Budgeting Smarter, Faster, and with Greater Accuracy
The most dangerous phrase in the English language is, “we’ve always done it this way.” We often hear this adage applied to business, or more specifically, the Office of Finance.
Navy Rear Admiral and American computer scientist Grace Hopper famously rebuked this quote. She started her career when women weren’t recognized as computer scientists, despite designing some of the earliest computers, including Mark 1. She was also one of the first advocates for developing a coding language similar to English, so people could easily understand programming.
In addition to her transformative technology contributions, she was also a mentor and inspiration to the young people she taught and trained. She worked tirelessly to enlighten her pupils of the danger of believing, “we’ve always done it this way.”
Grace Hopper should serve as an inspiration to senior leadership because challenging the status quo is necessary to propel organizations forward. Embracing change and doing away with what you’ve always done has the power to turn laggards into transformational leaders.
Recognizing the Need for Change in Office of Finance
Always overworked, and in many cases underappreciated, the finance team works diligently to complete the same repetitive tasks every month, quarter, and year. Despite the tedious nature of the work, the tasks get done, and the finance team perseveres.
Until something out of the ordinary happens…such as the financial crisis in 2008/9 or more recently, the COVID-19 pandemic in 2020, which drastically disrupted the markets.
After spending the better part of 2020 improvising financial plans, CFOs recognized the need for “real” budgets that would match resources with strategy. However, many finance leaders realized that traditional budgeting processes were no longer fit for the task ahead.
Many businesses identified a need for greater speed and accuracy to develop budgets amid ongoing uncertainty.
Transforming Budgeting with Technology
While a “perfect” budget may not be feasible – it is entirely possible to use technology to help facilitate and streamline the budget cycle.
- 79% of finance teams are discontent with their current budgeting tool
- 70% of finance professionals still rely on manual processes and disconnected Excel spreadsheets to conduct their budgeting
- 40% of finance leaders require 90 days or longer to complete their budget
This is where technology comes in. You cannot use traditional methods and disconnected spreadsheets to conduct advanced accounting techniques. These processes require a purpose-built planning tool that centralizes financial data to support budgeting.
Corporate Performance Management for Budgeting
So, how can CPM software transform your budgeting processes?
1. Use Cloud-Based Software for Budgeting and Planning
Many CPM vendors offer cloud-based FP&A platforms that can be implemented without support from your IT department. A cloud-based CPM solution allows team members to securely access budget templates from wherever they’re working – ideal for remote and hybrid work arrangements.
Contributors can make updates to the budget in real-time, which are instantly rolled up or down into the budget’s underlying data sources. Finance can easily conduct powerful analysis and spread data (i.e., using historical data like seasonality), eliminating the need for spreadsheets and data imports. Another advantage of cloud-based CPM is the ability to fall back to a prior budget version, as previous versions live in the cloud.
2. Streamline Budgeting with Workflows and Approvals
CPM software automates and streamlines the tedious tasks associated with budgeting. You can automate your budget submissions and reviews with workflows and remove bottlenecks by having a clear picture of what’s left to do in the planning process.
3. Adopt More Advanced Budgeting Techniques
A top-down approach to budgeting requires senior management to develop a high-level budget for the entire organization. In contrast, a bottom-up approach requires managers create a budget and then circulate it for approval. Zero-based budgeting eliminates the time-consuming nature of both top-down and bottom-up approaches while incorporating a more granular level of detail.
Many finance leaders consider zero-based budgeting laborious because they must justify expenses for each budget period. CPM software can eliminate many of the difficulties associated with zero-based budgeting, enabling organizations to take a more informed approach to their expenses. By simplifying data entry and streamlining the approval process, CPM software can support finance’s adoption of more advanced budgeting techniques.
4. Extend Planning Automation to all Contributors
One of the challenges associated with adopting new technology is ensuring everyone can access and understand the software.
Some CPM vendors offer proprietary user interfaces (web-based) designed to simplify reporting and budgeting. Others use Microsoft Excel as the front-end of their software and add value by providing CPM capabilities as add-ons.
Prophix takes a hybrid approach which includes a web-based interface optimized for finance users and an Excel experience for the occasional budget contributor (i.e., sales and marketing). Regardless of the interface you prefer, a hybrid approach allows you to take advantage of the centralized data and automation capabilities of CPM software to transform the way you budget.
5. Automate Budgeting with Artificial Intelligence (AI)
- Generate Insights with Robotic Process Automation (RPA)
Robotic process automation (RPA) is a technical term that describes a basic process – automating manual tasks. Our survey showed that FP&A teams spend over 40% of their time on low-value manual tasks, such as generating insights, writing report narratives, and distributing reports. You can automate these tasks with RPA, freeing you up to tackle more strategic work.
- Create Baseline Budgets and Forecasts Faster with Predictive Analytics
For several years, statistical modeling, Artificial Intelligence (AI), and Machine Learning (ML) have been growing in popularity. These advanced capabilities can analyze large quantities of unstructured data at a very detailed level. Early adopters of AI and ML have found them far more insightful and reliable than traditional methods.Many vendors now include these capabilities in their CPM software as a natural extension of budgeting and planning. Artificial intelligence is making budgeting more automated and intelligent each day.
FP&A teams are under a significant amount of pressure to adapt and evolve in the face of uncertainty. It’s no longer possible to resist change by suggesting, “we’ve always done it this way.”
Adopting a Corporate Performance Management (CPM) solution will empower you to budget smarter, faster, and with greater accuracy. This will enable you to become a true strategic partner to the business that supports organizational decision-making and drives success.