Transform Process: A Quick Guide to Budgeting and Forecasting
Every technological advancement—from the plow to the supercomputer—helps move people from “what I have to do” to“what I want to do.” It’s about handing off the physical and mental grunt work so we can focus on the rewarding, fulfilling and useful work that only human beings can do.
Many Finance teams are still stuck in the “have to do” phase. They have to manually consolidate data, compile reports, and a dozen other repetitive processes. These obligations can ultimately lead to value for the company, but they’re not the best use of anyone’s time.
Transforming Finance means using technology to reinvent processes, streamline and automate, and ultimately free your team to pursue higher value tasks. “Your organization’s strategy must include process transformation to remain competitive. The successful finance leaders will embrace that finance and accounting will be continually changing, so they create a culture that values and includes modernizing their processes,” says Stephen McLain III, Host of The Finance Leader Podcast, Business Consultant, and Educator in Finance and Accounting. “Create a culture that looks to improve its processes, and then make it part of every leadership conversation.”
Here’s a quick overview of how your team can go from ‘have to do’ to ‘want to do.’
Transforming Forecasting and Budgeting
Finance transformation takes a combination of the right tools, the right processes, and the right attitude. A team with great software but outdated processes will lag behind, right along with a team that’s fully equipped but isn’t sold on making the change. Before you get started, it’s important to look at what might be holding your team back.
What’s holding Finance teams back from transformation?
Our research has found a few common problems that keep Finance teams from realizing their full potential:
Data is one of the most valuable assets a business has. But it’s only valuable if you can refine it, analyze it and use it to inform your decisions. Bringing data together on a single platform makes it easier for your Finance team to make good use of it.
Lack of Collaboration
Data isn’t the only thing in silos in many businesses. If each department is going its own way, with minimal communication across the organization, you’re likely to have bottlenecks. These slowdowns put the brakes on even the most streamlined process.
Lack of Proper Tools
Your organization is taking in more data than a human can process—even more than a dedicated team of humans can sort through. Without the right tools to make sense of your data, you’re stuck trying to drink from a firehose. The right tools can help automate and streamline reporting, forecasting, budgeting and more.
In our 2022 CFO Benchmark Survey, we found that over half of CFOs plan to invest in automation and business intelligence tools—the top two areas of investment across the board.
The biggest obstacle to transformation is the lack of time and resources to do it. It’s hard to take on a new role if you’re stuck manually manipulating data in spreadsheets, for example. Automation is a crucial part of a successful Finance transformation.
Our survey found that only 9% of CFOs have automated 75% or more of their Finance processes. However, another 30% say they expect to hit that benchmark by 2023. Finance teams that invest in automation will have an advantage that will only grow over time.
Transforming Forecasting: Rolling vs. Quarterly
Once you’ve addressed the obstacles above, your team is ready to dig into processes. Making the shift to rolling forecasting is a strong indicator for future success. As evidenced in our report about rolling forecasts, teams that use rolling forecasts can quickly and more accurately predict revenue and earnings than teams that forecast quarterly.
Rolling forecasters are more agile, too: 71% can make minor changes in a budget or forecast model within half a day, versus 57% of quarterly forecasters. Over half of rolling forecasters can also get these changes reflected in all reports within half a day, versus only 32% of quarterly forecasters.
Ultimately, the major advantages of rolling forecasts are flexibility and agility. "To make processes fit for the future of Finance, Finance leaders need to create flexible and agile processes. The only thing we can be certain of is that the world changes faster than we can forecast an accurate number or predict what will happen next,” says Anders Liu-Lindberg, Partner and Co-founder at Business Partnering Institute. “It's critical that we understand the assumptions behind the strategic and tactical choices we have made. We can track reality against these assumptions and know when we need to act because our assumptions don't hold anymore. That's the kind of process Finance leaders need to create as they continue their transformation journey."
Only 19% of those we surveyed have adopted rolling forecasting. This is likely because manual forecasting is complex, painstaking, and time-consuming. In order to successfully transition away from quarterly forecasting, your team needs an automated and streamlined process. This process requires:
- A single integrated solution. A platform like Prophix can import data automatically, seamlessly integrating with your other business solutions.
- Tools for collaboration. Prophix offers workflows that streamline forecasting by tracking inputs, logging changes, and recording approvals, all with version control and without “reply all” email chains.
- Tools that promote agility. There are dozens of factors that can change an entire forecast: interest rates, exchange rates, production levels and more. Prophix makes it easy to adjust these values when they change.
Transforming Budget: Zero-Based Budgeting
The switch to zero-based budgeting (ZBB) can be a powerful driver of change for Finance teams. Our FSN report on Zero-Based Budgeting found that practitioners could more accurately forecast revenue and earnings, and could make changes to their budget models more quickly and efficiently than others.
The benefits of ZBB can be substantial for organizations that are a good fit for the practice. If your organization has the following, it’s worth exploring:
- The resources to create a well-prepared cross-disciplinary committee
- Data competency or mastery
- Tools for automation and collaboration (or organizational will to invest in them)
Getting Started with ZBB
The ZBB process starts with people. It’s critical to have support all the way up to the executive level. It’s a paradigm shift from the usual budgeting process and requires more input and involvement from other departments. Finance leaders can be champions for the process, making the business case to the C-suite.
Once you have executive buy-in, success depends on process and training. Your Finance team—along with others participating in the process—will need to learn how to use the required tools. Finance leaders need to have a working knowledge of the organization, including how various departments work and what their budgeting requirements will be. This is a good opportunity for your team to become more connected to the organization and more data-savvy.
Finally, the technology component is essential for success. While it’s possible to do ZBB manually on spreadsheets, it’s a complex and time-consuming process. A platform like Prophix can help automate what can be automated, and facilitate communication and collaboration for the rest.
Start Your Transformation
Digital transformation is essential for Finance teams to take on a more meaningful and valuable role in their organizations. The agility and efficiency that transformation brings can free Finance teams to be more forward-looking and better equipped to advise the rest of the organization. In addition, transformed processes can increase the quality and quantity of insights your team can get from your data, as well as your ability to act on these insights.
Ready to get started? Prophix can help! Watch the demo to see transformative Finance in action.