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How to Break Through Barriers to Fast-Track Your Budget
If you think your forecast process could be more efficient, you’re not alone: The Adaptive Insights Q1 2017 global CFO survey found that finance leaders would like to see their teams spend less time on report preparation and data collection (36%) and more time on forecasting and scenario analysis (40%).
In a recent webinar, we looked at the three biggest barriers to effective forecasting—and how to remove them. I summarize them here as I think you will find them interesting.
Lack of data integrity
CFOs are drowning in numbers but often starving for reliable information, as the data available for their planning is often only somewhat accurate. And as business complexity and the preponderance of big data increase, the problem only stands to get worse. According to our CFO Indicator Q2 2016 report, one-third of finance leaders expect the amount of data their teams manage to increase by 50% over the next five years.
This leads to a decline in efficiency because, of course, if people don’t believe in the data and the process, they’re not going to invest the time and attention necessary to help you make the best possible projections.
How do you fix this? First, minimize the possibility of human error by creating a single depository into which every division funnels information.
When a finance team is constantly integrating data into a master spreadsheet, mistakes are inevitable. According to the Association of Chartered Certified Accountants, more than 90% of spreadsheets contain serious errors—even though more than 90% of spreadsheet users are convinced that their models are error-free.
Ditching the spreadsheets for a central data store creates a single source of truth that is always updated, always correct—and always trusted by every stakeholder. That means you can spend less time defending the data and more time considering the issues and making better decisions.
Lack of visibility
Clear communication is as vital to corporate success as hand washing is to hospitals. Finance leaders have to reduce other departments’ burden, making it easier for their colleagues to access information and provide their own in return. This creates a virtuous cycle of improved data, more accurate forecasts, and better results.
Yet, just as research shows that one of every three doctors don’t practice hand hygiene properly, the current status quo keeps finance professionals siloed behind a spreadsheet, unable to successfully do a basic part of their job. The key to breaking through is providing every department access to interactive dashboards for financial and operational planning, decision making.
Lack of flexibility
The annual budgeting process creates an artificial sense that everything happens in a neat 12-month cycle, and the fourth quarter is spent looking only in the rearview mirror. But when the entire business is holding its breath at the end of a budget cycle, hoping to stick its projections, it kills any confidence that the planning process is actually a realistic tool. Instead, it reinforces the belief that forecasts are antiquated and inefficient.
“It makes no sense to use a 19th-century tool to manage a 21st-century company in a volatile global economy,” said Steve Player, the North American program director at the Beyond Budgeting Round Table, in the webinar.
In order to break this cycle of inefficiency and skepticism, finance leaders need to convert their organizations to rolling budgets that allow the company to look forward and constantly adjust for variables. By shifting to a fluid process, “you can create a whole different organization, a whole different culture—one that has far greater trust, far greater transparency, and is much more accountable,” said Player.
From the Adaptive Insights Blog.
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