Together at Last: Planning and Budgeting

What’s the One Word That Says Our Budgeting is Broken?

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I first encountered packaged budgeting applications in the early 1990s when as head of marketing (and budget contributor) in an insurance company I was sent an invitation to a one-day off-site for training on Hyperion Pillar. Despite the training, by the time we got around to budgeting, I had forgotten so much of what I had been taught, it was a real struggle to get my figures into the system. By the next year, I was a complete blank. But, Mike, my friendly financial controller, came to my rescue and offered to enter our data if I sent him a spreadsheet – job done.

Implementing that solution may have made life easier for Mike and his colleagues in the finance function but it did little for our business users or the organization’s ability to reforecast. In fact, other than an occasional month-end query to explain any variances, the solution was only ever used once a year for the dreaded annual budget. My guess is that we weren’t alone. Over the ensuing years, numerous companies have likely followed the same route of implementing solutions that get little use and never deliver on the promise.

The result is that three decades later, after a steady migration away from spreadsheets to packaged solutions, budgeting as it is currently practiced is still viewed by many as delivering little value. After hundreds of millions of dollars of investment, we still hear the same gripes that budgets take too long, cost too much, and are perpetually out of date. So while automation has improved data quality and productivity for finance, it has done little to reduce the almost universal desire to reforecast more frequently, which many recognize as essential in responding to the persistent uncertainty prevalent in most markets.

So What’s That Word Again?

Years of sitting in on exploratory client calls and listening to folks present at conferences has attuned my ears to listen for the key word that instantly betrays that a company is caught up in such a budgeting log-jam. They all talk about issuing their budgeting ‘template.’ Put simply, that means they know what numbers they want you to pull from their chart of accounts. Now, while there might be some guidance attached about senior management’s expectations for revenue growing much faster than expenses, what is never said is that finance really doesn’t care what you do to come up with the numbers.

This situation prevails because many finance departments still view budgeting simply as the process of collecting and collating financial line item expenses; they take little or no interest in the detailed planning that contributors do on spreadsheets to forecast their resource requirements and resulting expenses in order to complete the darned template. Everyone, including software vendors, talks about ‘planning and budgeting’ in a single breath. But even in those organizations that have the latest Financial Planning and Analysis (FP&A) tools deployed, the reality is that detailed planning remains disconnected from financial budgeting, just like it was decades ago.

Join us for our Driver Based Budgeting webinar on October 2, 2014 and we’ll show you how to bring planning and budgeting together again and transform the process into something that is fit for purpose today.

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