The budgeting process is a pain!
Richard, the CEO of “Get Fitted” is dreading this years budgeting process. Get Fitted a large regional player in East Africa in the car services industry has just acquired an upcoming competitor “Moto Fiti”. Charles was the CFO of Moto Fiti.
Richard, was curious at how Charles ran a very efficient finance department. Charles had managed to bring the various reporting processes within Moto Fiti to a high level of efficiency.
Normally in Richard’s company budgeting season was difficult and it lasted a month. Clara, the CFO, always had to get the team “locked in” during this period with office “sleepovers” being very regular at this time. Richard was foreseeing a messy budgeting process in this new entity of the merged companies.
With Charles having joined the new company as the Head of Reporting, to work with Clara in the Finance department, Richard felt this would be a relief.
Key pain points in budgeting.
Budgeting at Get Fitted was done at a Profit Center level and there were 25 profit centers each with a manager.
The following are some of the issues that Richard had to grapple with:
- Historic data for each Profit Center was extracted from the ERP for the managers to include in their budgeting process. The format of these historic data extracts was neither friendly nor easily usable for the budgeting process.
- The now dated ERP system for Get Fitted had undergone many patches on structure to cover new developments in the business. This made the historic data extracts even more challenging to use.
- Although each manager was given a predefined Excel template for the budgeting process, they would make various adjustments on the structure of the budget template. Some even went ahead to have their own separate budgeting files which they linked to the budget template.
- The nightmare would start when the CFO got to the consolidation phase. The process of consolidation would be laborious, lengthy and prone to error. This complication was caused by the various tweaks and links introduced by managers in their budget files.
- Adjustments that would be proposed by the CEO or Board would introduce further chaos to this process. This would further stretch the timelines of completing the exercise.
- And finally to have the budget numbers loaded onto the ERP would portend another chaotic process. This was because the budget numbers needed to be mapped properly with the ERP structure.
Key steps in making your budgeting smooth
Charles laid it out to Richard what he would do to bring order and minimize the budgeting costs.
- He would build, using Excel, a Template to capture all the data needed for budgeting. This would include creating a framework on how any new information that needs to be captured would be incorporated.The Template would have a user friendly design with a navigation flow that makes it simple to use. The user will only have access to inputting budget data in specific input point while the rest of the template would be locked from user interference.
- Charles would then build a central database that would be used to capture all budget data. He would ensure that the database incorporates all data transformation processes for not only receiving the budget data from the Excel templates, but also enable transformation of the budget data into the ERP data format.
- He would then automate the processes of transferring the historical data from the ERP into the central database and from the central database onto the Profit Centre Templates.
- The various managers would then incorporate their budget proposals into the standardized Template. The Profit Center templates would then be consolidated into the central Database. From this database, the CFO can “slice and dice” into departments and divisions and get an accurate picture of the company.
Richard was surprised how simple this sounded coming from Charles. “How about forecasts?” Richard liked forecasts that extend beyond two or more years for strategic planning. He was never able to get them on a year-on-year basis.
“What parameters do you want the forecast based on?” Charles asked. Richard smiled.