# How financial planning starts with a new approach to budgeting and forecasting
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-03-22
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Agile Solutions for Uncertain Times: CFO's Key Focus
Meta Description: Discover how finance leaders can navigate uncertainty with agile, transparent digital planning tools in 2022. Enhance decision-making and drive business success.
URL: https://financedigest.com/how-financial-planning-starts-with-a-new-approach-to-budgeting-and-forecastinghtml

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_By_ **_Mark Bodger,_** _Director at_ [_ICit Business Intelligence_](https://icitbi.com/)

We live in extremely volatile times. But unpredictability has traditionally been the enemy of effective [financial planning](https://www.financedigest.com/cfos-need-a-focus-on-forex-in-financial-planning-tools-accountagility-reveals.html "CFOs need a focus on forex in financial planning tools, Accountagility reveals"). Over the past two years, legacy budgeting and forecasting processes have been cruelly exposed as incapable of dealing with this flux. So, what’s the solution? When the only certainty is more uncertainty, [finance leaders](https://www.financedigest.com/how-finance-leaders-can-turn-the-inflation-challenge-into-opportunity.html "How finance leaders can turn the inflation challenge into opportunity") need a more agile and transparent approach. In fact, a September 2021 [Gartner study revealed](https://www.gartner.com/en/newsroom/press-releases/2021-11-16-gartner-cfo-survey-shows-improving-the-flexibility-of-budgeting-and-forecasting-will-be-the-top-focus-area-in-2022) that improving the flexibility of budgeting and forecasting will be the top area of focus for three-quarters (72%) of CFOs this coming year.

To get there, [finance leaders must focus on data-driven automated](https://www.financedigest.com/why-do-modern-finance-functions-strive-for-automation.html "WHY DO MODERN FINANCE FUNCTIONS STRIVE FOR AUTOMATION?") solutions to support scorecarding, rolling forecasting and intelligent, adaptive company-wide planning.

**Why digital and why now?**

Digital planning tools like these will be essential to [CFOs as they try to manage risk](https://www.financedigest.com/managing-corporate-currency-risk-the-cfos-balancing-act.html "Managing Corporate Currency Risk: The CFO’s Balancing Act") and adapt to rapidly changing circumstances in 2022. With macroeconomic [conditions on a knife-edge thanks to the latest COVID-19](https://www.financedigest.com/condition-monitoring-service-market-buoyant-with-flourishing-power-generation-industry-adoption-exhibits-a-notable-decline-amid-covid-19-pandemic-fmi.html "Condition Monitoring Service Market Buoyant with Flourishing Power Generation Industry; Adoption Exhibits a Notable Decline Amid COVID-19 Pandemic: FMI") variant, the stakes couldn’t be higher. By leveraging intelligent planning tools, [finance leaders](https://www.financedigest.com/g7-finance-leaders-pledge-financial-stability-supply-chain-diversity.html "G7 finance leaders pledge financial stability, supply chain diversity") are able to check to see if assumptions made during the pandemic were accurate or not, by seeing how initiatives impacted performance. This [insight can in turn help to stress-test future](https://www.financedigest.com/heightened-interest-in-global-cuisines-to-brighten-the-expansion-prospects-of-herbs-and-spices-manufacturers-industry-predicted-to-rise-at-3-6-cagr-future-market-insights-inc.html "Heightened Interest in Global Cuisines to Brighten the Expansion Prospects of Herbs and Spices Manufacturers: Industry Predicted to Rise at 3.6% CAGR | Future Market Insights Inc. ") plans.

It’s not something that can be done with legacy, static planning and [budgeting approaches built around spreadsheets and informed only by backward-looking business](https://www.financedigest.com/how-to-budget-for-legal-fees-in-your-business.html "How to Budget for Legal Fees in Your Business") reviews. There’s nothing intrinsically wrong with spreadsheets. But when they’re used as quasi-databases, well beyond their intended purpose, [finance teams can quickly run](https://www.financedigest.com/scottish-finance-minister-kate-forbes-to-run-for-countrys-leadership.html "Scottish finance minister Kate Forbes to run for country’s leadership") into trouble. Information often contains input errors and it’s difficult for distributed teams to work collaboratively on spreadsheets—not a great fit for the new [era](https://www.financedigest.com/shoring-up-cyber-defences-in-the-remote-working-era.html "Shoring up cyber defences in the remote working era") of hybrid working.

Why make [things harder than they need](https://www.financedigest.com/4-things-you-need-to-know-about-mortgages.html "4 Things you Need to Know About Mortgages") to be for team members? In an era where talent is hard to come by and many [workers are reconsidering their current](https://www.financedigest.com/more-than-half-of-workers-are-open-to-leaving-their-current-employers.html "MORE THAN HALF OF WORKERS ARE OPEN TO LEAVING THEIR CURRENT EMPLOYERS") career path, the tools you provide must at the very least be intuitive and enhance rather than restrict productivity.

**Analyse your [way to business](https://www.financedigest.com/6-ways-to-spring-clean-your-business-finances.html "6 ways to Spring clean your business finances") success**

Consequently, what should you look for in a [digital planning and forecasting platform](https://www.financedigest.com/de-surinaamsche-bank-expands-relationship-with-fiserv-to-upgrade-core-banking-platform-and-add-new-digital-banking-capabilities.html "De Surinaamsche Bank Expands Relationship with Fiserv to Upgrade Core Banking Platform and Add New Digital Banking Capabilities")? It must be able to support driver-based modelling—that is, the creation of plans and budgets based on the organisation’s [key business and value](https://www.financedigest.com/fluid-coolers-market-by-covid-19-impact-analysis-volume-and-value-revenue-business-opportunity-future-projections-and-key-trends.html "Fluid Coolers Market By Covid-19 Impact Analysis – Volume And Value, Revenue, Business Opportunity, Future Projections, And Key Trends") drivers. For example, rather than having to fill in account line details for a department, a driver-based system might ask for [data on employee numbers](https://www.financedigest.com/why-finance-teams-need-to-go-beyond-numbers-to-an-active-relationship-with-data.html "Why finance teams need to go beyond numbers to an active relationship with data ") for different salary grades. It would use this input to calculate the detailed salary [account lines](https://www.financedigest.com/theres-a-fine-line-between-relinquishing-control-and-accountability-financial-institutions-must-balance-both-to-successfully-cloudify-operations-and-meet-customer-expectations.html "There’s a fine line between relinquishing control and accountability. Financial institutions must balance both to successfully cloudify operations and meet customer expectations") by month using standard rates for salary, overtime, and so on.

Automation does all the heavy lifting here. Teams quickly and easily input driver figures into the budgeting process and the model does the [hard work](https://www.financedigest.com/uk-pm-sunaks-office-says-the-hard-work-begins-now35794.html "UK PM Sunak’s office says ‘the hard work begins now’"), calculating the financial implications. This kind of [efficiency will also help to democratise the budgeting process across](https://www.financedigest.com/demand-for-energy-efficient-and-advanced-fairway-mowers-to-be-witnessed-across-europe.html "Demand for Energy-efficient and Advanced Fairway Mowers to Be Witnessed across Europe") the organisation, to other departments. Teams can use it to compare and contrast multiple scenarios with relative ease, enhancing decision making.

In fact, it’s essential that any tool you choose runs across the enterprise. Again, this is much harder to achieve using spreadsheets as it inevitably leads to multiple sources of the truth. The direction of travel should instead be towards a [platform where every stakeholder can input data](https://www.financedigest.com/mercedes-benz-and-microsoft-collaborate-on-supply-chain-data-platform.html "Mercedes-Benz and Microsoft collaborate on supply chain data platform"), understand who added what and when, and then benefit from meaningful insight generated from integrated information sources. By combining operational [forecasting with financial](https://www.financedigest.com/financial-forecast-for-2023-recessionary-fog-looming.html "Financial Forecast for 2023: Recessionary fog looming") budgeting, everyone can work with the same information—from Marketing to HR to IT.

**Scorecards and forecasts**

Integrated solutions also [support action-oriented scorecards across the business](https://www.financedigest.com/how-banks-will-evolve-to-support-small-business-owners.html "How banks will evolve to support small business owners"), to help analyse and communicate how the organisation is performing holistically, rather than from a pure financial perspective. Scorecards are preferable to dashboards as a way of ensuring everyone is [working to an agreed set of corporate objectives that go beyond the financially](https://www.financedigest.com/turning-a-blind-eye-wont-work-for-financial-firms-as-the-fca-tightens-its-grip.html "TURNING A BLIND EYE WON’T WORK FOR FINANCIAL FIRMS AS THE FCA TIGHTENS ITS GRIP") based measures of KPIs.

Once operational and [financial performance management has been successfully](https://www.financedigest.com/how-financial-services-companies-can-successfully-utilise-low-code-and-no-code-technologies.html "How financial services companies can successfully utilise low-code and no-code technologies") integrated, it’s easier to deploy rolling forecasting. This is increasingly essential for a [modern business](https://www.financedigest.com/does-the-cloud-benefit-modern-business.html "Does the Cloud Benefit Modern Business?"), especially in an age when uncertainty is everywhere. It [allows teams](https://www.financedigest.com/allowing-yourself-time-to-grow-as-a-leader-consciously-will-enable-you-to-support-your-team-authentically.html "Allowing yourself time to grow as a leader, consciously, will enable you to support your team authentically") to input current figures regularly to a centralised system, to maintain 12 or 18-month forecasts with targets that will always retain their relevance. The business landscape moves simply too fast for organisations to be measuring performance against budgets that may have been prepared [months earlier, and only look a couple of months ahead](https://www.financedigest.com/dutch-governor-knot-signals-ecb-will-keep-raising-rates-in-months-ahead-ft.html "Dutch governor Knot signals ECB will keep raising rates in months ahead- FT").

**Plan better, succeed faster**

The bottom line is that [powerful analytics](https://www.financedigest.com/4-ways-high-performance-analytics-powers-financial-services.html "4 ways high-performance analytics powers financial services") combined with accurate, up-to-date financial and operational data should be table stakes for today’s CFOs. The resulting insight will help align resources with opportunities and help articulate where, when and how growth can be realised. As we enter 2022, nothing less will do.


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