What budgeting techniques can you master to stay adaptable in Corporate FP&A?

The ease of working with rolling budgets depends on your organization's structure, culture, and the complexity of its operations. Rolling budgets offer advantages like flexibility and adaptability, but they may require more frequent updates and monitoring.

A rolling budget enables the organization to have real time control over the baseline values and enable effective controlling measures on time. A rolling budget might not be suitable for project based industries and it might not account for the skewed data.

Ditch annual cycles and embrace continuous planning with adjustments as you learn. Don't just budget for one future, explore "what-ifs" for different economic climates or market shifts. Imagine having multiple financial plans in your back pocket, ready to pull out depending on the situation. Focus on key factors that influence your finances, like sales volume or raw material costs. It's like understanding the levers that control your financial ship. Move beyond departmental silos and link budgets to specific activities that drive value. Think of it as budgeting for the specific actions that matter. Start each budgeting cycle from scratch, justifying every expense. The best technique isn't a one-size-fits-all solution.

Large corporations in FP&A benefit from Zero-Based Budgeting (ZBB), requiring justification for all expenses annually, promoting cost efficiency. Activity-Based Budgeting (ABB) allocates resources based on activities, enhancing cost visibility. Rolling Budgets offer flexibility by continuously updating future periods. Beyond Budgeting focuses on adaptive, agile planning, encouraging dynamic adjustments. Driver-Based Budgeting aligns budgets with key business drivers for accurate forecasting. Incorporating these techniques provides comprehensive financial insights, strategic alignment, and adaptability for robust corporate financial planning and analysis.

Rolling budgets are a dynamic approach to financial planning, involving continuously updating the budget for a set period ahead, usually 12 months. Unlike traditional annual budgets, rolling budgets are revised regularly, often monthly or quarterly which allows companies to adapt their financial planning to current market conditions and operational realities faster. By constantly incorporating the latest data and forecasts, rolling budgets provide a more accurate and current view of financial performance and needs. I find that rolling budgets are also often easier to work do, as they don't require everything to be considered bottom-up as some classical budget processes demand.

A main proponent of ZBB is starting from scratch and consideration of only necessary expenditures. ZBB is perfect for organisations who strive to become cost leaders in mature industries.

The greatest benefit of rolling budgets is calibrating forecasts for material unexpected events, especially in the next 6-12 months. Prime examples include: unexpected change in revenue (may be due to a large new order), a potential legal settlement, and unforecasted IT mitigation spending. Plus, another side benefit is that operational managers and finance business partners are more vigilant to changes in the financial forecast.

Zero-based budgeting, while thorough, is notably time-consuming due to its fundamental approach. Unlike traditional budgeting methods, it requires every expense to be justified from scratch in each new budget period. This means that instead of adjusting previous budgets, each department starts at zero and must analyze and validate every cost and project. This exhaustive review demands significant time and effort as it involves detailed data collection, analysis, and justification for every budget line item. I find that managers and finance teams must devote substantial resources to scrutinize each expense, which can't always be justified, since the resulting budget is not necessarily more precise anyways.

O Or?amento de Base Zero (OBZ) é uma daquelas práticas que coloca todo mundo na empresa para pensar como um dono do negócio. Nada de se acomodar nos gastos do ano passado. Aqui, cada real precisa provar seu valor, como se estivesse competindo em um reality show financeiro. Sim, é uma baita ferramenta para cortar a gordura e manter todo mundo na linha, mas também é um teste de paciência. Justificar cada linha do or?amento pode ser exaustivo e, vamos ser sinceros, às vezes você só quer que algumas coisas continuem sem ter que reinventar a roda todo ano. Mas é esse o pre?o da eficiência: vigilancia constante e nenhum gasto passa sem escrutínio.

Adapting scenario planning is helpful so companies can realize the gaps and what matters to focus on, including base case, best case, worst case, and breakeven case. This way, risk can be approached, and mitigating techniques can be an opportunity for readiness. In addition, partnering with key stakeholders in this matter will help even more for better scenario assumptions that will lead to better outcomes.

With the changing business environment, forecasting according to multiple scenarios is a necessity for enhance accuracy. It enables one to factor all contingent events and transactions for presenting a more optimal and accurate picture of the business environment

Scenario planning requires FP&A to understand business drivers and their impact on long and short term goals. This technique helps finance to have continued pulse check on business. Throw in MonteCarlo simulation and you can have a really good and realistic forecast.

O planejamento de cenários é tipo aquele jogo de xadrez com o futuro da empresa: você tem que pensar em várias jogadas à frente. N?o é só imaginar o que pode dar certo ou errado, é praticamente escrever roteiros diferentes para a novela financeira da empresa. E cada cenário é um capítulo que pode ou n?o acontecer. A beleza disso é que você se prepara para os sustos do mercado. O ruim? Pode ser uma baita dor de cabe?a. Você precisa de uma pitada de vidente para chutar como o mundo vai girar e outra de diplomata para alinhar todo mundo com essas vis?es. E mesmo com todo esse esfor?o, a realidade adora pregar pe?as que nenhum cenário previu. Mas sem dúvida, é melhor estar com o plano na manga do que ser pego de cal?as curtas.

Change from direct costing methods to a driver based costing facilitates higher accuracy and cost management. Assigning overheads basis the different drivers of different activities represents a true picture of business ops. Further, creating and maintaining driver trees for key business operations proves to be beneficial in the long run.

Driver-based budgeting is a more modern, streamlined approach to financial planning that focuses on identifying and understanding the key business drivers that significantly impact financial outcomes. Instead of analyzing every line item, this method concentrates on the main factors that drive revenue, costs, and profitability, such as sales volume, pricing, headcount, and operational metrics. This approach is more efficient and strategic compared to traditional budgeting methods. By focusing on these key drivers, organizations can create more relevant and agile budgets. However, I find that implementing driver-based budgeting can be a time-consuming process that might now always be worth it.

By adopting a driver-based approach, businesses can achieve sustainable growth and unlock their full potential. It is essential to link performance measurement with the organization's strategic planning to ensure that it is done and tracked effectively. Aligning it with a benchmark helps to identify areas that require improvement and adjustment for future planning.

é uma forma inteligente de fazer or?amento porque você foca no que realmente importa, o que realmente traz a grana. Mas n?o é só festa; se os seus drivers n?o estiverem bem calibrados, você pode acabar indo para a dire??o errada. E tem mais, mudan?as nesses drivers podem exigir um retrabalho no seu or?amento que dá um baile em qualquer planilha. Ent?o, sim, é mais esperto, mas exige que você esteja sempre atento ao volante.

Or?amento ascendente é aquele momento democrático das finan?as onde todo mundo tem voz. é sair do castelo de marfim e ir ouvir a galera que está no campo de batalha todos os dias. é um jeito de fazer or?amento que tem o poder de engajar todo mundo, porque quando as pessoas podem falar, elas se sentem parte do jogo. E n?o é só moral que sobe; você acaba pegando ideias que nunca chegariam na sala da diretoria. Só que tem o outro lado: pode virar a feira do caos se todo mundo resolver pedir o que acha que precisa. Se n?o tiver controle, em vez de um or?amento, você tem uma lista de desejos. E aí, em vez de empoderar, você está distribuindo frustra??o porque, no fim das contas, nem todo mundo pode levar o que quer.

Budgeting is much more than just a numerical exercise of submitting figures into a system; it's a strategic tool for guiding a business towards its long-term objectives. Effective budgeting involves setting clear, realistic targets that align with the company's strategic goals. These targets act as benchmarks, guiding decision-making and resource allocation across the organization. By aligning budgeting with the company's strategic vision, it ensures that every financial decision made contributes towards achieving broader business goals. I find that many companies get stuck in the number crunching and lose the overview of how budgets are supposed to help drive strategy execution.

Na arte de or?ar, uma li??o que muitas vezes fica de fora dos manuais é que os números s?o só a ponta do iceberg. Por trás deles, há sempre uma história humana. Os conflitos e conquistas, as viradas inesperadas, a resistência à mudan?a, tudo isso molda o real desenho financeiro de uma empresa. Um insight que n?o se pode esquecer é a importancia de construir uma cultura onde o or?amento n?o é visto como um fim, mas como um meio - um mapa que guia, mas que deve ser flexível o suficiente para permitir desvios quando o terreno à frente muda.

Every budget and forecast must be in line with the Annual Operating Plan and data must be validated across all three. The AOP forms the basis for execution of the budgets and forecasts and integrates the business strategy to the finance strategy.

Depends on where the company is headed and what the corporate strategy is. Also depends on what the maturity of the company - start up v growth v mature. All the budgeting methods identified here can work and have been shown to be effective. As the finance person you need to decide which is the approach that: 1. Takes up optimal time away from the managers, who have to focus on getting their job done 2. Provides a forecast that is accurate enough, accounting for the business risks, and lastly, 3. The finance resources can support.

An ideal budgeting exercise for an organization includes all the approaches depending on which aspect of the organization is being evaluated for. RBB,ZBB,SBB,DBB,BUB,MBB are all used. Budget finalization would be inclusive of all the above inputs since products and functions for each industry differ from one another.. Lessons learned from internal Budget reviews and revisions feed forward to the next.