How to improve the budgeting, planning and forecasting process

June is often the beginning of a new fiscal year. The annual plan is typically approved by the board before the summer holidays, the accountants were barely able to close the books and it is time for the first monthly forecast for the coming year. Everything seems in order, but the same complex forecasting spreadsheets are being converted to a new fiscal year, stale metrics are being calculated and lengthy instructional emails are being readied to be sent throughout the company. Worse yet, companies will continue to get big surprises in results that will need to be analyzed, reported and explained to management.

Most companies will wait until the second half of the fiscal year to improve budgeting, planning and forecasting. However, the beginning of the fiscal year is the perfect time to start getting ready for a new planning process and system by:

• Improving processes while last year’s planning pain is still fresh. The planning process involves people who are too busy to make changes to increase process efficiency. Suggested changes to the iterative process are often overlooked because people are relieved to be done with planning and put off changes until later. A formalized process improvement discussion is the perfect forum for people to share and collaborate on ideas for the next cycle. Going through a process to improve budgeting, planning and forecasting is most effective when the wounds are fresh and the ideas are not forgotten.

• Redefining KPIs to make a difference for next year. The organization would benefit greatly by reducing surprises with a refreshed planning process. There is often a big disconnect between the short-term and long-range plans.  Many KPIs do not have relevance to managing day-to-day business activities and the monthly forecasting schedule seems to drive business events, not the other way around. The executive team can take advantage of the process improvement discussion to link the strategic vision of the company with the tactical business plan for more predictable, timely and accurate results. Revisiting the KPIs and communicating strategic vision will drive changes to the organizational structure and communicate new roles and responsibilities.

• Taking advantage of simple solutions. Spreadsheets are the tool of choice for most planning processes. Unfortunately, spreadsheets are prone to error and limit the level of analytic reporting that can be performed. Typically, companies will consider ‘big box’ software that requires significant effort to implement and support. There are cloud-based, inexpensive and easily implementable solutions, like Host Analytics, which improve budgeting, planning and forecasting at companies.

Forecasting accuracy can improve with the proper blending of process improvements, organizational change and new tools. The first step is defining the process, followed by assigning roles and responsibilities and, finally, selecting the tools needed. Overemphasis on any one can lead to an imbalance that can impact results.