Signs that your financial planning process is far too complex

Signs that your financial planning process is far too complex

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It took you days of hard work to collect, enter and aggregate all financial data. But you still feel that the information you are looking at is neither complete nor reliable. If only your financial planning process would give you fewer headaches. Do you recognize this? Here are some important signs that your financial planning process is far too complex.

Why budgeting and forecasting are vital

An organisation can be defined as a cooperation between people and other resources to create value and achieve – usually predefined – financial results. Strategic and financial planning is vital to obtaining and maintaining a competitive advantage by making the right strategic decisions. Accurate budgeting and forecasting provide you with reliable financial insights for assessing the financial consequences of your decisions. And these insights also serve to check along the way if you are still on track.

Especially forecasts are extremely important, as they are less static than budgets. Rolling forecasts help you to periodically evaluate and adjust your prognosis and goals, based on actual results and developments. For instance, global developments such as COVID19, supply chain issues, personnel shortages, and the war in Ukraine can have a severe impact on your company’s performance. As a result, the budgets and plans you originally drafted may no longer be valid and need adjustment.

Signs that your financial planning process is far too complex

Financial planning is a complicated process. But some ‘growing pains in your organisation can make it even more difficult. Be aware of the following signs that your financial planning process is far too complex:

• Too many people involved

Financial planning is critical for your company strategy, as it concerns the entire organisation. Both finance people and other stakeholders, like sales persons and cost owners, must provide information. The more people are involved, the more effort and communication it takes to obtain useful insights.

• Poor alignment between business and finance

For accurate financial planning, information from the business, such as market developments, demand prognoses, economic trends, and company capability is essential. If business and finance are poorly aligned, your business strategy becomes a burden instead of helping to achieve your company goals.

• Too many data sources

Manually collecting and accumulating the input for your budgeting and forecasting process from many different data sources makes your financial planning process unnecessarily complex. Importing information from financial, operational, sales, marketing, HR and other systems, into your financial system – or maybe even a dynamic interface – could save you a huge amount of time.

• Countless Excel templates and files

About 70-80% of the organisations still use Excel for their financial planning. Every department in your organisation might have their own Excel template. Often those templates do not have matching layouts, which makes it difficult and time-consuming to insert data into your budgeting and forecasting tool (possibly also an Excel file). And what about version management: are you sure you are working in the latest version of this file?

• Too much manual work

Many CFOs indicated that too much manual work is their biggest frustration. Obviously, copying and pasting information between Excel files gives a high risk of errors. Even inserting formulas for aggregating and consolidating data from various files cannot completely prevent omissions. Without a solid workflow and a clear overview, gathering and modifying data for your financial planning becomes an inefficient and time-consuming process.

• Unreliable data

Inefficient data collection leads to unreliable data. How can you be in control and take the right decisions if you are not 100% sure you have the right data, the right version and that your data are correct?

• Wrong strategic decisions

Accurate data and insights are vital for determining the strategic direction of your company. If your data is not timely, incomplete, or unreliable, you run a serious risk of taking wrong decisions. Decisions that will not have the expected impact on your company’s performance. Or even a negative impact. Ouch!

• Bad work/life balance

In general, a budgeting process takes up to three months. An intense and time-consuming process, especially when you must collect all information manually. And every single month, comparing the actuals against the budget means working overtime and a lot of frustration. This has a negative impact on your work/life balance.

• No added value

Instead of being a genuine business partner by analysing data and giving valuable performance insights, your business controller spends most of his time crunching data. This makes his daily job a lot less interesting and certainly does not add value to your business.

• Not attractive for new employees

In the current tight labour market, inefficient financial planning with a lot of manual work gives you a big competitive disadvantage when it comes to attracting talent. What would you prefer: working with high-end financial software or crunching data to obtain information for your financial planning?

Automation makes your financial planning easier

Considering the tight labour market and the vital importance of budgeting and forecasting, investing in technology and automating your financial processes pays off. For example by implementing a cpm platform to facilitate easy and reliable data gathering and processing.

No more hiring extra people to solve problems by even more data crunching. Say hello to attracting high potentials who can genuinely add value to your business by turning accurate data into promising insights.

Not only budgeting and forecasting can be challenging. In our next blog post, you can read all about common reporting and closing issues.