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Time to Change the Annual Budget Process

New guide shows CFOs how to create efficient and effective budgets

March 26th 2012 Jack Welch, the former CEO of GE described the annual budget round as ‘the most ineffective practice in management’. This is not surprising when you realise that the idea of the annual budget was proposed by James McKinsey in the 1900’s. Things have changed. The annual budget needs to evolve. Today, the dynamic business needs continuous budgeting and forecasting processes not an annual number crunch that takes three to four months to complete and is out-of-date within weeks. According to specialist UK software developers, Financial Driver, Corporate UK needs to re-think its approach to the time intensive budgeting ritual that does little for the business. Financial Driver recommends that by applying simple ‘best practices’ along with the right technology, organisations can make budgeting into a more manageable process that adds real value to the business. Practical changes include involving more people in deciding where resources should be placed, ensuring that budget numbers are both realistic and achievable and speeding up the whole process with reduced team effort. With two thirds of UK companies, still relying on spreadsheets as their primary budget development tool the collection and collation of information from various departments is a form of nightmare for most finance directors. This means that 75% of finance staff time can be spent chasing, collecting and validating data, rather than analysing and planning. This problem is amplified when a second budget pass is needed and data has changed. To help take a fresh look at their process, Financial Driver has produced a guide; ‘Speeding up the Budget Process’ which provides practical guidance. It can be downloaded from www.financialdriver.com. Top tips are: • Budget on a continuous basis • Use technology. The guide outlines what to expect from a budgeting system • Populate drivers with agreed trends and forecasts • Populate fixed costs/revenues centrally • Compare resulting budgets with historic trends and forecasts. Financial Driver is a low-cost, low-risk hosted application that automates the collection of budgets and forecasts in small and medium sized organisations and eradicates the time consuming task of distributing, collecting and consolidating individual spreadsheets. Developed by UK accountants with extensive experience in implementing ‘best practice’ systems in some of the world’s leading organisations, Financial Driver handles the consolidation of financial statements involving multi-currencies to International Accounting Standards and provides secure access to a single version of data and results that span multiple years for analysis and reporting. It represents a viable and cost effective option for companies looking to develop advanced budgeting, forecasting and reporting functionality.