Why Smart CFOs Are Transforming the Planning, Budgeting, and Forecasting Process (PBF)
If there was ever any doubt about the necessity to transform the PBF process, there isn’t any more. FSN’s most recent research, “Agility in Planning, Budgeting and Forecasting”, confirms and quantifies the compelling advantages of modernizing and digitizing the planning, budgeting, and forecasting process. The survey, which analyzed the views of over 500 businesses globally, identifies a strong correlation between transformation leaders and superior performance – by an impressive margin.
The survey compares transformation leaders, the 5 percent of survey respondents that say they have completely transformed their process, against businesses that have not commenced their transformation journey. In a nutshell, transformation leaders forecast more quickly and accurately and further out on the time horizon. For example, 37 percent of transformation leaders can reforecast within 24 hours compared to just 12 percent of the transformation laggards and crucially, 31 percent can forecast beyond 12 months compared to just 11 percent of those that have not modernized.
So, the obvious question is what do transformation leaders do differently?
The answer is divided into two parts. Firstly, they have invested in modern tools and infrastructure to provide the foundation architecture that modern finance functions need. Secondly, they leverage accounting techniques that give them a profound advantage in terms of forecasting agility, speed, accuracy, and the ability to look out further into the future with confidence.
But it is the investment in modern tools and infrastructure that gives finance functions ‘permission’ to use advanced accounting techniques such as rolling forecasts, zero-based budgeting, and scenario planning. Put bluntly, there is no shortcut to success. The complexity and sophistication of these accounting techniques puts them beyond the reach of organizations that are dependent on standalone, disconnected spreadsheets.
Creating agile scenario plans and rolling forecasts is simply not feasible in spreadsheets. This was the major reason that PBF was the most disrupted of the core financial processes during the pandemic, and why many companies that had not transformed were struggling to cope. However, although transformation leaders were able to ride out the pandemic with relative ease, it would be misleading to suggest that transformation pertains only to extreme circumstances. Businesses face constant change, and as we begin to emerge from the pandemic, businesses will need ongoing forecasting agility to respond to more ‘normal’ market change, such as new business models, competitor activity, consumer behavior, and reorganizations.
So, what sets transformation leaders’ infrastructure apart from the rest? The answer comes down to three things:
- Data mastery, i.e., the ability to leverage data as a corporate asset and hold it in a centralized business model that can be shared across business functions.
- To deploy a specialized budgeting tool in the Cloud that has the financial intelligence to support the advanced accounting techniques mentioned earlier.
- To eliminate standalone, i.e., disconnected spreadsheets for data entry and reporting.
Smart CFOs know that the combination of infrastructure and modern tools is the way forward, but armed with this research, they have the empirical evidence to make a compelling business case to the rest of the C-Suite.
FSN Global Survey 2021: Agility in Planning, Budgeting and Forecasting
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