Challenges in the budgeting & planning process

The most common challenges of the budgeting & planning process

In practice, there are three challenges we often encounter during the budgeting & planning process. First, organizations often spend too much time collecting the data. This leaves too little time for analysis. The data must come from different departments with separate responsibilities. Next, it is important to coordinate this correctly to create the plans and budgets. An incredibly time-consuming and manual (Excel) process that often reduces the quality of analysis.

Due to an overly long and inefficient planning process, the budget created is often outdated before the planning process is complete. The budget is used as a performance measurement within an organization. This process can become more complicated due to unpredictable market developments, making it more complex and taking more and more time. Greater lead time in the planning process results in less representative budgets. The later budgeting can be started, the more insight there is into the results for the current year as a starting point for the budget year.

Finally, organizations regularly tend to avoid uncertainty and, in doing so, create a very detailed forecast to predict the future. This often leads to a limited quality of the forecast, preventing an organization from using it effectively to drive the business. After all, more financial data does not always mean better information. Organizations need to determine which financial data is most material and volatile and therefore where more detail is needed. This can lead to shorter lead times in the forecasting process and better steering information to make timely decisions in rapidly changing market conditions.

How do you address challenges in the budgeting & planning process?

So the challenges of producing high-quality budgets and forecasts in the shortest possible lead time are substantial. There are many ways you can approach this. There are three pillars that help achieve this goal: simplicity, technique and focus. Simplicity can be achieved by budgeting at an outline level and linking it to your strategic planning. Budgeting at a detailed level is only necessary if it actually provides better steering information. Technology can be used to support the planning process and break down items on outlines. When this is used properly, the controller can focus on the core. This is all about ensuring that budgets are in line with strategy.

What about that technology?

As consultants, we work with a broad spectrum of budgeting & planning tools. One of them is CCH Tagetik: an EPM platform that offers solutions for all your financial processes. Over the next month, in a short series of articles, we will discuss the main techniques that CCH Tagetik offers to address the challenges in the budgeting & planning process. In this way, we are happy to help you get the technology right so you can focus on the simplicity and focus of your budgeting & planning process.