Are You Planning For The Future?

More than half the respondents to a 2008 survey by the BPM Forum, a business performance management group, said that their budgeting process is overly burdensome. In general, employees "don't buy into the fact that [budgeting] is an important part of the strategic-planning process," says Daniel A. Szpiro, professor of accounting at Cornell University.

Which Half Are You In?

So in which 50% do you sit? Budgeting is burdensome or not? I have to say my personal experience was that budgeting was an annual process and very, very time consuming with endless rounds of complex Excel spreadsheets which had to be poured over and finger in the air estimating. The more scientific we got, the worse our estimates became because we only did it once a year and you took in an annual guess rather than look at the situations as they develop.

Recently, I have teamed up with Adaptive Planning and that's all about to change. Theirs is a SaaS based system which takes your cost and budget data and puts it into a multi user, powerful but familiar spreadsheet-style format that allows everyone to budget and plan simultaneously and to make budgeting, forecasting, planning and reporting an everyday task rather than annual.

And gone are the days of countless rounds of complex spreadsheets being rolled up and down the management tree and consolidated as each manager thinks differently, and of tiny errors getting magnified as the sheets are consolidated. Adaptive Planning have a system which cuts down time to plan by 70% and has an in-built audit and work flow for make sure everyone agrees with the assumptions on which the plan is built. Accountability is an integral part of the system.

So Why is Planning Important?

Linking budgeting to planning is a powerful way of assessing your future because it allows you at each step to measure how much impact every decision you make has on your bottom line.

Usually after an annual budget, companies only reforecast on a cigarette-packet level and try to marry that to a quick fire P&L. Then people start making decisions on tactical moves and justify it in measuring the isolated effect of that decision on costs and revenues. Too often I have seen 'double accounting' for a cost saving or financial impact and when the year is out, you find that the supposed incredible uplifts in profits actually didn't materialise.

I believe that's because most businesses do not have the ability to 'globally' analyse their business on a day to day basis and be able to truly measure the financial impacts of individual and collective decisions.

As we approach a tougher business climate, it is even more important to understand the impact of every decision and to be able to plan ahead to take account of the changing environment and market conditions - waiting until the annual budget process kicks in is way too late.

Is This Normal?

Listed company announces annual figures and shock the City with their sudden lack of performance - ah, but here are the plans to actually put that right, say the stiff-collared management to shareholders. Does this sound familiar? It's like as if the company suddenly found out their business was underperforming and in the annual budget process wrote a new plan to remedy it. Don't businesses actually plan on a more regular basis to avoid poor performance?

Apparently not. So often I have sat in businesses where each quarter is a massive shock, good or bad, like no one knew about it.

But Is This a New Management Nightmare?

Forecasting is the bain of the life of a salesperson. So more forecasting and planning sounds like a bad idea - it gets in the way of doing their job, are the arguments. But as Bill Soward, CEO of Adaptive Planning, points out in CFO Magazine recently, if the marketing guys are planning a 3 month push, you need to understand not just that sales may increase, but what resources will you have to beef up to accommodate or take advantage of the plan. It's actually common sense.

Adaptive Planning to The Fore

Most large firms have expensive, complex budgeting systems. Now Adaptive Planning make it simple and affordable for Medium and even small sized companies and organisations to be able to implement effective budgeting, planning and forecasting systems which can be cascaded down the organisation easily and make business planning an everyday task not an annual nightmare. Out with Excel nightmares and in with simple, easy to use and centrally based consolidated outlooks on your business.

As a CEO facing a tougher climate there has never been a more important time to have full control of your business - take control now and make your business far more resilient to the vagaries of the market and plan ahead knowing the full impact to your bottom line - BEFORE it happens.

Call me on +44 (0)207 193 2356 or email me at nigel.dunn@calxeurope.com for more information or a discussion.