Budget season can be difficult for financial professionals. The combination of resource allocation under strict deadlines creates an unenviable, annual responsibility. While budgeting may be difficult, it does not have to be an ordeal to suffer through. Proper planning and targeted budget scope can help reduce the time organizations spend on budget iterations before finalization.
Using APQC’s Open Standards Benchmarking® database, we determined that top performers, within North and South America, achieved a finalized budget after three iterations. Compared to bottom performers, which need nine iterations, top performers can help their internal business partners launch new product lines and programs faster than their competitors.
Of course, it is quite possible that all that hard work may soon be a thing of the past. According to finance industry consultant David Axson, the transformation of markets and supply chains that resulted from globalization requires firms to maintain a certain level of budget agility. Budgets become obsolete as conditions dictate different action with real-time events taking precedence over year-on-year financial plans. Changes throughout the year can cause dramatic shifts in revenue streams, quarterly operating margins, and financial forecasts. This is where a talented and capable finance organization within a firm can shine, helping the firm adapt to changes and realities not foreseen three, six, or nine months previously when the budget was produced.
Whatever a firm’s views on budgetary practices, it is easy to see that the sooner a budget can be finalized, the better off the firm is. Even if your firm is better prepared for budget season than the U.S. government, best practices, strong leadership, and well defined job roles can make all the difference in how the budget process turns out.
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