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Data-driven planning and budgeting

Data-driven planning and budgeting

By Janro Grey, FPM Solution Delivery Manager, iOCO Data and Analytics

You might have heard the saying that if you fail to plan, then you plan to fail. An organisation’s ability to deliver sustainable, profitable growth depends on the strength of its plan, and a strong planning strategy requires a solid budget. However, the traditional months-long process of collecting, massaging, and publishing a spreadsheet-based budget is no longer good enough in a business environment where things change rapidly and decisions need to be made instantly.

The challenges associated with the budgeting process, which can range from long nights and weekends spent co-ordinating personnel, to issues with gathering information from diverse sources or managing multiple approval processes, are exacerbated by the fact that budget data collection and analysis are typically performed manually. Needless to say, this process can be overwhelming and stressful — and mistakes are common.

Dynamic data for a dynamic business environment

Finance needs structure. That’s why financial planning is constructed around general ledgers, journal entries, accounts, cost centres, debits and credits, and so on. The data from those tools flow into more structured work products, including P&Ls, balance sheets, cash flow statements, and other outputs that are central to the finance function.

While finance needs structure, other business units require dynamic planning tools – formats that work for their unique business use cases. Outside of finance, planning platforms have to be highly customisable so they take in data from a range of operating systems and can be updated and changed as often as needed, which can be as frequently as every day.

While finance needs structure and other departments require bespoke solutions, they really are two sides of the same planning coin. Businesses therefore require solutions that provide finance and the business with the capabilities they need to close, plan, report, and execute on a continuous basis, seamlessly integrating the dynamic planning businesses need with the structured processes finance requires.

Better budgets

Today’s financial departments have access to technology that allows them to become highly tuned time machines, which can streak forward and back through a wealth of data at a moment’s notice. As a result, they should move beyond a pure accounting-based approach and start looking at how they can budget according to the key drivers of business instead.

Today’s budgets are often outdated by the time they are finalised, if only because they take so long to complete. The business units putting budgets together are experts in their field, not accountants, and it’s easy to see why budgets are considered such a time consuming and energy sapping task.

A more effective approach would be to move from this finance-centric approach to one that involves the entire operations staff, mirroring how the business is run. This would allow every business unit and division to draw functional, intelligent budgets that use customised models that replicate how the business works. Our solution has been designed to do exactly this, even enabling the company’s spreadsheet data to still be used, only with that data moved to a secure central server, from which all reports and templates can be populated.

Similarly, our general ledger solution has been designed to allow finance to access the hidden insights in their general ledger data. With a view into account transactions and balances at the lowest granular level, finance teams can go from a high-level summary to as much detail as they want or need. Accounts can be tracked against budgets, and our solution automatically provides for budget revisions into updated forecasts as the year progresses.

While today you’re focused on the past and present, tomorrow you’ll need to make use of vast amounts of data that is available in our digitised world. This will help you predict the future of your business, uncover hidden opportunities and close information gaps. Driven by new technology such as the cloud and automation, combined with increasing customer expectations, your organisation needs a finance department with the right foundation to ensure results across the entire business ecosystem.