How to build better budgets and forecasts

How to build better budgets and forecasts - Phocas

Build better budgets and forecasts and set the right plan

In many organisations, the problems found when preparing the budgets are often caused by cross-team miscommunications. This is typically due to inefficient and tedious processes and an over-reliance on complex spreadsheets that limit the opportunity for effective collaboration. However, building a budget correctly can set your business up well for the year ahead, and provide realistic and achievable targets for your teams to work towards.

Should you update your budgeting process?

Budgets are usually either built from the top-down or the bottom-up, and both methods have their shortfalls. Preparing a budget from the bottom-up means that you can draw detailed data from across your entire company. However, preparation time is drastically increased due to the extra inputs required, and the final budget can miss the big picture as it becomes too tied down in the granular details. When built from the top-down, you face the opposite problem. Your results will lack the detail that you would get from a deeper dive, and the budget may not be taking your full position into account.

Due to the complexity of building a budget through a single, static spreadsheet, it can be almost impossible to review the figures and make changes at later points in the year. Your business will be unable to respond to market changes in a timely manner, at least until you re-analyse your figures at the end of the financial year.

Forecasts are also primarily based on your previous years’ data, leading to inaccurate conclusions being drawn. The ability to review your figures with some more recent, actual data is key to maintaining your course through the year. Forecasting is an important process that goes hand in hand with budgeting for the year ahead. Being able to re-evaluate your forecasts at timely intervals is imperative to recognising changes and making adjustments.

Is there a better way to build budgets and forecasts?

Cloud-based business intelligence tools, like Phocas’ Budgeting and Forecasting module, manage workflows and processes to increase collaboration while ensuring that everyone is working from a single source of truth. It allows the balance of top-down and bottom-up detailing required to get the most accurate picture for the coming year.

The forecasting element incorporates scenario planning so that you can be best prepared for the introduction of something new into your business. Reviewing your figures and re-forecasting is simple and can be done half-yearly or quarterly, allowing your business to remain dynamic and responsive to change.

These features lead to the production of budgets and forecasts that are more in tune with reality and can be used as actionable information, rather than just referred to at month or year end.

The future of financial reporting

Want to learn more about how you leverage a modern, future-focussed budgeting and forecasting tool? We are holding a webinar with Phocas Software, the business intelligence and data analytics experts, to explore the future of financial reporting and how Phocas’ different modules can give you all the visibility and budget planning you need.

Click here to register for the free webinar or for more information.


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