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Five Strategies to Save Time and Maximize Output of Your Budget Process

For many of us, this is the time of year when preparations begin for the annual budgeting process. There are few who relish the experience. Budgeting is often characterized by long hours and vast differences between what executive management wants and line management can deliver in terms of future financial performance.

In 2012, we asked 100 finance personnel across the country a series of questions regarding their planning process. One of them, “How long does it take?” yielded a surprising result: more than 88% of all respondents using at least one full business quarter to plan their budget for the upcoming year. These results were further corroborated by the 2012 BPM Pulse Survey conducted by BPM Partners.

We can do better. Here are five great strategies your organization can reduce the time it takes to complete your annual budget—without sacrificing the accuracy or quality of the plan:

  • Eliminate excessive detail.We learned that most organizations have a chart of account (COA) size greater than 300; many well above 500 line items.Granularity for actuals does equal accuracy, but not for plan. Consider streamlining your COA based on materiality.A more streamlined COA is easier to manage and in most cases the loss of granularity won’t be missed.
  • Increase and/or improve calculation logic. Too many planning systems present users with an empty grid to fill out.Empty grids are time consuming to complete, are heavily dependent upon the time and energy of the planner and handicap the organization from doing any real business modeling. Rather than empty grids, use driver-based logic and history driven logic to seed the plan mathematically in alignment with corporate goals (e.g. growth factors)—greatly reducing the amount of input required by a planner.
  • Enable both top-down and bottom-up. Most planning processes get stalled in managing and negotiating the gulf between top-down directives and actual bottom-up developed plans.Leverage more sophisticated top-down business logic that can effectively modify the bottom-up plans quickly; and efficiently, eliminating the need for elongated and highly iterative review cycles.
  • Rolling, rolling, rolling.Consider moving to a five quarter rolling forecast process where the forecast that’s completed in the fall becomes next year’s budget.Forecast processes are more streamlined than budget processes—often completed in less than one month. The loss of detail that many organizations are addicted to won’t be missed.
  • Move away from stand-alone spreadsheets.BPM Partners suggests that organizations that use stand-alone spreadsheets for budgeting are nearly five times more likely to take five months or more to complete a budget cycle vs. organizations that have invested in a purpose-built application for planning. Stop uploading, downloading, e-mailing, manually consolidating spreadsheets, and focus on the goals and strategies that will deliver the performance everyone is looking for using a purpose-built application.
  • Peri Pierone is CEO for Axiom EPM in Portland, Oregon. Reprinted with permission.