Clients and results

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We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with Planergy.

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Cristian Maradiaga

King Ocean

Download a free copy of "Preparing Your AP Department For The Future", to learn:

  • How to transition from paper and excel to eInvoicing.
  • How AP can improve relationships with your key suppliers.
  • How to capture early payment discounts and avoid late payment penalties.
  • How better management in AP can give you better flexibility for cash flow management.

What's Planergy?

Modern Spend Management and Accounts Payable software.

Helping organizations spend smarter and more efficiently by automating purchasing and invoice processing.

Budget Reporting and Forecasting Best Practices

Budget Reporting and Forecasting Best Practices

Building and maintaining competitive strength in today’s crowded and fast-paced economy requires more than just clever marketing and quality goods and services. Companies who want to pull ahead of the pack must optimize their internal processes in order to eliminate waste, capture savings opportunities, and build value.

One area of special importance for such businesses is budget reporting and forecasting. Finding effective methods for streamlining your budgeting, financial reporting processes and forecasting can swiftly provide concrete results, helping business owners manage cash flow more effectively, develop more strategic decision-making, and develop accurate, intelligence-based financial planning initiatives that can be executed sooner rather than later.

Optimized Budget Reporting and Forecasting Are More Important Than Ever

For many businesses operating in the age of Big Data, budget reporting is a “secret weapon” of sorts. When they’re prepared accurately, completely, and quickly enough to be strategically useful, budget reports can provide invaluable insights that can help companies better control their spend, identify problem areas, and, of course, reduce budget variance by providing a direct comparison of budgeted amounts versus actual spend for a given accounting period (e.g., the current year, a specific quarter, or the fiscal year).

Financial budgets also drive accountability by requiring budget holders to monitor and justify actual spend as compared to budgeted figures.

Forecasts are another weapon in the arsenal, providing a look at the future rather than harvesting insights from the past but still relying on those insights for maximum utility. Accurate forecasts of what a company will spend in a given period provide teams with the data they need to create operating budgets, project budgets, etc.

Having an accurate and complete spending plan in place for the four to six quarters ahead is a powerful tool in maximizing financial performance while still ensuring budget compliance.

Despite their apparent usefulness, however, both budget reporting and forecasting are sore spots for chief financial officers (CFOs) across industries as the world continues to grapple with pandemic fallout. COVID-19 wreaked havoc on supply chains, consumer behaviors, operations, and financial planning for businesses across the globe, effectively flipping budgets set in the previous year on their head and making financial management more a matter of triage than strategy.

After spending 2020 and the early part of 2021 developing strategies to accommodate the new normal, CFOs are keen to take corrective action in their financial reporting and planning. Research conducted by McKinsey and Company found 43% of CFOS surveyed cited the need to optimize their budgeting processes and financial reports for speed and efficiency, with a hefty 65% planning to develop and deploy more accurate rolling forecasts in 2021 and beyond.

In addition to setting new policies and procedures, be ready to provide information and training needed to help team members use your software tools correctly, adhere to spend protocols effectively, and practice awareness of organizational goals when building budgets and spending company resources.

Best Practices for Creating Optimal Budget Reports and Forecasts

By following a few basic best practices, small business owners, CFOs, and the finance teams they lead can streamline and strengthen their budget reporting and forecasting.

1. Invest in the Software Tools You Need to Succeed

From budget analysis reports to rolling forecasts to your income statement and balance sheet, you need complete, clean, and accurate data to make smart decisions and build strategically useful budgets.

Consequently, implementing a comprehensive data management and process optimization solution like Planergy can give companies the firm foundation they need to build successful budgets, forecasts, and other financial statements and take full advantage of the insights they provide.

A cloud-based, centralized procure-to-pay system provides:

  • Complete data management. By integrating fully with the existing software environment and creating a single shared data source, a purpose-built P2P solution:
    • Provides full data transparency for the greatest accuracy, efficiency, and speed in analyzing spend data or generating reports and forecasts.
    • Eliminates data silos.
    • Standardizes data exchange (including support for report templates).
    • Greatly improves communication and collaboration between stakeholders.
  • Greater process efficiency. Robotic process automation and analytics, powered by artificial intelligence (and, more specifically, machine learning) make it simple to automate and streamline common workflows. Human error and inefficiencies are eliminated, while your staff is freed from tedious low-value tasks to apply their time and talents to more strategic endeavors.
    Implementing guided buying and providing full vendor integration further enhances data transparency while improving its quality, and helps combat time-wasting, costly problems such as rogue spend and invoice fraud.
    In addition, greater speed and efficiency help finance teams produce budgets and financial statements more quickly. Senior management has more time to act to capture opportunities to reduce costs, build value, or make strategic investments. Plus, companies can quickly monitor and adjust budget data in real time to reflect changing market conditions, address potential disruptions, etc.

2. Chart a Course from Where You Are, Not Where You’d Like to Be

Before you can take full control over your budgeting and forecasting processes, you need to know where you stand currently. A detailed spend analysis will tell you where actual results of spend activity rest as compared to budgeted amounts for each budget so you can determine the current variance, if any.

Identifying variances is the first step to correcting them effectively. This first step, and all those that follow, will be much simpler if you’ve invested in a quality P2P solution, as you’ll have the spend management and analysis tools needed to delve deep and examine budgets line item by line item as needed.

Once you’ve identified the variances in your budgets, be sure to prioritize a collaborative, communicative approach to solving them, whether they appear in operating expenses, raw materials, or office supplies.

Accountability is important, but ultimately you want budget holders and other stakeholders to understand the importance of budget compliance, how it supports organizational goals, and the best ways they can meet their own obligations for compliance while still having access to the resources they need to get the job done. 

3. Understand Your Business Drivers

Your spend data holds the key to identifying the activities and processes that drive operational and financial performance for your company. Following a driver-based budgeting model can help companies build more targeted and flexible budgets that directly support specific goals, e.g. improving conversion rates on the company’s online store or improving invoice processing cycle times to capture more discounts and reduce costs.

Again, having access to powerful analysis and automation tools will prove invaluable. Forecasting the impact of potential spending decisions is much faster, and therefore more strategically useful, than with manual processes that rely on paper documents or last-gen tech like Excel spreadsheets. So, too is the analysis of past spend data, which can provide additional performance-related insights related to factors such as seasonality and help inform the creation of “what-if” scenarios such as major supply chain disruptions, etc.

4. Standardize, Formalize, and Optimize

Improving the functionality, efficiency, and accuracy of your budgeting and forecasting requires an overhaul of some core processes.

  • Create and distribute an official spending policy, with full details on spend amounts, contract compliance, guided buying, spend-level authorizations, etc.
  • Standardize all budgeting and forecasting processes as dictated by spend policy.
  • Use spend management tools to track spend in real time so your team can generate budget reports and forecasts that reflect current and upcoming conditions and needs accurately.
  • Ensure finance collaborates with budget owners when building budgets to ensure all their concerns and needs are met and company goals are supported while keeping waste, shortages, and surpluses to a minimum.

Company culture will definitely play a part, especially for organizations that haven’t taken a rigorous and agile approach to spend management. In addition to setting new policies and procedures, be ready to provide information and training needed to help team members use your software tools correctly, adhere to spend protocols effectively, and practice awareness of organizational goals when building budgets and spending company resources.

It’s Time to Streamline Your Budget Reporting and Forecasting

Sticking to a budget isn’t always fun, but it can be very rewarding for businesses who know how to leverage their budgets and forecasts for growth, innovation, and greater competitive strength. Invest in digital data management tools, dive deep with your spend analysis and spend management, and take corrective action where needed. You’ll have the power you need to monitor, tweak, and optimize your budgets and forecasts for optimal performance, maximize budget compliance while maintaining the flexibility you need for effective cash flow management and growth, and build value for your organization by getting the best possible return on your investments—one line item at a time.

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our email newsletter and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

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