What is Financial Budgeting and Forecasting?

Financial budgeting and forecasting is an essential part of any business.  Typically, it can be a major exercise, resulting in hundreds (or thousands) of manhours of work in order to collect, consolidate and revise a company budget.  It usually involves getting some initial budget figures - which are often based on last year's figures - to a series of managers and asking them to outline their expenditure for the year ahead.  This often runs in iterations as the figures go through many changes before being finalised.

Where are the common pain points?

In many cases, this entire process is still done using spreadsheets.  Spreadsheets can work well in small companies, but quickly become completely unmanageable and cannot scale properly.  Some of the common pain points are :

• Difficult to consolidate figures - Doing this manually with spreadsheets can be an extremely laborious, monotonous and error prone job.

• No centralised control - You can't control a spreadsheet.  People can put in any figures they like and send them to anyone.  It's impossible to know where things are at in any point in time.

• Lack of auditability - You can't see who made what change and when. 

• Uncontrolled workflows - The entire process is manual, often resulting in a mess of email communications and meetings.  People aren't sure of what they are meant to be doing and when.

• Contributors are unsure of what numbers to use - Contributors may not know what the standard figure for a salary is, or it is possible for them to enter in any figures they like with no restrictions, unaware that it may not be allowed.

Click here to download an IBM whitepaper - Seven symptoms of forecasting illness

How can it be made better?

There are many things that can be done to improve this process.

• Real time consolidation - Systems can be built that will take contributor numbers and consolidate instantly with no manual intervention.

• Top level rules - Finance can take control of the rules that will be allowed in the budgeting process.

• Full audit trail - We can build systems that show who entered what figure and when.

• Automated and controlled workflow - We can build an automated workflow that will show who needs to do what and when.

• Automatic baseline population and validation – We can build a system to automatically populate baseline figures for contributors and ensure that only valid numbers that meet your Finance Department’s business rules can be entered.