The Importance of Budgeting & Forecasting
A detailed and realistic budget is one of the most important tools for guiding a business and providing the information necessary to operate within the business’ means, handle upcoming challenges, and ultimately turn a profit.
Challenges
Whilst a high level budget or reforecast may be easily developed and maintained in Excel, this may be inadequate for many businesses.
- A business may be running multiple stores, engage with thousands of customers across multiple channels and sell hundreds if not thousands of different products and their associated variants.
- A business may also like to undertake detailed analysis of actual vs. budget vs. reforecast at these more detailed levels of granularity than cannot be easily achieve in an Excel spreadsheet?
- Many organisations employ multiple sales representatives across various regions, channels and product ranges that would like to set budgets and reforecasts for each representative’s area of responsibility.
- Whilst management may set an initial budget/reforecast using specific parameters (top down), they may like to invite their sales representatives responsible for delivering on a segment of the proposed budget/forecast to finesse the outcomes based on their innate knowledge of their territory (bottom – up).
- After setting an initial budget, a business may want to undertake multiple revision or reforecasts as the year progresses to take into account changes in customer buying habits, the occurrence of a pandemic or the inability to source or produce particular products.
- Whilst most companies budget and reforecast sales dollars, many seldom break their budget/reforecast into price and volume. Breaking a budget/reforecast down into price and volume outcomes provides significant insights unachievable by simply looking at sales dollars.
- A business want to compare actual results against a budget or reforecast at this detailed level to identify non-performing products or customers that they should perhaps be devoting less time to.
- The fact that there are many variables that impact the achievement of planned business outcomes causes the majority of budgets and forecasts to be outdated well and truly prior to their expected outcome date.
Solutions
I&A offer a range of solutions that enable businesses large and small to quickly and effectively undertake a level of budgeting and re-forecasting where;
- Actual results can be seamlessly combined with multiple scenarios of a budget or forecast
- Analysis of actual vs budget/reforecast performance can occur at detailed customer/product combination, by territory or store across time and
- The budgeting/reforecasting process can be undertaken Top / Down from a strategic perspective and then integrated with a Bottom / Up process where parties responsible for delivering results can contribute and effectively take ownership for the budget/reforecast applicable to their area of responsibility.
This type of capability will provide your business opportunities to increase revenue and reduce costs.
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