The reason why managing the budget process is a high wire act should be obvious. 1) Every corner of the organization is involved or impacted by the process in some way. 2) The process impacts people where it hurts – their wallets. 3) The most senior ranks of the organization are engaged in the process, which means a lot of exposure for you 4) And let’s not forget that the process itself has the potential to create… or destroy… value based on the decisions it produces.
In short, if you do a good job and manage the process well, everyone is going to know about it. Unfortunately the opposite is true too. That’s your tightrope.
So the most important decision you have to make is this. Am I playing to win, or am I playing not to lose?
If you’re playing not to lose the advice is simple. Don’t make any changes to the process; keep your head down and your fingers crossed. That keeping your fingers crossed is actually pretty important. Simply repeating last year’s process is no guarantee of success, there’s still an awful lot that can go wrong.
Now if you’re playing to win, that’s a different story. A better story in my opinion. Why? Because there is enormous room for improvement.
The Buttonwood Group and Financial Executives International (FEI) conducted a survey of 225 companies of all shapes and sizes, profit and no profit alike.
The research focused on both the cost AND the value of the annual planning process (technical point: the survey focused on the common denominator of the annual planning process because nearly every organization does it in some shape of fashion. It’s a decent proxy for the whole planning process). Here are some highlights:
- It costs the average company $1,000 per employee to produce the annual plan. So a company with 200 employees will spend $200,000 to get the annual plan produced. A company with 2,000 employees will spend $2,000,000. Yikes.
- The process winds up involving 20% of the entire workforce. Might sound like a lot, but think all those department heads that need to do a budget 9or review what you do for them) and all the people up the food chain that need to review and approve budgets underneath them.
- The average participant devotes a day a week over 10 ½ weeks. When you understand that, and the sheer number of people somehow involved in the process, it’s easy to see how you get up to an average cost of $1,000 per employee.
Now I said the research focused on the cost AND the value of the annual planning process. That’s important because if you want to use your time in budgeting to further your career, you’ve got to work on improving its value to the organization.
The good news is that the research study revealed that there is great potential for a well run planning process to Align goals, Improve control over costs, Create foresight, Increase insight into the business, Improve the operational performance of the business, Build a sense of shared purpose, Drive shareholder value, Increase transparency, Drive an increase in Revenue of at least 1%.
Imagine if you could achieve even just one of those outcomes. The even better news is the survey revealed that in fact there are companies experiencing these results; they scored in the upper 10% of all the organizations that participated.
So, I know I’m begging the question how what the companies did differently to wind up in the top 10%. And more importantly, what you can do to make the process run better and in doing so, use your time running the budget process to further your career in Finance.
We’ll be blogging about that in the days to come. But if you want a link to the recording of the webinar, or to the benchmarking study, you can find them both with the links we provided earlier.
XLerant is a SaaS software solutions company that builds and implements innovative, practical and incredibly powerful browser-based budget preparation software for mid-sized and large organizations and higher education institutions, energizing a “Culture of Budget Accountability” among users. The company serves customers in several industries. XLerant’s premier budgeting and planning application, BudgetPak, replaces spreadsheet-based budgeting and provides maximum user flexibility and financial controls. Improved communication, greater ownership of the numbers and increased transparency enable companies to better manage financial performance throughout the fiscal year.