How to Improve Budgeting, Planning, and Forecasting

TV weatherman Phil Connors, played by Bill Murray, finds himself in a never-ending cycle of repeating the same day over and over again in the movie "Groundhog Day." Phil gets to the point of anticipating events, and no matter what is done, the results do not change. Phil is in a rut and many companies experience the same type of déjà vu with the budgeting and forecasting process.

It is the beginning of a new year. The annual plan was approved by the board before the holidays, the accountants just closed the books, and it's time for the first monthly forecast for the coming year. Everything seems to be in order, but the same complex forecasting spreadsheets are converted to a new year, stale metrics are calculated, and lengthy instructional emails are ready to go out to the entire company. It looks and feels like Groundhog Day! Worse, companies will continue to get big surprises in results that need to be analyzed, reported, and explained to management.

Most companies will wait until the second half of the year to improve budgeting, planning, and forecasting. However, this is the perfect time of year to start getting ready for a new planning process and system:

1. Improve processes while last year’s planning pain is still fresh

The planning process involves people who are too busy to make on-the-fly changes to increase process efficiency. Suggested changes to the iterative process are often overlooked because people are relieved to be done with planning and put off changes until later. A formalized process improvement discussion is the perfect forum for people to share and collaborate on ideas for the next cycle. Going through a process to improve budgeting, planning, and forecasting is most effective when the wounds are fresh and ideas are not forgotten.

2. Redefine KPI’s to make a difference for next year

The organization would benefit greatly by reducing surprises with a refreshed planning process. There is often a big disconnect between the short term and long range plans. Many KPIs do not have relevance to managing day to day business activities and the monthly forecasting schedule seems to drive business events, not the other way around. The executive team can take advantage of the process improvement discussion to link the strategic vision of the company with the tactical business plan for more predictable, timely, and accurate results. Revisiting the KPI’s and communicating strategic vision will drive changes to the organizational structure and communicate new roles and responsibilities.

3. Take advantage of simple solutions

Spreadsheets are the tool of choice for most planning processes. Unfortunately, spreadsheets are prone to error and limit the level of analytic reporting that can be performed. Typically, companies will consider big box software that requires significant effort to implement and support. There are cloud-based, inexpensive, and easily implementable solutions that improve budgeting, planning, and forecasting.

Forecasting accuracy can improve with the proper blending of process improvements, organizational change, and new tools. Define the process, assigning roles and responsibilities, and select tools. Overemphasis on one of these can lead to an imbalance that can impact results.

Trenegy helps companies create demand for change to help ensure new planning processes and systems are used to support more predictable and accurate results.