5 Tips for Effective Planning, Budgeting, and Forecasting Strategies

Marketing Team
Published on April 19, 2022

Benefits of Planning and Budgeting

Most firms have well-established planning, budgeting, and forecasting procedures, but just because you've always done things one way doesn't mean you can't improve them. Given the scarcity of financial expertise these days and the power of technology to assist organize and expediting these processes, it's more important than ever to rethink your planning, budgeting, and forecasting processes. Your budget serves as a road map for your firm, identifying significant financial checkpoints at each stage of the journey. However, once that journey has begun, conditions are likely to alter, eventually outdating the original assumptions that were made when the budget was prepared. Best practices for proactive finance teams include analyzing your budget against the changing business environment on a regular basis, projecting properly to see where the numbers are headed, and revising your plans as needed.

Start With Strategic Goals

Budgets that are most effective are those that are based on a clear set of strategic goals. These are the results of an executive-level vision for the company, which outlines the company's medium and long-term goals and lays out a clear route to attain them. The strategic goal-setting process usually includes a strong analytical component; executives must grasp market size, the competitive environment, and the underlying strengths that can set the company apart from the competition. Strategic priorities serve as a high-level filter for how businesses allocate resources during the planning and budgeting process. In many ways, strategy is just as much about selecting what isn't important as it is about deciding what is. Adopting all-around business solutions like Dynamics 365 could give you the strategic start that you need to drive efficiency and high productivity.

Determine Your Methodology

It's critical to think about the budgeting approach you wish to use thoroughly. Traditional budgeting calls for a typical increase over the previous year's figures, followed by minor changes to accommodate for changed priorities or quickly rising prices in one or more categories. Although this method involves less effort than some others, it is frequently criticized for its tendency to promote only your company. While Dynamics 365 provides a "start from scratch" strategy that has the ability to remove budget waste, it can also take a lot more time and effort than the old way. Business Central supports driver-based budgeting (DBB)which provides greater flexibility and aids organizations in adapting to quickly changing business conditions. DBB examines the major drivers of business success and then models the expenses and resource allocations required to sustain the company's operations when those drivers change. Whatever technique you take, be explicit about the time and effort involved, the benefits you expect from implementing a new methodology, and the learning curve for your employees.

Built-in Flexibility

Leaders must make quick decisions in the face of this ever-changing business environment. It's less probable that your company will have to vary from its financial plans later if you develop meaningful financial strategies. However, it is beneficial to adopt solutions like Dynamics 365 Finance which offers flexibility even if the business conditions, or functions changes. Executives will require access to up-to-date information on the key performance indicators that drive the company's success in order to do so. To determine whether course corrections are required, leaders must first have timely and reliable access to relevant data. Executive dashboards are effective tools for assisting important members of the organization in understanding what is going on in real-time.

Make It a Collaborative Process

By its very nature, planning and budgeting are collaborative processes. Line-of-business managers or department heads must provide input to C-level business leaders. They, in turn, rely on important members of their departments for information about expenses, commitments, timetables, and expected outcomes. The entire process usually necessitates a lot of back-and-forth communication, which occurs in a variety of settingsā€“sometimes via e-mail, as comments inside spreadsheet files, thoughts contained within slide presentations, or simply in person-to-person chats around the office or on the phone. The best planning and budgeting software includes collaboration capabilities that encourage good group dynamics by collecting and preserving the back-and-forth discussions that lead to a finalized annual budget. It's all too easy to forget about these types of interactions or to recall them differently than the other people in the room. Good collaboration tools guarantee that all of the appropriate people receive communications that are relevant to them, and that the organization preserves the results so that everyone engaged is clear on the promises they made during the planning and budgeting process.

Monitor, Forecast, and Adjust

The next step in achieving success is to continuously monitor performance in real-time, forecast outcomes based on existing conditions and expectations, and change to maximize results in the present business environment. Unfortunately, this may be easier said than done, particularly for firms that use inflexible planning and budgeting tools or technologies that were not created for the purpose. Many businesses prefer to create budgets with Microsoft Excel because it is so familiar and versatile. Spreadsheet programs have some limitations as a stand-alone tool. Manually updating an Excel file with the most recent sales or inventory data, for example, can be time-consuming. It's easy to make mistakes, especially if a user copies and pastes data from their ERP. When monitoring performance or making forecasts, look for software that delivers real-time linkages to transactional facts, avoiding the need to assemble manual updates.

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