Planning Budgeting and Forecasting

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About the research 4,Introduction 6,Executive summary 7. 1 Create the right organisational,culture and ways of working 8. 2 Integrate the PBF process,leveraging high quality data 12. 3 Deploy effective and scalable,technology solutions 16. About the authors 22,AN EYE ON THE FUTURE 3,ABOUT THE RESEARCH.
This global report is the first of three pieces of research that have been jointly. commissioned by ACCA and KPMG to assess how the Enterprise Performance. Management EPM capability within Finance is providing the CFO with the. appropriate people processes and technology to support Planning Budgeting. and Forecasting, The data used in the report is from a survey which was conducted between 17th April. 2015 and 11th May 2015 and represents the view of over 900 Finance professionals. THIS REPORT REPRESENTS THE VIEW, from more than 50 countries Whilst employees from organisations of all sizes. participated in the survey over 60 percent were from organisations with over 1 000 OF OVER 900 FINANCE PROFESSIONALS. FROM MORE THAN 50 COUNTRIES,employees with annual turnover of at least 100m. In addition 30 percent of the respondents identified themselves as a Senior Finance. Manager Manager 20 percent as newly qualified experienced Accountant 11 percent. as Financial Controller 7 percent as Director Partner 6 percent as CFO and the. remaining 26 percent spread between a range of roles that included CEO Internal. Audit Treasury Analyst and Consultant,EPM consists of Planning Budgeting Forecasting. Performance Reporting and Dimensional Profitability. 4 AN EYE ON THE FUTURE AN EYE ON THE FUTURE 5,EXECUTIVE SUMMARY.
Planning Budgeting and Forecasting PBF Yet in the face of an increasingly challenging. should serve to support the business in business environment this study suggests. understanding how its on going activities current PBF process are flawed and many. contribute to delivering its future longer term enterprises continue to invest significant time in. strategy It is a method for allocating scarce sub optimal performance management processes. resources in line with the strategic intent of which do not meet the strategic or operational. the business and for planning actions to help needs of the business. it meet its strategic goals in response to, This study suggests there are three critical areas. changing circumstances,to focus on to improve the current PBF process. and better align to a leading practice performance. INTRODUCTION management framework, Our view is that Planning Budgeting and Forecasting PBF sits within a performance management framework. consisting of three components the other two being Performance Reporting and Dimensional Profitability where. organisations can seamlessly link top down strategic targets to financial and operational forecasts and report THE RIGHT. performance against such targets ORGANISATIONAL,CULTURE AND WAYS. The role of each element of planning budgeting and forecasting is outlined below. OF WORKING,Ownership must remain within the,business with Finance being a facilitator of.
the process and one of a number of equally,important inputs into it. 2 INTEGRATE,Traditional performance measures THE PBF PROCESS. reinforce short termism in,organisations as they are rarely. LEVERAGING HIGH,if ever aligned to QUALITY DATA,strategic goals. The PBF process and data is enterprise, PLANNING BUDGETING FORECASTING wide impacting all areas of the business.
and the data governance should reflect this, A top down strategic plan that A budget that enables resource A forecast that tracks the expected The process must embrace Big Data. defines the strategic aims of the allocation to be aligned to strategic performance of the business 3 DEPLOY and be utilised to deliver the. enterprise and high level activities goals and targets set across so that timely decisions can EFFECTIVE AND strategic goals. required to achieve the goals of the entire organisation be taken to address shortfalls SCALABLE TECHNOLOGY. the organisation against target or maximise an SOLUTIONS. emerging opportunity,Technology is moving from providing. A fully integrated performance management framework is essential to provide corporate visibility of the activities one off static analysis to a more regular. quicker and dynamic enabler in the process, that directly deliver growth and provide a clear framework for determining how to continuously allocate resources to. support the strategy Cloud solutions are enabling,real time reporting with continuous. improvement embedded at,a cheaper cost which enables.
culture including appropriate leadership, tone at the top is essential for the BUDGETING AND FORECASTING PROCESS MUST BE A Q2 Who spends most time on current and future PBF Process. Planning Budgeting Forecasting PARTNERSHIP BASED APPROACH DRIVEN JOINTLY BY. PBF processes to flourish The PBF,process is one of the few enterprise. THE BUSINESS AND FINANCE THAT TAKES INTO ACCOUNT, activities that touches every part of the ENTERPRISE WIDE RISKS CEO CFO COO FINANCE OPERATIONS OTHER DON T KNOW. organisation It connects information,CURRENTLY SPEND THE. processes and people across the To what extent do you feel that planning budgeting and forecasting MOST TIME ON THE PLANNING. business and if executed properly,is essential to drive better business.
should be an enterprise wide process linking operations with finance BUDGETING FORECASTING PBF. PROCESS IN YOUR ORGANISATION,decisions that can create competitive. advantage and deliver sustainable PBF should be done in. partnership between, long term business value WILL SPEND THE MOST TIME ON. Operations and Finance, Yet too often PBF process continue taking account of. enterprise wide risks,THE PBF PROCESS IN THE FUTURE 6 19 5. to operate as age old established, practices imposed on the enterprise Finance should own.
by the Finance function with little and create the plan. alignment to the reality of day to day first and receive. business operations With senior additional insights. management setting the overall strategy, from the business THE CFO MUST TAKE A STARRING ROLE IN PLANNING BUDGETING. and Finance typically setting budgets 10 AND FORECASTING. and shorter term targets the process John O Mahony Head of EPM KPMG UK. A centralised planning tool is, is often fragmented and isolated from 9 too critical to be integrated. the business This often results in line The budget is How many famous chief financial officers are perhaps not as vocal as they could be This will be a hard sell given that senior. 3 with other departments, management being held accountable exclusively a can you name I doubt they trip off the only 33 percent thought they were managers tend to be rewarded handsomely. Finance activity planning tools, to the output from a process into which 2 tongue like Buffett Bezos or Blankfein but Organisations need genuinely forward on performance against budgets This was. they feel they have had little input perhaps it is now time to look beyond these looking Finance leaders to phase out echoed in the survey revealing that almost. CEOs and give the CFO more of a starring traditional rigid point in time planning half of respondents viewed the budget as a. In this situation the odds are stacked Effective PBF tools are not. user friendly for people role Our survey illustrates disagreement and forecasting practices and deploy politically agreed number. against the process producing plans, outside of Finance on who owns the planning budgeting and effective rolling forecasting with moving So what can CFOs do At present.
budgets and forecasts that have buy in, forecasting PBF process and who should targets that reflect real time changes in many are expected to demonstrate the. from Operations, do so in the future external factors They must be capable of value of transforming PBF upfront in order. Clear decision making authority across Regardless of who you believe this recognising they cannot make empowered to gain the credibility with the CEO and. different elements of the PBF process is should be the case the proportion of concept or demonstrate the appropriate must be CFO or CEO it is very unlikely decisions on behalf of the company by board Again tricky But if CFOs are not. particularly relevant in complex respondents that believe Finance should behaviours Strong PBF process must that the CEO will personally facilitate PBF using an obsolete static budget created six prepared to be resolute in championing a. multi layered enterprises that are continue to spend the most time on be seen as an essential on going CFOs therefore need to exercise sufficient to nine months earlier more enlightened and integrated approach. stretched across different geographies the PBF process drops to 50 percent and valuable activity that is critical to control to ensure integrity behind Along with that vision the CFO needs to PBF they risk being shut out of broader. and operating divisions This study with the difference being apportioned the performance of the organisation the numbers that come out of the PBF the charisma and impact to lead or at planning and strategy altogether. suggests that Finance is easily to an increasing role for the CEO requiring a high level of engagement process to provide basic hygiene least facilitate enterprise wide change This investment will pay off Over the. considered to be the resource that and Operations across all operational units How do they do that while at the same with Strategy or Operations The fact that past few years CFOs have been proving they. currently spends most time on the PBF, time gaining traction as a strategic leader 77 percent of survey respondents believe can be more than the Chief Bean Counter. Clarity behind accountabilities and In this survey however 46 percent in the business PBF should be an enterprise wide process with instances of direct promotion of CFOs. process 65 percent of respondents, greater operational management of respondents believe the current To carve out a strategic role CFOs need is pleasing but the respondents are to CEO positions steadily rising Companies. However grounded in the belief that the, involvement in the PBF process do budget produces a politically agreed to have presence and strong influencing predominantly from Finance roles that have taken a more forward looking.
process should be done in partnership, not themselves guarantee success number from the top of the organisation skills across the organisation especially It is the rest of the organisation that approach to Finance have flourished. between Operations and Finance, if executive leadership and the not aligned to the real business outlook or the C suite The survey suggests that CFOs needs convincing. 77 percent of respondents felt that this, organisation do not buy in to the linked to bottom up operational reality. 8 AN EYE ON THE FUTURE AN EYE ON THE FUTURE 9,Q3 Who owns the PBF Process now and in the future. KEY ACTIONS TO CREATE THE, CEO CFO COO FINANCE OPERATIONS OTHER DON T KNOW RIGHT ORGANISATIONAL CULTURE.
CURRENTLY OWN AND HAVE,FINAL SAY ON THE PBF PROCESS. 41 33 4 13 4 3 3,AND WAYS OF WORKING,IN YOUR ORGANISATION. WILL OWN AND HAVE FINAL,SAY ON THE PBF PROCESS IN,THE FUTURE 36 30 7 13 5 4 5. FOCUS ON TOP DOWN,AND BOTTOM UP,The CFO must continuously work. Advanced tools and data will not enable better PBF accuracy Targets with a one year time horizon generated from an across the enterprise to ensure. and efficiency if the culture remains embedded in the sort annual budget are rarely aligned with longer term strategic senior executives do not politicise. of old fashioned thinking that is illustrated by 41 percent goals encapsulated in the planning process Using the the budget process or agree figures. believing that the CEO currently owns and has the final say budget to generate short term targets breeds a short term autocratically. on the PBF process within their organisation culture which can incentivise undesirable behaviours in. the business whereby short term gains are chosen over. Another critical cultural challenge is the age old problem. long term value creation, of incentivisation Too often organisations compensate.
employees based on exceeding the kind of set targets that. MAKE THE BUSINESS, fall out of the traditional planning process creating a natural 46 PERCENT OF RESPONDENTS BELIEVE ACCOUNTABLE. incentive to set low and easily achievable targets as well THE CURRENT BUDGET PRODUCES A The PBF process must be owned by the. as encouraging a drawn out time consuming process of. POLITICALLY AGREED NUMBER NOT business and supported by Finance to. negotiation that does not add value to the organisation. ALIGNED TO REAL BUSINESS OUTLOOK, BE CLEAR ON ensure integration and a genuine sense. DECISION MAKING of ownership across the enterprise. The who does what in the PBF process, ARE PEOPLE MISUNDERSTANDING THE ROLE OF THE BUDGETING AND is a critical challenge to get right. create the right organisational culture and ways of working 77 percent of respondents believe the planning budgeting and forecasting process must be a

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