If you’re like the average business, it takes your finance team 77 days to complete an annual budget, according to an Association for Financial Professionals Benchmarking Survey. So if you started your budget Jan. 2 (the day after the New Year’s Day holiday), it would be complete today—77 days later.
So congratulations—and I’m sorry. Because if you’re like most businesses, at least some part of your budget will be obsolete tomorrow, even though you just finished it. The reason is that most annual budgets take so long to prepare that they are certain to contain static information. That information may have accurately represented your business at the time it was gathered and entered. But when was that, exactly? Two months ago?
In the age of urgency, two months is a long time. And this reality makes 77 days simply an unacceptable time frame that leaves little opportunity for analysis when companies work from plans that are immediately out of date.
Most finance teams still use manual processes to create budgets, forecasts, and plans. These processes are not optimized for rapid change. According to Workday Adaptive Planning research, 85% of CFOs have direct access to the data they need, but they spend too much time gathering data, confirming its accuracy, and formatting reports. Traditional, static planning processes hobble the ability of CFOs to make the best use of the data that drives their business.
One problem is that static planning is siloed; it’s not collaborative and does not have comprehensive interlocked models across an organization’s teams. That makes the process too slow to conduct proper scenario planning, let alone achieve a continuous planning and forecasting environment. Organizations that live with these limitations struggle with actively managing the business. If it takes close to a quarter to produce a plan by traditional means, then planning must be kept to an annual event. And as soon as the plan is done, it’s already reached its sell-by date.
Even as they are hemmed in by this long and unproductive cycle, organizations remain loyal to the tools that are holding them back. Many who use legacy, on-premises planning applications have found them so limited and user-hostile that business planners eventually resort to spreadsheets to plan—a situation where the cure is as deadly as the disease. In fact, more than 7 in 10 (71%) organizations still depend on spreadsheets for collecting data across the majority of their businesses, according to FSN Publishing’s 2017 The Future of Financial Reporting survey.
This can be a recipe for disaster. Version control is a persistent headache. Errors stemming from manual data entry are common. Data validation and reconciliation take forever. As spreadsheets eat up valuable hours, they leave little time for the analysis that leads to insights that help people throughout the business make better, smarter decisions in a timely fashion.
Unlearning the habit of annual planning—and creating an environment for continuous planning—is an essential component of active planning, and it is essential groundwork to freeing up FP&A to take on a more strategic role in the business. An active planning process—which is collaborative, continuous, and comprehensive—gives finance the time, tools, and automated processes it needs to bring strategy back into budgeting, forecasting, and planning as a whole.
“I inherited an Excel nightmare,” recalls Kevin Murphy, senior vice president of finance at Hospitality Staffing Solutions, the leading provider of permanent and temporary hospitality staff for casinos, resorts, and hotels across the United States. “We had a lot of spreadsheets that were gigantic, with many tabs, many links, and as we worked through them, the links were broken. A lot of time was just spent trying to make sure our reporting was accurate.”
Taking six months to create a budget simply just wasn’t working for a business built around flexibility. What HSS needed was an active planning environment that allowed it to plan faster. Now, the budget that previously took 26 weeks to prepare only takes six, freeing time for finance to conduct strategic tasks like profitability analysis and what-if scenarios. Now, says Murphy, “The role of finance has been elevated. We’re not just an accounting team shooting numbers out the door.”
For many companies, an important byproduct of an active planning environment is the disappearance of the dreaded annual budgeting process itself. Planning becomes continuous. A modern, cloud-based planning and budgeting solution automates data integration with ERP, HCM, and other enterprise systems, which spares finance professionals and business users from wasting valuable time and risking costly errors by re-keying data.
And with faster planning cycles come budgets that adjust with the shifts and changes of the business and the marketplace. Entering a new market? Acquiring a company or technology? Your planning environment needs to be fleet-footed enough to accommodate these often unexpected developments. In a continuous, active planning environment, the budget isn’t frozen—and it’s never obsolete.
But to be clear, working within a single, centralized, cloud-based planning platform doesn’t mean ditching spreadsheets entirely. It means supporting users so they can focus on what they’re great at—developing ideas, testing hypotheses, and making things happen quickly—while adopting a new integrated planning system for bigger tasks.
Meanwhile, active planning allows the finance team to help other business functions plan continuously by driving collaboration and integration between historically disconnected planning activities. Connecting shadow planning into the central corporate plan means finance encourages business functions to take more ownership of their planning and budgeting activities. This increases participation and engagement and reduces box ticking.
It’s understandable that most FP&A professionals are frustrated with how long the annual budget process takes and the way it prevents finance from doing more strategic tasks and projects. If the outcome were tremendously helpful, it might be worth it. But it’s hard to find a practitioner who still believes that the static 12-month budget has much of a future in a world that refuses to stand still. Because, on the 77thday, finance teams don’t get to rest.