What is your process for accurate budgeting and financial planning?

- in my experience, any successful budget should be guided by the direction and the strategic focus which the company is trying to implement/take during the planning period. And this can be more than one strategic focus For example: if the company is trying to transform the business, much resources should be allocated to R&D and technology. If the company wants to fix, then more resources should be allocated to control environment, processes efficiency etc. These investments are usually attached to specific revenue or profits targets within the agreeable returns level by the entity. Which must as well be included in your plan numbers. It is important all the key stakeholders to be included in the entire journey of planning process.

Communicating with all operational and administrative departments to: 1. Forecast the upcoming year revenues. 2. Present their needs during the upcoming year per quarter. 3. Contact the key departments such as HR, IT and Estates & Facilities to validate for each department demand. 4. Estimate some budget elements such as utilities, governmental fees, insurance and depreciation depending on the last five years actual expenses. 5. Finally, compare between the upcoming year full budget and last five years trend, and targeted net profit. 6. Discuss and negotiate with all departments to achieve the targeted net profit. 7. After all compare between requested CAPEX and last actual five years and investigate the necessity for operation, and ROA.

Meeting with all department heads individually and going through each line item to see what was paid to ensure invoices are being coded properly and to ensure the necessity of the expenditure is the first thing I do each year. Once department heads are trained in doing this and they understand that it is important for them to take part in cost savings and improving efficiency in the organization, it makes the budget process clearer and less time consuming year after year. Also, multi-year budgeting for capital projects is a great process to adopt.

If you don't have defined objectives, how can you get to them? This first step is crucial. Imagine getting in the car, turn it on and start driving without knowing where you are heading to, you just keep driving and pumping gas. Make sense? Well, is the same when you are planning your budget without a defined objective

First step is to collect budget proposals from the bottom level with proper justification of of the same on the basis of guidelines framed by the corporate body. Second step is to consolidate the same for the company as a whole. Third step is to analyse the same on the basis of availability of fund or expected revenue to be generated for that fund. Revenue budget and capital budget to be analysed separately. Fourth step is to prepare item wise budget on the basis of availability of fund. Fifth step is to obtain competent approval with the provision of flexibility based on the actual scenario. Sixth step is to allocate the same to the unit level. Actions to be taken to complete the entire process before the starting of the next F/ year.

Very important to build a strong data base with information of the pass but, remembering that we are thinking about the future so, no because in the pass the revenue and costs and expenses had a behavior must be the same in the future. Always should be considered the SWOT analysis.

Track record is a must element to provide, other than actual needs and current financial situation. But then again, when it comes to budgeting is not some decision made within months before financial year but continuing process of preparation way before that. As for myself strategic sourcing also takes main part to the process.

You need strong underlying data, both internal and external data that will impact your business, a good modelling tool, and a finance team who understands the business and the environment it operates in. On top of that you need to push back against parties with different objectives participating in the budget process. Senior management and sales are often pressured to provide a sales budget that is too aggressive. It is then for finance to manage the spend and ensure EBITDA is on target. Analysing previous budgets/forecasts and their accuracy is also a good tool to understand what has caused deviation in the past but might not necessarily have the same impact in the future.

It's Key to have a data driven scenario, an been accountable for the projections, in my experience people is very optimistic when doing the planning and projections but the figures are hard to achieve later on

Collect historical financial data, market trends, and forecast information. This step is critical for understanding past performance and anticipating future financial needs. Analyze this data to identify patterns, opportunities for cost savings, and areas requiring investment.

Develop a detailed budget that allocates resources towards achieving your defined objectives. This budget should include income, expenses, capital expenditures, and any other financial considerations. Engage stakeholders in reviewing this budget to ensure it’s comprehensive and realistic, fostering a sense of ownership and accountability.

What is the point to get a budget if you are not going to put into work. Monitor is a must, this will show where you are standing. Would you like to take blind steps?

The key of set-up an accurate budget is to achieve a balance between the effectiveness (which requires giving the mid-management level a top hand in setting-up their costs needed to achieve the determined targets), and the efficiency (which requires the top-management level to align the planned ROI accordingly). Otherwise, the determined budget will be a pressure tool rather than a financial planing tool.

An effective budget implementation relies on the endorsement of senior leadership. When executive support is secured, it fosters organizational alignment, encouraging team members to adhere to the budgetary framework. Furthermore, informing department heads of key financial aspects of the budget allows for a collaborative approach, enabling the organization to achieve its strategic objectives more seamlessly.

Put your budget into action and continuously monitor performance against it. This involves tracking actual income and expenditures, comparing them to your projections, and adjusting activities as needed to stay on course.

In my experience this is the best place to start your planning. The budget should be a balance between historic spend and new priorities. If at all possible, keep the budget review windows as small as possible. Long-term planning is fantastic, but unrealistic to budget that far out. My suggestion is to keep the plans long-term but the keep the budget short term.

In my opinion, the budget is some guidline to operate the business, evaluation needs to be done regularly to keep the business on track or make some budget adjustment to adapt the latest condition either from the business perspective or operational perspective.

We're often hardwired to have confirmation bias and with a budget or financial projection it goes against our instincts to admit material deviations. It's critical to evaluate the performance of the real (actual) against the theoretical (budget) with clear eyes and to implement those reforecasts in a timely manner. Anything else will hamper the actionability of a budget or financial forecast. Simply put, don't be afraid to recognize the obvious truth that when events change, your forecast should change as well.

When?I was CFO of a modest $95 million firm, I utilized the general ledger to program and review monthly spending while briefing the board members at the end of the month. I utilized Monte Carlo analysis to better calculate and update monthly figures for year-end projections. Instead of calculating 2 digits, I did 4 digits (ten thousands) so I could course corrected in time if needed.

Regularly assess your budget’s effectiveness in meeting your objectives. This evaluation should be both quantitative (analyzing the numbers) and qualitative (assessing how budget allocations support strategic goals). Use this analysis to make informed revisions to your budget, addressing any discrepancies between planned and actual figures.

I think communication and transparency is vital for a successful budget process. Communication of the budget to the budget holders and even larger audience will get their buy-in, increase collaboration and help the organization to achieve goals and objectives.

From my experience, holding an annual “boot camp” with department heads facilitates departmental collaboration and ensures that each department's priorities are acknowledged. In addition, inviting departments to submit wish lists of items they’d like to invest in promotes a collective discussion at a company-wide level. This approach has been proven effective in addressing and fulfilling budget aspirations.

Incorporate a contingency plan for unexpected expenses or income shortfalls. Embrace technology to streamline the budgeting process, improve accuracy, and facilitate real-time monitoring. Engage in continuous learning to stay abreast of best practices and emerging trends in financial planning and budgeting.