Budget or Bludgeon
As we settle back to enjoy the summer, many of us will welcome the opportunity to re-charge our batteries before the advent of the Budgeting and Planning Season in the autumn. Indeed, many will spend two or three months in a cycle of strategic planning and budgeting that seems both endless and repetitive. By the end of the exercise, much of the strategy and data initiated some eight or twelve weeks before will have lost it’s imperative in a whirl of top-down and bottom-up iterations of the budget.
Consolidating data from across the enterprise, be it product groups, divisions or geographies is never easy. Or often sheer hell if managed in spreadsheets, in a process driven by an erratic managers. Not only is it a frustrating, costly and error-prone process, but, often micromanaged by various company ‘influencers’. All guaranteed to drive people from FP&A totally crazy. Instead of the value added activity of ‘what if’ analysis, time is spent on who changed this?, why?, is this the real number? Can we do this differently? Or worse, it is all wrong, redo it now!
In the budgeting process, we often experience irrational behaviour and elements of hidden management agendas. The reality is that after spending days compiling your data for review, your manager will change the figures with no reasoning given, or thoughts for the consequence. He apparently knows something you do not! And since the different and uncoordinated messages are sent to different constituents, discrepancies will abound, and many will remain because there is no time to go back, coordinate and re-work the budget based on any earlier premise.
Spreadsheets will be re-distributed for updates, and a quick response demanded that does not allow for any alignment with the actual operation of that division or segment. This results in revised budgets being pushed down the organisation with little regard for the time spent in crafting the original figures. And here also comes the manual overwrite of formula with a plug in number that nobody knows why it has been used. Any relevance to business drivers is lost along with ownership of the data. And at the end of the process, little time is left for satisfactory analysis of the data, trends, seasonality etc. Not to mention the fact that with the data available any assumptions made more than 60 days ago are more likely to be incorrect.
There are not necessarily many correct answers generated during the budgeting process but there are certainly wrong decisions. It is key to balance the high level view with valuable levels of detail provided by the managers running the operational divisions. Planning is not a game of ping pong, it is a team effort, with everyone seeking a common goal.
While there are technologies that may help manage budget process in a real time collaboration realm, shorten the budgeting period, improve consistency of data, or allow for swift data and assumption updates as the process evolves; a tool to handle irrational behaviour is yet to be invented. So, take a deep breath, and go and get couple of mojitos before you will live on endless cups of coffee.