5 Articles on Budgeting Trends Every CFO Should Read

Last Updated: January 16th, 2023
Researched and Written by: Adam Bluemner

Budgeting, by definition, involves preparing for change. But lately prominent business thinkers are insisting that the very process of corporate budgeting itself is due for an evolution.

Increasingly, the call to advance budgeting practices is being paired with criticism of old budgeting standards, such as spreadsheet-usage and the ritual of the annual planning process. Dedicated budgeting applications and techniques like rolling budgets are gaining favor as preferred alternatives. Meanwhile, business intelligence and predictive analytics technologies are leading to more accurate forecasting, which provides an opportunity for tech-savvy organizations to add precision to financial plans.

CFO’s tracking down must-read material on budgeting trends shouldn’t miss the following 5 articles:

1 “Don’t Rely on Spreadsheets: Essential Tools for Planning, Budgeting, and Forecasting”

by Nick Castellina, Senior Research Analyst at Aberdeen Research Group.

Why You Should Read It: Software researcher Nick Castellina delivers the data on the connection between breaking budgeting spreadsheet reliance and improving corporate performance. When it comes to budgeting processes, experts recommend dedicated applications over spreadsheets. Why? The difficulty of manual consolidation, an inability to qualify data is up to date, and issues with shareability are a few of the spreadsheet drawbacks explored in this article.

By the numbers: 68% of companies rated as “top performers” use budgeting applications, compared with a 47% median for all corporate performance levels.

Employees are comfortable with spreadsheets because many of them use them in both their professional and personal lives. This familiarity makes it unsurprising that both top performing and Laggard organizations are employing them in some aspect of their financial planning process. Yet while the Best-in-Class may be using spreadsheets as a part of the planning process, they are less reliant on them as the sole means of communication and interaction, preferring to combine them with the use of applications.

2 “Is It Time to Scrap the Annual Budget Process?”

by Al Bredenberg, Technology Writer. Read the full article on thomasnet.com._

Why you should read it: Technology writer, Al Bredenberg investigates whether a continuous, rolling budget approach might be a better option for CFO’s than the traditional (but time-consuming) annual budget process. The article heavily quotes Steve Player, the program director of the Beyond Budgeting Roundtable, who makes the case that the annual budget is stifling innovation, incentivizing the wrong employee behaviors, and failing to adapt to real-time changes.

By the numbers: 60% of companies spend longer than 3 months working on annual budgets.

Instead of budgeting, BBRT members use rolling forecasts to eliminate the resource-consuming annual push to get the budget done. They organize for agility to respond rapidly to changing conditions and replace the annual budget poker game with a focus on continuous cost adjustment. They eliminate the time wasted on annual budgeting and reinvest it in more productive continuous planning.

3 “Forecasting Comes of Age”

by Kathy Hoffelder, Technology Writer. Read the full article on cfo.com._

Why you should read it: One of the criticisms levied at annual budgeting processes is that it spends too much time looking backward. This CFO.com article from Kathy Hoffelder explores the growth of forecasting as a critical component of financial planning. The piece chronicles the adoption of various forecast targets–including production, sales, cash-flow, and revenue–in a number of well known companies.

By the numbers: 90%. The amount of time Paul Schuster, treasurer and vice president at Trustmark Insurance identifies they spend in monthly business meetings discussing future conditions.

But companies today don’t stop there. For some CFOs and other senior finance executives, forecasting is no longer just a supporting analytical tool. Instead, the process has become so central to companies’ overall growth plans that the way it’s done has become an essential part of the business itself. Companies have come to rely on their forecasts as working documents throughout the year, while updating them on a daily basis. No longer do multiyear plans merely molder in desk drawers, gathering dust.

4 “Planning and Budgeting: Driving Value Through the Optimization of Planning and Budgeting Processes”

by Patrick Kavanagh, Senior Manager at Deloitte. Read the full article on fmi.ca._

Why you should read it: Budgeting expert, Patrick Kavanagh, delivers a visual and data rich exploration that covers everything from the impact of technology and varying methodologies on budget outcomes to concrete recommendations for budgeting optimization. One of the key findings shared in this presentation is that the amount of time spent on annual budgeting can actually negatively effect corporate performance. According to the research presented, top performing business spent less time on budgets and poor performers were likely to have created a larger number of budget versions.

By the numbers: Corporate usage rates for the most popular budget development methodologies: “historical-based” (58%), “zero-based” (6%), “results-based” (20%), and “driver-based” (16%)

A combined [top down and bottom-up budgeting] approach is preferable. The weakness of a single bottom-up approach lies in the potential for the budget not supporting the organization’s stated goals and financial targets. The weakness of a single top-down can be reflected in a lack of organizational buy-in in the budget process.

5 Liberate the Budget Process: A Step-by-Step Guide

by John Orlando, Executive Vice President at Centage. Read the full article on businessfinancemag.com.

Why you should read it: Simply put, this article covers a lot of ground. The article provides a 12 point diagnosis of potential signs you’ve outgrown spreadsheet budgeting, offers a run-down of the benefits of dedicated budgeting applications, and offers a step-by-step guide to exploring enterprise budgeting software.

By the numbers: 5-10 years. Likely period of time an organization will utilize a budgeting application.

Unlike the Fortune 1000, with greater resources and tolerance for risk, or the small office/home office (SOHO) business with its greater agility, mid-market companies are stuck in the middle. The challenges their executives confront are different. Finance professionals in an SMB need business tools that help them quickly evaluate current and past performance against a predefined set of performance data (goals and forecasts), present clear facts and uncover trends.

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