Budgeting, Planning and Forecasting

Gordon Tan | July 25, 2017

Photo by Oli Dale on Unsplash

Budgeting, planning and forecasting is a pain point for many organisations no matter how big they are. In this post, R&G Technologies Managing Director Gordon Tan shares his experience with a range of not-for-profits, and tips to ease the forecasting pain.

What are the problems faced by medium sized not-for-profit organisations?

With a lot of not-for-profit organisations, the main problem is growth.

When the organisation starts, they’re a lot smaller, and therefore they use a basic tool to perform all their budgeting, planning and forecasting. Something like Microsoft Excel. As they grow, they typically then try to enhance and add to their Excel spreadsheet.

The issue with this is over time the spreadsheet becomes unwieldy, and by the time the organisation reaches a stage when they have 50, 60, 100 or even 200 staff, the solution is overly complicated and becomes so complex that it’s often very difficult to verify the integrity of the information. It’s also very error prone.

The other issue with using Microsoft Excel for budgeting, planning and forecasting is that it’s very manual, which means there is often multiple copies of the same Excel sheets being circulated. At some point these must be combined and then consolidated by someone who understands all the underlying complexities and formulas behind the scenes.

The standard tool that's used in these situations is typically Excel, which is great for being able to model scenarios, however what it's not so good for is being able to verify and check the integrity and the underlying formulas and the way that they work. Therefore, simple things like having the wrong cells used in formula calculations happens regularly and again can create a lot of errors and complexity that can be rolled up into data that mid-level and senior level managers are seeing.

Are there any organisations that typically struggle more with budgeting, planning and forecasting?

The most common example is an organisation where there are multiple departments or business units. Where, for example, an organisation might be involved in disability support, but also disability employment services, or where they’re running multiple types of services out to the community.

In those scenarios, each of those units typically have their own way of generating funding or revenue, and typically often have their own profit and loss statements, and as such there is more and more of these Excel sheets. Each unit needs these Excel sheets to model each of those business units that feeds back into the budgeting and forecasting process, and therefore, those are the ones that have the most problems.

What is the solution for medium sized organisations?

In most organisations, the solution they employ is to continue along with Excel. These organisations have someone internally, usually a finance person or someone that understands these sheets intimately, that is completely tied up annually on the budgeting and forecasting process, and from a reporting standpoint is tied up in that process every month. It’s very manual.

That's a tactic that a lot of these organisations employ, and it does work okay. This person often must do a lot of error checking, must go back and forth a lot between themselves and different units, but ultimately the organisation gets a result that they're happy with, albeit with spending a lot more time and effort.

There are software solutions on the market that specialise in this, and they're known as Corporate Performance Management (CPM) Software Solutions.

There are several different CPM solutions available, such as Cognos, Adaptive Insights and a host of other options that are either built for mid-market organisations or tailored for the not-for-profit sector.

These solutions remove a lot of the complexity around Excel and allow the budgeting and forecasting process to happen in a much more structured way, where the different line managers and finance people are interacting with an application to get that information in. As well as that, these tools often have very advanced business intelligence capabilities, which allows you to do a lot with reporting and consolidating reporting very easily. With these capabilities, a lot of the manual processes that you might have done in Excel of rolling reports up and summarising them at a higher and higher level can be automated as part of the CPM software suites as well.

We have one client that we're working with that has 350 staff and they have several business units in very distinct, separate service lines that range from disability employment services, right through to manufacturing and supply chain.

Previously they had used several Excel sheets, and had a finance person that was responsible for managing that budgeting and forecasting process. Reporting involved both the CFO and the finance person spending a significant portion of their time at the end of the month to prepare all the budgeting and forecasting information and get it ready for C level and board level presentation.

The process that we went through with them was to first understand the requirements of the organisation and each of the different departments, and from there go to market with them to look at Corporate Performance Management solutions.

In that scenario, we used a few different techniques to whittle down the CPM vendors to three, which also involved looking at the Gartner Magic Quadrant, which highlights the market leaders in the CPM space. Ultimately, we worked with them and had the vendors come in to present their solutions to us, create a weighted scorecard which determined functionally which would be best for the organisation, as well as deliver the most value.

One of the most important things for this organisation was that the system could be managed internally without the need for expensive consultants and paid contractors to maintain it.

Finally, we ended up selecting our solution and implementing that, and it has significantly improved not only the budgeting and forecasting process, but also the monthly and quarterly reporting processes, which are virtually all now automated, which is a great result for the organisation.

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