Top 5 Budgeting Challenges Facing Organizations
You might have heard the saying that if you fail to plan, then you plan to fail. An organization’s ability to deliver sustainable, profitable growth depends on the strength of its plan.
A strong planning strategy begins with developing a fiscal budget. To do so, employees must work together to compile, review, and update a company’s revenue, expenses, and cash flows for the upcoming fiscal or calendar year.
As a technology organization working within a CPA firm, we interact daily with people responsible for budgeting. They often share the challenges associated with their budgeting process, which can range from long nights and weekends spent coordinating personnel to trouble gathering information from diverse sources or managing multiple approval processes. Budget data collection and analysis are typically performed manually using Microsoft Excel. Needless to say, this process can be overwhelming and stressful — and mistakes are common.
Based on discussions with our clients, we have identified the top five budgeting challenges companies face during fiscal planning.
1. Coordination and Collaboration
Creating a budget requires many moving parts and phases. These phases can involve lots of back-and-forth with department managers before everything is finalized. Consequently, in larger organizations, challenges and complexities are magnified exponentially.
2. Complexity
There are several tasks that can create complexity for budget owners, including:
- Gathering information that goes into the budget from various sources, such as CRM and human resource systems.
- Creating complex formulas to consolidate the budget spreadsheets.
- Coordinating changes to the spreadsheets, updating numbers, and gathering the latest files for consolidation.
- Reviewing multiple iterations and changes.
3. Time
It can take organizations three months or longer to manually complete a budget. Most organizations prepare the budget right before the new fiscal year. Budget owners typically use the current year’s actuals as the basis for the next year’s budget. Therefore, ideally, you want to start the budget process as late in the year as possible to maximize the number of actual months available for budgeting. But when the process is manual and time-consuming, you have no choice but to begin months in advance.
4. Accuracy
Unfortunately, we have heard from clients that they discovered gross errors in their budget numbers after the budgets were approved by the board of directors. There is risk in consolidating Excel files, for multiple reasons.
5. Continuous Planning
Unless an organization is small and business is very predictable and routine, continuous planning is key. At a minimum, continuous planning involves reviewing the budget versus actual variance report monthly. Organizations should also plan to realign projections for the remaining months and perform “what if” scenarios to strategize and plan for future growth. Because the budget process is so daunting when it’s performed manually, many of our clients are not forecasting even though it is best practice.
The question is, how do we overcome these CHALLENGES? There are various financial planning and analysis (FP&A) solutions that provide simple, adaptable, and easy-to-use tools to control and streamline the budgeting process. These products connect to all ERP solutions and allow you to manage the entire budgeting and forecasting process.
Marcum Technology has partnered with a number of providers to automate and streamline the budget process. If you are interested in learning more about these budget solutions, register for our upcoming budget CPE-accredited webinars or contact us at [email protected] today!
