgeting and forecasting, and how you plan to mitigate or manage them. By being transparent and honest, you can build trust and credibility with your audience and avoid any misunderstandings or surprises.
Budgeting/forecasting is about being the most realistic and the least wrong. This takes inputs from all areas of the business and using those inputs appropriately. By listening to these people with multiple priorities and then overlaying that with your professional expertise will come to the best possible outcome.
Transparency is key and is of great importance that commercial teams communicate accurately conversation rates and new deals going live - sometimes these teams with the eager to empower themselves, anticipate revenue that occur months later with impact on runway.
Transparency and honesty are the keys that unlock understanding, trust and informed decision making. Acknowledging inherent risks, far from being a sign of weakness, it is a testament to our adaptability and our commitment to delivering as accurate a projection as possible in an unpredictable future. It creates a collaborative environment where stakeholders actively participate, navigating the uncertain times alongside us, creating a sense of partnership and shared mission. This approach enables us to remain agile, incorporate new variables and evaluate their impact, strengthening our readiness for uncertainty and preserving the integrity of financial planning.
In all our financial communications, transparency is key. We believe in being upfront about our data, assumptions, and potential challenges. Honesty builds trust, and trust is essential for sound financial planning. It's a commitment to integrity in every aspect of our work.
Figures don't lie and if you try to change them to suit your view, the truth will come out eventually. When it comes to figures being transparent is top priority. Decisions are generally made on figures, if the figures reported aren't correct then decisions are not being made to reflect the current correct picture.
The final tip to communicate your budgeting and forecasting effectively is to seek feedback and input from your audience. Budgeting and forecasting are not one-way processes, but rather collaborative and iterative ones. You need to engage your audience in the budgeting and forecasting process and invite them to share their opinions, questions, suggestions, or concerns. You need to listen to their feedback and input and incorporate them into your budgeting and forecasting if appropriate. You also need to follow up with your audience and update them on the progress and results of your budgeting and forecasting. By seeking feedback and input, you can improve your budgeting and forecasting communication and make it more relevant and useful for your audience.
In a time where the labor industry can vary from day to day, it's important to keep your data close to the pulse of the business. A helpful tip is providing a space for mid-level management to communicate. They see real time what could skew forecasting, for example quiet quitting on the floor. Including this data, can go a long way when it comes to relevant forecasting and budgeting.
When engaging with internal stakeholders in regard to their budget it is imperative to be transparent from day 1 & to over communicate instead of under communicate. If you have a draft view then share it, if a change of direction is needed in the middle then let them know. There is nothing worse than a top down imposed budget which will alienate senior stakeholders & result in apathy & limited buy in.
By requesting feedback and input, you can involve and influence the stakeholders. Encouraging "ownership" and generating ideas for mitigating emerging risks to the budget and forecast.
In this unpredictable world of today, keeping our budgeting and forecasting communication on point means we’ve got to stay on our toes. Regular updates, scenario planning, and a good dose of transparency can help everyone stay in the loop and know what’s going on. It’s all about embracing risks, engaging with our stakeholders, and making the most of tech to keep our data sharp and our visuals snappy. Flexibility is our friend, and a bit of education can go a long way in keeping everyone on the same page. And, of course, keeping an eye on the world around us ensures we’re not caught off guard. By juggling all these elements, we can keep our financial communication relevant and robust, come rain or shine!
It's important to be proactive and responsive in an uncertain environment to ensure your budgeting and forecasting remains relevant. Sensitivity analysis, Rolling forecasts and Contingency planning are key.
Let your tools enable flexibility. Whether that is a complex ERP, or a flexible excel model. Choose what suits your organisation best. Let your tools enable flexibility. Whether that is an ERP. Or a flexible excel model. Whatever suits your organisation best. Have your tools set up to enable delivery of different scenarios / outcomes for your organisation.