Role of Planning & Budgeting process in the era of Digitization:

Small and mid size organizations have become dominant players of the economy and business environment has become highly competitive, challenging and disrupted by digitization & cloud revolution. Realizing the trend CEOs have been revising their companies’ core value offerings, long term & short term goals and objectives. 

Most of the top managements have come up with new road map for achieving new business goals and introduced changes in the existing business strategies. CFOs also have been involved heavily as CEOs have changed the direction of their ships. CFO teams examine their current financial health- cash flow, debts, fixed assets, risk analysis, revenue streams and capital expenditures and so on and coming up new financial strategy and revising their planning & budgeting process.

Typically financial budgeting process has been perceived less value activity, considered as lengthy, in flexible, iterative in nature. Research shows that 75 % of finance users are heavily dependent on spreadsheets for budgeting, planning and reporting which is time consuming, error prone, weigh down users with cumbersome tasks, increase cost/inefficiency and can delay decision making process.

Finance team frequently gets questions like Are these numbers correct? , Have you verified it, Which is the correct version, who has approved it, Why it’s taking long time, Why we have not incorporated stakeholders concerns/ demands in planning process, Have you done analysis properly, how confidential data got leaked and so on. These kind of questions they keep hearing as they spend lot of time on working with spread sheet, collecting data, consolidation of data, verifying the data, getting the approvals in this entire exercise and as a result left with very less time in analyzing those data/ scenario analysis which should be the key activity and should be given sufficient time.   

Gone are those days when financial planning process was just a formality which is done once a year, or every year just increase budget by 5-10 % and allocate budget accordingly.

Managing business performance has become crucial in highly complex and rapidly changing business climate for organization’s success. In order to provide top management insight in to business and retain investor’s confidence financial planning & reporting has become the most critical exercise in the organization which can provide the comprehensive intelligence in current trends and drivers of the business performance.

Whether company follows top down approach or bottom up approach, follows activity based planning or driver based planning or zero based budgeting, companies need to come up with flexible planning process which incorporates required details, which should not be too conservative in nature, which can drill down to granular level, can closely link other SBU/sales/operation departments, can give clarity on different scenarios and business opportunities as external factors are becoming prominent in overall business success. Rolling forecast is not a new trend any more but has become integral part of planning process as it allows business users to look forward.

CEO, CFO, investors & LOB heads are looking for robust budgeting process and it has become high priority over other initiatives.

Companies who have revamped their financial budgeting process by putting right structure, adopting right planning approach & implementing suitable cloud technology -as a process enabler can yield desirable results like reduction in planning cycle, improved staff productivity, advanced reporting capabilities – scenario analysis, secure collaboration, approval automation, reduce working capital cost which can enhance decision making capabilities and help take right course of action. 

Need for transformation of budgeting and planning process has put CFOs team in lime light as organization’s focus is shifting away from controlling business by tracking performance or beat the budget or finding loopholes. The focus is more towards regular collaboration with business stakeholders/ departments, proactively identifying risk, winning more market share & capitalizing new marketing opportunities.  

Thanks!!

Jitu Patel