Where to start with Budgeting and Forecasting
There is no doubt that Budgeting and Forecasting for your business can be difficult. Strangely enough one of the first questions we get asked where should we start with our budget or our forecast. When you think about it, it is very hard to just jump in. For our experience in implementing forecasting and business solutions the only place to start is with the top and actually also with the bottom, let me explain why.
For any business an important ingredient in successful Budgeting and Forecasting lies in a company’s ability to plan from the bottom-up and to meet top-down strategic objectives. It is true that some companies establish top-down targets and then turn the annual budget process over to finance, with a mandate to meet the numbers. You can see how that would go down with finance. With other companies require detailed bottom-up planning, and then “plug” the total company numbers at the top so that the plan meets strategic targets. By applying a plug or a top side adjustment you have already taken away some of the value of your Budget and Forecast.
It should be said that neither of these approaches reflects a commitment to planning excellence.
Instead, leading companies will provide initial guidance from senior management — a top-down perspective on strategic goals, objectives, and expectations. Next, department managers build a plan from the bottom-up, showing how they intend to meet those goals. This process will often require frequent iterations for the top-down and bottom-up approaches to meet.
The result is a plan that:
- Is supported by department managers, because they helped create it and will be rewarded for meeting it.
- Is supported by senior management, because the operational goals are aligned with the strategic goals.
- And is supported by finance, because they added value to a productive, collaborative effort, rather than demanding participation in an exercise with little added value.
I know which company I would back in terms of reaching their budget or forecast. If you are a company trying to make the most of your resources, then the top down and bottom up approach should be the only option. The best and simplest way to achieve this is with Forecast Pro, click here to read more on Forecast Pro and how it can give you that leading edge.