Members in business: approaches to budgeting and planning

The critical functions of budgeting and planning are becoming more frequent and real-time – so how do different teams tackle the challenge?

Budgeting and planning have been elevated in importance over the past 18 months. They are a critical component of the finance function – and one that can leave the team vulnerable in the eyes of senior leaders across organisations.

Finance teams have been stretching the functionality of Excel as far as it will go, but they’ve also been taking on new tools that automate some of the work, allowing them to share dashboards, create reports easily, and make quicker decisions.

This can open a whole new realm of possibilities for finance teams to dig into the detail, identify trends, mitigate any risks and challenges, and test scenarios to see how they might affect business performance and how they can be managed.

Not every finance function is embracing all of these tools at this time, but more and more are thinking about how they can do more budgeting and planning at regular intervals. We asked members in business what tools they value the most and how they use them to improve their budgeting and planning.

Cloud tools allow for daily forecasting – but sometimes Excel is the only option

Clare Elliott FMAAT, CFO, ILUX

We use Float, which API’s to Xero, and makes daily forecasting super quick. It also has scenario planning, so you can forecast outside of current business processes. The scenario planning gives me quick answers for the Directors to make decisions.

We also use Dear Inventory, which again API’s to Xero. This is where we do all of our POs and quotes, so at any point, I can access the system to forecast what is due to come in (and at what stage the quote is, ie. prospective or accepted) and which POs are likely to convert to bills on which dates, and when they will be payable. 

This isn’t quite so intuitive as it doesn’t collate all of that information, but it does make it easier to put it together. Dear is quite a new addition – we only put it in nine months ago. It has been a big change to how we do things internally, i.e. how we process quotes and invoices, POs and bills. The Inventory Management side also allows us to see exactly what we have in stock, and therefore we can accurately manage our stock levels and our costs of stock.

Prior to Dear, it was a manual system. Having the system has locked down our processes more, which is financially a good thing. But it has also reduced flexibility to do quirky processes to suit the client or the situation at the time, so it has been a challenge on occasions to tell others within the business that we can no longer do certain things in certain ways, and that we have to abide by the strict processes (which ultimately is better for the business, it’s just that people often rebel against it).

I’ve also just started to use Fathom, which I’m hoping will provide an even better forecasting tool, but haven’t spent enough time on it to get it fully up to speed. I don’t find it particularly intuitive so it’s taking a bit of effort to get it set up. I’m having to force myself to make the switch from my manual process (which at the moment ironically still feels easier). ExpenseIn is our expenses management system, again this allows us to collate all information monthly and I always know what is due to go out at what time.

Lastly, often I find myself in Excel, crunching the numbers in the trusted old fashioned way. This isn’t my preferred option, but sometimes it is easier as I have many templates already set up. Excel is still underestimated in many ways, though setting up templates is very time-consuming. Then they do need protecting so that formulae cannot be amended in error, especially when sharing with others. So it’s not my preference in theory, but sometimes I find myself defaulting to it in practice.

We collaborated at the end of the pandemic for accurate resource planning

Björgvin Vigfússon MAAT AATQB, finance manager, Westmorland Linen Rental and Laundry

When it comes to budgeting and planning we use Xero, OpenCRM (our CRM system), Workforce (payroll software) and Excel. We use Xero to help us gather information such as total sales figures over a period or sales figures per customer. OpenCRM shows us which products are our best sellers or worst sellers. Workforce helps us understand labour cost, per month, per week, per day, per hour. They help us gather crucial information regarding the running of the business in just a few clicks.

Here’s an example of how these systems help us with decision making. At the end of the lockdown when businesses were slowly reopening, we were faced with the issue that our business was only going to be operating on 40% capacity for the first month, then slowly but steadily get to 100%.

We had to calculate how many staff we would take off furlough. Would we need to hire more staff? How many? Using Xero, OpenCRM, Workforce and Excel, we were able to look at, say, sales for the spring period for the last three years, and find the average.

We could see what changes occurred in the customer base and adjusted accordingly. We worked out what products were our best/worst performers, and what revenue we could expect for each product. Once all this information had been gathered and inputted into Excel, we were able to calculate the expected number of staff required for reopening and were able to make a “staff cost” budget based on this information.

By ensuring the relevant managers and key staff were involved in the early stages of the adoption of these systems we were able to get them invested and understand how these systems could help them with their day-to-day roles. Since they fully understood the reasons for adoption and how they worked, the teams involved have taken to them well and often ask how we did things without them. The single most useful function of these tools is that they all give us good insights into the day to day running of the business, by using user-friendly dashboards.

We’re still using Excel, but we can get a lot out of it

Farha Jamadar FMAAT, finance manager, Todd Doors

In the past, our budgeting basis was always based on historical figures. We’re now able to be more flexible where we use budgets and forecasts. We revise them quarterly, which has become a necessity due to Covid and disruptions to our supply chains.

Excel is our main tool for this, using pivot tables. We set a year that we aim to exceed. We compare it to the previous year and unpack as much information as possible. We try to follow the highlights from our best year and the previous year and avoid the lowlights.

This enables us to scenario plan and builds in contingencies so our reporting is as accurate as possible (still using variance analysis but with more updated information) for the business and the bank when it comes to our funding needs.

As Excel use is the norm in the finance function, we have taken advanced courses to ensure that we are utilising excel optimally while automating as much as possible. The timeline function is a great tool to switch to prior periods for review while macros are great for scenario planning and making quick changes.

Want to share your experiences with members in business?

We are looking to expand our panel of members in business who share their knowledge, insights and experience for this article series. If you’re a member working in a finance team who wishes to take part, please get in touch with the Content team.

Mark Rowland is a journalist and former editor of Accounting Technician and 20 magazine.