The annual budgeting process produces too many headaches. Here's how to make the plan more relevant. It was with some sadness that I learned of Jeremy Hope’s recent passing. Mr. Hope’s name is not at the top of many finance professionals’ minds, but we owe him thanks for highlighting the problems we face in our annual budgeting process. He and coauthor Robin Fraser’s ground-breaking book “Beyond Budgeting” should be required reading for any finance executive responsible for an annual planning cycle.Mention the word “budget” to an accountant or finance director, and the most pleasant reaction you will likely see is the rolling of eyes. Budgeting carries many negative connotations, including excessive conservatism (i.e. “sandbagging”) or top-down directives that have little basis in reality. Today’s budgeting also burdens finance departments with detailed and cumbersome Excel spreadsheets, as I outlined in a previous CFOworld blog.As I heard a John Deere executive say, “If data were dirt and information were water, we would be buried alive and dying of thirst.” The annual budgeting process overwhelms organizations with complex negotiations, time-consuming iterations, and charges of excessive financial meddling. Fixed budgets also lead to inaccurate decision making. In 2008, my prior employer’s opening budget was prepared in October and useless by November.When I work with my clients, we develop a rolling five-quarter financial forecast. We forecast cash flow and profits for the next three months and then forecast by quarter for the next four quarters after that. This process allows us to identify key cash shortages or business opportunities over the next three months to develop a plan to address this situation. The four-quarter forecast balances the need to plan for future cash needs with not overwhelming my clients with too much data. The rolling nature of this forecast allows us to use the forecast as a living plan instead of a once-a-year exercise. Mr. Hope asked the right questions about the budgeting process. It’s up to us to identify the right answers to drive a culture of performance through our organizations. Related content opinion The Importance of Identity Management in Security By Charles Pelton Nov 28, 2023 5 mins Cybercrime Artificial Intelligence Data Management brandpost Sponsored by Rocket Software Why data virtualization is critical for business success Data is your most valuable resource—but only if you can access it fast enough to address present challenges. Data virtualization is the key. By Milan Shetti, CEO of Rocket Software Nov 28, 2023 4 mins Digital Transformation brandpost Sponsored by Rocket Software The hybrid approach: Get the best of both mainframe and cloud Cloud computing and modernization often go hand in hand, but that doesn’t mean the mainframe should be left behind. A hybrid approach offers the most value, enabling businesses to get the best of both worlds. By Milan Shetti, CEO Rocket Software Nov 28, 2023 4 mins Digital Transformation brandpost Sponsored by Rimini Street Dear Oracle Cloud…I need my own space Access results from a recent Rimini Street survey about why enterprises are rethinking their Oracle relationship and cloud strategy. By Tanya O'Hara Nov 28, 2023 5 mins Cloud Computing Podcasts Videos Resources Events SUBSCRIBE TO OUR NEWSLETTER From our editors straight to your inbox Get started by entering your email address below. Please enter a valid email address Subscribe