The budget model is where the rubber hits the road in FP&A financial modelling. By taking the financial plan you’ve carefully crafted and applying it to the messy realities of all your different departments, you’re able to better predict what’s really important in your business. It’s ironic, then, that many FP&A teams still try to manage such an important, complex process manually.
Budget forecasting models help finance understand the company’s performance based on input from its various components. As each programme, department, and business unit creates its own budget, you can then roll them up into a single overall financial model for the entire business. This model can then be used to allocate resources and predict financial results for the coming year.
Simple in theory, but when done manually, it can be complex in practice:
While budget modelling is crucial to the company’s success, finance often gets stuck in the middle managing and coordinating the whole process. Individual business managers drag their feet getting you what they need, either because they don’t see the value in the process or they think you’re trying to take their budget away.
There are several drawbacks to using a spreadsheet-driven static planning process when creating a financial model.
With static planning, finance teams deal with issues like:
With active planning, each business owner has the power to model their own area as they see fit.
An active planning approach to financial modelling means:
Workday Adaptive Planning makes it simple to conduct a financial modelling process that’s built around collaboration and transparency throughout the company. Because everything is connected in the cloud, every department can see how their budgets will impact both other departments and the bottom line. When everything is connected, you get a single source of insights. Benefits include:
See your models adjust to reality in real time as new information about the business enters the system. Since your data is in the cloud, all of your different department models will be connected in one place instead of across multiple, unconnected spreadsheets.
Dashboards and data visualisation help finance and non-finance team members understand the health of their department and the entire company. With business intelligence software, you are able to quickly identify areas of opportunity or concern, and gain a broader business perspective through analytics.
Finance and each individual department can collaborate on the same financial model instead of emailing spreadsheets back and forth. Seeing an audit trail of which team member made what changes increases transparency and keeps everyone working on the same, up-to-date model.
Everyone can spend their valuable time analysing the data instead of updating spreadsheets and fixing errors. When everyone is working with the same source data, you can focus your team's time on the story behind the numbers, and create visuals to quickly communicate that story to the rest of the company.