A) Analysis
B) Budgeting
C) Consolidation
D) Forecasting
E) Reporting
What process gives you the most headache?
Answers
In small and medium size companies (less than $100 million), budgeting seems to be the area with the most headaches. Getting the other departments to provide information in a timely manner is often the longest part of the process. Department heads either don't think it is important, don't want to commit to numbers that they will be held accountable for, or claim that they don't have enough information to outline what their income or costs will be. Even when you provide them with a "fill in the blank" questionnaire and prior year information, it is often like pulling teeth to get the information in a timely manner.
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We are a small company around $10 million. The process that gives me the most headache is Cashflow Forecasting. It is an area that is cumbersome to calculate manually and therefore should be handled by our ERP system. However all the streams flowing into our ERP system need to be analyzed and cleaned-up.
The headache will depend on the size of the company and the nature of the
The more complex the organization - the more the issues relating to external reporting issues.
For smaller sized companies - I will go with budgeting / forecasting / variance analysis as the major issues.
What would you have chosen if the "Strategic Planning" process was also listed?
Budgeting hands down. Only because no one understands the process, no one takes the time to understand their area of responsibility to provide information that will go into the budget; and the only one that really uses the info is.... the
Fast poll; How many of your owners understand that a budget is dynamic, not static?
If you expand the list to include strategic planning, the choice is easy. Eliminate B) Budgeting as it should is should be replaced by a rolling forecasts that creates an adaptive plan. For more info see the May 2011 CFO magazine cover story "Let It Roll: Why more companies are eliminating budgets in favor of rolling forecasts"
(http://www.cfo.com/article.cfm/14570220?f=search)
or the Oct 2011 issue of the AICPA's Journal of Accountancy article on "Planning for Uncertainty - New Approach to Forecasting Guides Companies in Unpredictable Economy" (http://www.journalofaccountancy.com/Issues/2011/Oct/20114354 )
or the Feb 2012 issue of
(http://www.entrepreneur.com/article/222574)
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Steve, we have seen an increase of companies using a rolling forecast methodology in our implementations. Good read.
Dean Collura
Vertical Edge Consulting Group
www.verticaledgecg.com
Oracle Gold Partner/Hyperion Specialists
I have developed an easy to use template to prepare budgets/rolling forecasts that my clients understand and value. The template also provides budget variances that I discuss with the business owner. While business decisions are made from the model's results, the key is analyzing actual performance against the model and considering adjustments to the plan. Implementing these adjustments, like reducing headcount when revenues fall below the budgeted amounts, is my biggest challenge.
What is the logistical difference between a budget and a rolling forecast?
I would easily answer analysis. In the finance world, too many explanations don't dig beyond the variance to identify the true root casue. They communicate the effect and not the issue and if there is any corrective action that can be taken to prevent it from happening again.
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