By Northexis Financial accounting and reporting What is the point of budgeting and forecasting? 8 Dec 2025 This content is brought to you by Northexis. “Plans are worthless, but planning is everything.” – President Dwight D. Eisenhower I had a meeting with a finance team the other day, to talk about improving their budgeting and forecasting. The FD confided in me that one of the managers in the business had asked them, “How can you expect me to predict the future?” And they found themselves struggling to think of how to respond. It’s certainly not the first time I’ve heard this objection from within a business, and if you’ve ever heard it – or suspect that everyone’s thinking it but just isn’t saying it – then I’d like to help you out. So, to start with: budgets and forecasts were never meant to be looking into a crystal ball. After all, if we could predict the future…well, we’d all be on a beach, never working again after making our billions, wouldn’t we? It sounds obvious, and it is. But if it’s not for predicting the future, the business needs to communicate what it is doing planning for. And too often the businesses I speak to haven’t thought to do that – or perhaps they don’t know themselves! First and foremost, any plan should be seen as a tool to enable the business to make better decisions. I like this definition, because it’s hard to argue against making better decisions. So how do we do that? Emphasise that you’re not expecting people to predict the future. The FD at the beginning of this article simply needed to say “I don’t!”. We know plans will be wrong; that doesn’t invalidate the process. Emphasise what you are expecting. Which is, broadly, their best, educated guesses, if we’re all honest with one another. Educated is the key word here, as managers know more about their slice of the business than we do. Say that! Everyone likes to know that their knowledge is valued. Emphasise what you will actually do with the information. Often, a manager hasn’t given consideration to what happens with plan information; they just see a chore that they have to do. I find it useful to give an example, starting with the unarguable fact that we don’t have unlimited money, and we have to choose what to do with it. Given that, we ask sales for the best estimate of what they can deliver. If that sales forecast is going up, then we probably need to invest in however we deliver; production or people. If it’s doing down, we perhaps need to invest in marketing, or additional sales headcount. But we need a sales forecast to make that decision. If you do those three things, you’re likely to get better engagement and information from the business. Then, it becomes important to ask yourself and the rest of your finance team: does my planning process help the business make better decisions? Almost certainly some of it does. But, if you’re like the organisations I speak to every day, probably a lot of it doesn’t. Sorry. The good news is that you can fix that by examining your process through this lens. Go through everything you do, and ask yourself how the time spent leads to better decisions. Two common examples of time sinks that don’t add anything include: Unnecessary time detail. You probably use fewer Post-Its in August as everyone goes off on holiday. But insisting on month by month planning of stationery expense probably wastes more time – and kills more goodwill – than the materiality is worth, and is unlikely to impact decision making. Many areas will be fine to plan annually or quarterly. Unnecessary account detail. Similarly, when senior management reviews the budget contributions from the business, it is almost never at GL nominal code level. GL codes are important, but they are never all important when it comes to planning. Find out the actual required detail for decision making, and build the process on that; your current processes may well be forcing budgetholders to put in all sorts of effort for no reason. Having said that, the managers within the business often do want to plan in more detail than what senior management look at (often it’s easier to deliver multiple numbers than one, eg separate types of insurance). Ideally, find out what detail senior management looks at, then have conversations with budget holders about the best process for them that delivers at least that. A good planning process is something that needs to be continually iterated on and improved. But once you – and the business – recognise what the purpose of planning should be, it becomes a lot easier to motivate everyone to get better! For more insights on planning, reporting and consolidation, visit https://northexis.com/blog. Adam Rakich is Consulting Director at Northexis, a UK IT consultancy streamlining finances for businesses. This content is brought to you by Northexis. Northexis is a UK-based IT consultancy that helps businesses improve their financial processes, specialising in budgeting, forecasting, and reporting.