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Corporate Budgeting & Forecasting Webinar For The Middle-Market

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Corporate Budgeting & Forecasting WebinarAdvances in technology, and the associated economics, in conjunction with emerging techniques in the realm of budgeting and planning have opened the door for companies of all sizes to move away from a static and non-strategic budget to a budgeting process that drives dynamic forecasting and planning. How do companies align budgeting with forecasting and strategic planning? What factors are driving middle and even small market companies to reassess how they leverage budgeting and forecasting to drive business results? How are companies who once considered themselves too small to be on the forefront of budgeting and planning best practices achieving best in class results?

This Corporate Budgeting & Forecasting Webinar video is from the Proformative webinar "Budgeting and Forecasting for the Middle-Market" held on August 15, 2012.  The webinar features presentations from Dallas Moody, Director, Carlson Management Consulting and Tori Weissenberger, Controller, F. Brennan Company, Inc.


Corporate Budgeting & Forecasting Webinar


John: "Next up, learning objectives. After attending this webinar, you will hopefully have learned a number of effective budgeting practices that can help drive and improve strategic planning. Specifically we're focused on [SMBs] and we have a whole host of other topics that we'll be covering around best practices and things to avoid, technology and techniques in the arena of budgeting and planning. That's what we're looking forward to hearing more about today from our two presenters.

Starting us off this morning it's my pleasure to introduce Dallas Moody. Dallas is the Director with Carlson Management Consulting in his Boston office. He's responsible for providing advisory services and project management for Carlson's ongoing systems implementation projects, as well as serving an outsource FP&A leadership technical accounting roles within Carlson's client list.

Prior to Carlson Management Consulting, he was manager of FP&A for Crossbeam Systems, where he was in charge of the administration of the organizational planning and forecasting process, as well as the coordination of the annual budget, preparation of quarterly board reporting, provided technical guidance relative to equity-based
compensation, and performed other accounting and finance reviews.

Dallas began his career at KPMG as an insurance associate in its Boston and Atlanta offices and is a CPA. Dallas, at this point, I welcome you to take it away.

Dallas: Hello this is Dallas Moody. Thanks again, John. I really appreciate the opportunity to speak to your users. I just wanted to take you over kind of a session overview of what we're actually going to be covering today in our Corporate Budgeting & Forecasting Webinarand basically we're going to go over what's wrong with additional planning and forecasting process as well as the five key best practices in planning and forecasting. Key takeaways which would be four things that you should get right starting in 2013 planning cycle. I will also present a case study if time allows.

What is wrong with the current budgeting process? I think the quote here by Jack Welch is pretty much encompasses everybody's feeling about the budget within corporate America sometimes. It says, "The budgeting process in most companies has to be the most ineffective practice in management."

What is wrong with the process, it's generally not linked to your strategy. Meaning that it's driven by finance. Finance comes up with guidance, kind of on an island. That's not necessarily linked with the corporate strategy and operational goals. It also becomes time consuming, it's extremely rigid, meaning that we have random goals that came up by finance, and then it's also tied to arbitrary dates.

Sometimes there needs to be more flexibility built into the process. Furthermore it's just a difficult process in general in that it's handled through spread sheets and there's generally so much detail, and the people that are handling that detail are generally spending many late nights consolidating the data and then also having to split it out in order for people to be able to work with the spreadsheets.

Furthermore there's just generally a lack of scenario planning because you're generally focused on just building out your budget, and you don't have enough time to do the necessary scenario planning to think of the economic what if's.

The traditional budgeting process as we can see here is quite linear, meaning there's a kick off. Packages are distributed, everybody kind of has their goals that are set up by finance and they go through it. They give you your wish list and you go back to the drawing board. You do a second pass, once again it's iterative, and it's just a repeat, repetition. Wash, rinse, and repeat constantly until you get to a final product that everybody feels comfortable throwing in front of the board, and generally is no longer relevant by that time, three months later.

One of the biggest challenges to being able to successfully budget is the use of spreadsheets. Over 66% of companies use spreadsheets, and it's extremely common even for much larger enterprises greater than 1000 employees with 55% of them. Everybody kind of knows the pains of spreadsheets.

There's always formula errors. It's not flexible necessarily for being able to do reporting with variance analysis as well as also just the sheer volume and data if you're dealing with a number of different departments and trying to break that data apart for people. You can run into linkage problems back to your original budget file as well.

This right here is a chart that basically plots out how relevant your budget remains after the year begins. I think it's pretty poignant that the chart demonstrates that 28% of the budgets aren't even valid by the time the year already begins, and by the time you're four to six months into the year. 67% of them are no longer valid. That was [his] statistics from back in 2009, but, I still think it's still relevant today.

I'm now going to walk through five key best practices. I think number one for anybody within a company should always be that your budget is aligned with your corporate strategy. The best way to do that is quite frankly by having the executive team empowered with the ability to actually manage their budgets and also making them the actual business owners for the numbers.

One of the things I run into is everybody has their finance budget manager and he's the person they view as kind of responsible for the numbers, even though their the operating side of it.

So you've got to start talking about strategy at the beginning. The best way to do that is basically to have an executive off site. They may walk through what the strategy needs to be coming into that particular budget season, and then they use that strategy meeting to also work with their peers in order to push it down through the organization.

A key component of that should also be that your strategy shouldn't just be short term. It should also be long term. In particular I think companies in general have a look and a slant board for the current quarter performance part of that that was driven by the current economic climate as well as quarterly reporting driving the market as well.

You should really build a three to five year outlook into your planning process. You're probably going to model this a lot differently than you would the near term, and you're going to be driving it a lot off of assumptions made off of your near-term outlook, which would typically a year to a year and a half out, and then drive your longer term planning based off of your revenue growth percentages, and expense growth percentages relative to revenue for those timeframes.

In addition you should also look at what's happening within your competitors and make sure that your metrics kind of line up with them, and if you're not in line with that, why do you have variance and why is it reasonable.

Editor's Note: Take a look at the Proformative library of recorded webinars, which include videos on topics such as Corporate Controller Webinar, Chief Revenue Officer Webinar, Compensation Negotiation Webinar, Investor Relations Analytics Webinar and Automating Financial Consolidation Webinar.

The typical budget process is typically a very top down focus and less of a cycle. So it's driven from finance guidance, which is given down to the department managers through their executive teams, and the ideal scenario would be that you're setting your strategy. You're building out your financial budget relative to that strategy. You execute on it, you look at what happens and then you go back and revisit it as you're moving through Corporate Budgeting & Forecasting Webinar the year. It's really moving more towards developing a rolling forecast methodology.

One key restraint on being able to effectively budget is the lack of functional collaboration across departments. It should really be more of a cyclical cycle and process versus a linear process. In that instance one thing that allows you to have greater collaboration than the spreadsheet might allow, is to possibly be implementing a budget platform that allows everybody to be involved. Have their own log into it and being able to update the data accordingly.

It requires finance to be willing to give up a little bit of control possibly, but ultimately finance generally within these products typically have the ability to approve or reject a budget and require resubmission. It's a collaborative effort and it should really be that finance is a partner to the business versus just kind of handing down guidance and then somebody is stuck with trying to figure out how to get the round peg through the square hole.

The collaboration process should typically be reversed from what is shown here. You should first empower your budget owners. Then you should align the strategy and operating plan. Build a culture of accountability where it's no longer..."

End partial: Corporate Budgeting & Forecasting Webinar


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