We noted in our prior post that companies who go through the pain and effort of doing really good financial planning, budgeting and forecasting end up with significantly more accurate and timely reports and budgets whose results are much better aligned with reality – when compared against the average companies and laggards who do not put in the effort. In today’s post we’ll look briefly at the “strategic actions” taken by these Best-in-Class firms, as reported by Aberdeen Group in a recent survey and analysis.
In short, the companies who do the best job in planning and budgeting focused on the five following strategies (and all in relatively equal measures, we might add). They all worked to…
- Promote accountability within the organization through effective communication
- Employ ‘driver-driven’ analysis (i.e., KPIs) and scenario (i.e., What If?) modeling
- Align cash and risk management initiatives with financial planning
- Develop a consolidated view of the process and the results, to be available on demand
- Improve data quality
In short, the best companies focused on improving access to data and integrating the insight gained into their planning. They focused on producing accurate forecasts from accurate and relevant data. They knew their cash positions, their risk factors, and the KPIs that were important for them to measure. They conducted scenario models to gauge potential outcomes. They communicated needs and results throughout the organization to all stakeholders. They relied heavily on data, though often that was difficult to do. So too was aligning execution with planning, but the better the data… the more accurate and up-to-date the data… the more relevant the data… and the better systems they had for enabling that access… the better the results.
Following, then, were the four most important abilities required and strategies employed:
- Ability to assign resources and workflows for budgeting/forecasting activities
- Use budget ‘templates’ to communicate and manage input
- Ability to perform ‘What If’ scenarios and change analysis
- Ability to re-forecast as market conditions change
The best companies find that to accomplish these things they need to empower collaboration from the top to the bottom of their organizations… have their business units work collaboratively with finance throughout the entire budgeting process… train line managers in the use of their analytic tools and methods… and train/enable all users to create their own reports in a self-serve manner.
The short version: an intensive focus on collaboration and training. The results? Just as noted in our first post in this series: dramatically improved timing and accuracy of financial reporting and planning.
The tools: a modern ERP / financial accounting system… spreadsheets… technology… and training! We’ll look at the key “enablers” and Aberdeen’s key “takeaways” on this topic in our next and final post in this series. Stay tuned…