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#Budgeting #Budgeting Tips #budgeting software

5 Components of a Successful Rolling Forecast

For the past several years, businesses of all types have been deciding to either supplement or replace their annual budgets with rolling forecasts.

There are a number of reasons for this. For one, rolling forecasts can offer greater accuracy than an annual budget, which is often out of date within weeks of being put together – if it’s not already out of date when it’s finalized.

For another, rolling forecasts take up far fewer resources than the massive task of putting together an annual budget, which can tie up staff’s time for months on end.

Maybe these factors are part of why you’ve decided that you want to switch to a rolling forecasting model. Now that you’ve made the decision, what components need to be in place for your new method to be a success?

1. Buy-in.

When you made the decision to switch to rolling forecasting, you probably had already achieved buy-in from the rest of your finance team. However, if forecasting is going to work for your organization, you need to ensure that the rest of your colleagues and staff are ready to embrace it as well.

That means demonstrating to your staff at large how forecasting will improve not only the company’s success, but also their own workloads. Emphasizing the fact that rolling forecasts will mean staff has to spend less time and, eventually, effort, on putting their numbers together is always a good place to start.

2. People.

Do you have the right people for the job on your finance team? When you’re switching to something new like forecasting, you need to make sure your people are ready to embrace the changes.

Are they willing to learn what they need to to make the switch a success? Are they able to be evangelists for the new method to other members of the staff? Are they good at seeing the big picture as well as focusing on details as needed? All of these things will influence the success of your rolling forecasts.

3. Data.

When moving to rolling forecasts, having good data is vital. Almost before you do anything else, you need to decide how far out you want to forecast – three months? A year? Longer? Forecasts can be implemented as far as five years out, but only if you have the data to populate them. If not, there’s not much point in trying to forecast that far in advance.

Three-month, or quarterly, forecasts, on the other hand can be a great place for businesses to start. After you and your staff are comfortable with forecasting for this length of time, you may find that you want to move to more frequent forecasts – monthly, perhaps.

4. Systems.

If your company is one of the thousands of businesses that continue to use Excel for their finance needs, you’ll need to make a change once you start forecasting. Forecasting using only Excel, as noted by the Geneva Financial Planning and Analysis Club, is nearly impossible.

Instead, business that decide to forecast should really consider moving to a more robust planning and forecasting solution, like True Sky. One of the great things about True Sky is that it is Excel – it’s based in the Excel interface, but offers huge advantages including greater security, real-time updating, and the ability to manage the entire forecasting process through the office of the CFO.

5. Process.

Since forecasting involves many people both inside and outside of finance, it’s essential to establish clear, efficient processes that allow for collaboration and flexibility as needed.

This may involve merely tweaking your old budgeting processes, or it could mean coming up with entirely new ones. It will all depend on what works for you and your company. If you’re using True Sky, you’ll be able to configure your approvals process however you like, and easily involve the people you need to ensure the forecast is completed accurately and on time.

Want to learn more about how to make rolling forecasting work for your company?Check out our post “Making the Switch from an Annual Budget to a Rolling Forecast.”

View the full post here.

#business forecasting #forecasting #financial forecasts #Financial Forecasting #rolling forecast

How to Create a Strong Budgeting Culture at Your Organization

When you look at your budget, what do you see? A list of incomes and expenses? A snapshot of your business’s financial health? An account that gives you insight into your business drivers?

Ideally, you should be seeing all of those things. But there’s something else, too, that your budget can and should be: a commitment.

Now, that doesn’t mean it’s something written in stone. An effective budget should change and evolve throughout the year as your company has to meet new challenges, hire or let go of employees, or change direction in order to stay competitive.

What we mean by commitment is something a little different. A well-written, well-considered, and thoughtful budget is a tool that can help you to hold your employees accountable for the numbers they put in, as well as their performance against those numbers.

This, in turn, will help you create a strong budgeting culture at your organization. Here are a few reasons why.

Increasing employees’ involvement in the budget process will naturally increase their investment in it.

If employees see the budget as a document that simply gets handed down to them from the CFO’s office, they’ll most likely find it difficult to care about what it says. Yet this is how the budgeting process works at many companies – employees are kept at a remove from the budget, with little expectation or opportunity to contribute to what goes into it.

However, when you open up the budgeting process to more of your employees, you encourage them to take ownership of the process. In a way, budgeting can almost become a team-building exercise, as those who are involved will see how their input affects other departments and the business as a whole.

When you and your employees put time and thought into the budget, you increase accountability across the organization.

It’s easy to come up with a number and put it into a spreadsheet. But that’s not what you want in a budget – you want numbers that have been considered, and that are in that spreadsheet for a reason.

In order to get those numbers, you have to do two things:

Give employees ample time and resources to make their contributions to the budget.

Hold everyone (including yourself) accountable for those numbers once they’ve been finalized.

When employees know that their contributions matter, they’ll begin to see the budgeting process as more than just a routine chore. At the same time, when they know they’re accountable for the data they put in, they’ll take the time to make sure that data is solid.

Just remember that you have to be accountable, too – if you have to change your employees’ data, then you should, if possible, let them know. That way, your team members won’t feel that all the effort and time they put in to coming up with those numbers was wasted.

After a few budget cycles like this, you’ll be well on your way to a strong budgeting culture.

It takes time to build a strong budgeting culture at your organization, especially if you work on an annual budget model. If you’re using rolling forecasting, you’ll be able to affect change much more quickly.

Either way, you can’t go wrong by treating your budget as a commitment that you and all of your employees enter into. By doing so, you’re not only sending the message that your employees’ input matters – you’re also setting yourself up for much greater budgeting success.

Are you ready for a budgeting and forecasting solution that can help you achieve these goals? Learn more about how True Sky can help your organization here.

View the full post here.

#Budgeting #business budgeting

How True Sky Can Simplify the Budgeting Process for Businesses Using Sage X3

If your business is using Sage X3, then you already know how helpful it can be to simplify your business processes.

And just like Sage X3 takes the complexity out of your business operations, theTrue Sky budgeting and forecasting solution can simplify the budgeting process for companies using Excel.

As a certified Sage X3 solution, True Sky integrates seamlessly with Sage X3 to offer advanced budgeting capabilities. CFOs can easily use both systems without worrying about incomplete data transfer or incompatible file formats.

Here are some of the ways that True Sky can work with Sage X3 to help your business.

10 Budgeting and Forecasting Tips for CEOs

Photo credit: Sebastiaan ter Burg via Flickr

Being a CEO isn’t easy. It’s a role that can be hard to define at times, and with a hand in everything from marketing to financing, many CEOs end up drowning themselves in too much work to really invest time where they’re needed: the long-term vision and strategy for their company.

Two of the most important areas of a CEO’s focus are budgeting and forecasting, a pair of interconnected and mutually dependent factors that must be closely monitored and accurately analyzed before they make or break a company’s future.

The terms budgeting and forecasting relate closely to one another in the world of business, although they are not to be confused. Yet, even experienced business professionals sometimes treat them interchangeably. Both, however, should be clearly defined and understood before any action can be taken.

Business Budgeting and Baseball: More in Common Than You Think

The buzz of excitement in the ball park…the cheering crowds…the smell of hot dogs…the crack of the bat…doesn’t it all just remind you of your company’s budgeting and forecasting process?

Wait, what?

Yep, believe it or not, budgeting and baseball actually have a lot in common. Especially when your business is using data gathered from previous years’ budgets to plan for the upcoming year.

So how is this like baseball?

If you’ve ever read the book or seen the movie Moneyball, you might already have an inkling of what we’re talking about. The story featured the general manager of the Oakland A’s, and the plan he came up with in 2002 to make the most of the team’s limited financial resources by using statistical analytics and driver-based planning to choose which players to recruit.

Conventional baseball wisdom says that signing players with high batting averages and high numbers of runs batted in and stolen bases is the way to win games. Thus, those players are the most highly sought after by teams – and the most expensive to sign.

But when the general manager analyzed the data to determine which factors actually contributed most to the success of a team, he found that on-base percentage and slugging percentage were much better indicators of performance. Based on this analysis of the drivers of team success, he was able to put together a team that made it to the playoffs two years in a row – and that while paying 65% less in player salaries than an average MLB team.

How does True Sky work?

Remembering the basic philosophy of True Sky as Budget in Excel; Manage in SharePoint; Store in SQL Server, let’s walk through the basic process of Budgeting and Forecasting in this tool.

Input numbers in Excel

First, a budgeting template is designed in Excel. A template is a multi-use document that can be used for data entry as part of an assignment or deployment in read-only mode when used in a report. We will delve into template design in later posts.

How True Sky Can Help You Make Better Financial Decisions on Capital Expenditures

When it comes to making decisions about capital expenditures, you want to have as much financial information as you can.

These sorts of expenses – for property, industrial equipment, office equipment, and the like – can represent a large percentage of your company’s budget during a particular cycle, and influence your finances for a long time to come. Because of this, it’s important that you be able to plan for these expenses using the most accurate budgeting methods possible.

Create a separate budget

While each company handles capital expenditures somewhat differently, a good first step for most enterprises is to create a separate budget solely for these large investments. By breaking these costs out from your regular operational costs, you’ll do the following:

Allow for more accurate calculation of taxes, or determination of potential tax issues

Allow for easier consolidation of expenses, if different departments are submitting requests for items falling in the capital expenditures category

Allow for better and more transparent management of debt incurred by a capital expenditure

The Shift to Predictive Accounting

The following article is from guest blogger, Gary Cokins.

There is a widening gap between what the CFO and accountants report and what internal managers and employee teams want. This does not mean that information produced by the accountants is of little value. In the last few decades, management accountants have made significant strides, such as with activity-based costing (ABC), in improving the utility and accuracy of the costs they calculate and report. The gap is being caused by a shift in managers’ needs from just needing to know what things cost (such as a product cost) and what happened to a need for detailed information about what their future costs and profits will be and why. Examples include driver-based rolling for financial forecasting and true marginal cost analysis for what-if scenarios.

Despite accountants advancing a step to catch up with the increasing needs of managers to make good decisions, the managers have advanced two steps. In order to understand this widening gap, and more importantly how accountants can narrow and ideally close the gap, let’s examine the broad landscape of accounting.

Accounting and Your Budget: How Your Accounting Method Can Affect Your Budget

When it comes to setting up your budget, you’ve got several choices to make.

You can choose to use the annual budget model, or a rolling forecasting model.

You can manage it entirely through the office of the CFO, or you can include other departments.

And finally, you can choose which accounting method to use: the accrual basis or cash basis method.

If you’re struggling to decide which accounting method to use – or whether it might be time to switch accounting methods – here’s a quick primer on what each method is, and how these accounting methods can affect your budget.

Accrual basis

The accrual basis method of accounting is fairly simple. Revenue is recorded when a transaction is completed, rather than when the cash actually comes in.

For example, let’s say you run a consulting business that sells products or services to other businesses, you may complete a transaction in August, but not see the actual cash until October. Despite that, you would record the revenue for this transaction in August.

You’d handle expenses the same way. Using the same example, if you paid for travel expenses for one of your consultants on your company’s credit card, you would record the expenses at the time they were incurred – even though you wouldn’t technically pay for them until a month or so later.

Many companies use the accrual method of accounting, as it gives a much clearer picture of a company’s actual profitability. For publicly traded companies that must answer to shareholders, this method can be preferable. Because the revenue is matched with expenses in any given month, the company’s budget can show less severe ups and downs than with the cash basis accounting method.

The Benefits of Rolling Forecasts for Your Manufacturing Business

In manufacturing, having a strong idea of what lies ahead can mean the difference between a good year and a great year.

This may be why the manufacturing industry has been relatively quick to embrace the rolling forecasting method of planning, which, when done correctly, can give businesses a more accurate view of both present and future.

Has your manufacturing company been slow to embrace rolling forecasting? Are you wondering whether making the switch from an annual budget is worth the effort? Take a look at these 3 benefits that rolling forecasts can have for your manufacturing business.

Rolling forecasts allow you to create “what if” scenarios.

When you work with raw materials the way manufacturers do, your costs can be greatly impacted by volatile market forces.

For example, let’s say one of the materials that represents a large percentage of your costs is gold. In an annual budget scenario, you’re generally stuck projecting a single number, or possibly single range of numbers, for that material.

If something happens and the price of gold jumps sky-high or drops, then your budget has to be completely redone. That’s a time-consuming chore that takes your resources away from other important tasks.

5 More Reasons We’re Excited to Attend the Sage Summit this July

When it comes to tech conferences, the Sage Summit is one of the best. If you read our earlier post about this July’s event in Chicago, you know that the Summit is the biggest gathering of small and medium-sized businesses in the world.

As such, it’s a prime opportunity to network, learn, and continue exploring ways that True Sky can better serve businesses. Here are five more reasons we’re excited to attend the Sage Summit this July.’

1. We get the chance to talk with our customers face-to-face.

We always enjoy the chance to reconnect with our customers. While one of our year-round priorities is to be available to True Sky customers for help, guidance, and to answer questions whenever they need us, being at a gathering like this means we have the chance to enhance those relationships.

We can talk face-to-face, draw on conference resources like talks and technology demos, and connect with potential customers to show them how True Sky can help their business. Plus, the high-energy conference environment is a great backdrop for these conversations.

Detail Budgeting -Standard Templates

In our first post in the Detail Budgeting series, we noted that a common issue among budgeters was an inability, in traditional budgeting systems, to enter enough explanatory detail. True Sky, Planning, Budgeting and Forecasting, provides a number of solutions to this issue.

This post will examine the Standard Data Entry Template which is used to generate an assignment for budgeters to enter data using the Excel interface.

By using Standard Data Entry Template, Line Item Details are available for each individual line in the budget. In budget spreadsheet templates, there is an item in the Line Item Details section of the Excel ribbon.

Centralized Budgeting Systems

This is part 8 of 12 in a blog series on understanding the risks of your current planning, budgeting and forecasting process. For the next few weeks, we’ll be posting a new article every Wednesday that will look at the challenges of the budgeting process and how to solve them. Catch up on last week’s post, Improve the Logic Behind Your Data.

Working with multiple budgets?

As your enterprise grows, the number of financial budgets you manage may also grow. You may have a corporate budget in addition to budgets for multiple business units, locations, or other divisions. Keeping tabs on individual financial activities and incorporating that data into a corporate budget can be challenging unless you have a solid plan and the support of a robust business management solution.

Spreadsheets have a crazy way of multiplying almost right before your eyes. Employees may add or change data and create a new version of that spreadsheet to be passed around for review and approval. Imagine multiplying the numerous versions of spreadsheets by “X” number of new business units. In short time, you could have dozens of spreadsheets, each containing data pertinent to your individual lines of business as well as the overall corporation.

The Importance of Decision-based Costing

The following article is from guest blogger, Gary Cokins.

Managers are increasingly shifting from reacting to after-the-fact reported outcomes to anticipating the future with predictive analysis and proactively making adjustments with better decisions. Despite some advances in the application of new costing techniques such as activity-based costing, are management accountants adequately satisfying the needs of managers and employee teams for decision-based cost information? Or is the gap widening? That is, are the accountants still just counting the beans, or are they helping to grow them?

There is a difference between what management accountants report and what managers and employee teams want. This does not mean that information produced by accountants is of little value. In the last few decades, accountants have made significant strides in improving the utility and accuracy of the costs they calculate and report. The gap is being caused by a shift in managers’ needs – from needing to know what things cost (such as a product cost) and what happened – to a need for more purposeful information about what their future costs might be and why – what can happen?

Bad Data Or Bad Spreadsheets?

This is part 2 of 12 in a blog series on understanding the risks of your current planning, budgeting and forecasting process. For the next few weeks, we’ll be posting a new article every Wednesday that will look at the challenges of the budgeting process and how to solve them with budgeting best practices. Catch up on last week’s post, Budgets are Important, Make Sure You’re Doing them Correctly!

Are you using Excel for budgeting?

How many times have you found errors in your spreadsheets for budgeting as you are analyzing financial data and planning your budget? Trying to determine whether you have bad data or bad spreadsheets takes time, further aging your data and keeping you from moving forward with your business budgeting process.

Managers involved in the planning, budgeting and forecasting process often default to the use of spreadsheets. Applications such as Microsoft Excel® provide a quick and easy way to enter and analyze financial figures. However, according to MarketWatch, studies show that nearly 88% of spreadsheets have errors. Users enter data that could be wrong from the very start or they can make typographical mistakes. Additional errors can be found with formulas in the cells or with links between multiple spreadsheets.

Financial figures are often fluid and errors can be compounded in spreadsheets that are:

Reviewed

Changed

Updated regularly

Errors can easily go unnoticed which can lead managers to make bad decisions based on data that they didn’t know was incorrect.

4 Reasons You Need to Budget

Let’s state the obvious, budgeting isn’t sexy, nor is it fun. It’s an ongoing process, and companies need to do it on an annual basis. If you’ve ever stopped to ask yourself, why am I doing this budget report, then this article is for you…

1. “Because we have to”

So this may sound like a smart-alecky answer, but from an organization point of view, “because we have to” does carry some validity. Maybe you have industry or government regulatory reporting requirements and have to report back certain specific pieces of information in order to stay certified. Maybe you have certain covenants with your bank or lending institution that require you to provide future forecasts to keep lines of credit available. And maybe you have ownership or a board of directors that are not involved on a day-to-day basis but need specific information to make decisions about the future of the organization.

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