Agile Financial Management: Re-visioning the Budget Process

Creating an accurate budget is a little like time travel. You have to be in three places at once – able to see into the past, rooted in this exact moment of time, and able to forecast into the future – all within a constantly changing environment.

Peter Witham, UNIT4 Business Software

To effectively analyze financial data in the past and present in order to forecast the future, you must first make sure your business systems are capturing the right information, structuring the data to support maximum accessibility and flexibility for analysis, and extracting the data out to other systems quickly, easily and consistently.

Toward this end, following are best practices for creating a more accurate and streamlined budget process:

• It’s all about the data. Make sure everyone is working off the same accurate information. To ensure data consistency, implement a single-ledger approach that combines GL, AP and AR in one, and integrate your accounting system with other key systems in your organization. Large, multi-national companies must be able to enable access to information regardless of currency, taxes, regulations, etc.

• Build in agility for change. Change is the only constant, especially in the insurance business, where there are changing regulations, M&As, new product lines, and more. Make sure your accounting operations can not only address all of the current complexities and business needs in the industry, but that they also have the agility to be easily updated to accommodate changes on the fly.

• Focus on the process. Create processes that are visible, repeatable, and auditable. Implement a process control framework that can easily integrate new subsystems, manual processes, and ad-hoc spreadsheets. For example, if you add a new company, you should be able to easily incorporate the new entity, its systems, and employees into your accounting system.

• Use a “one-to-many” model for reporting flexibility. This system maintenance approach streamlines processes by enabling any changes in the data to be automatically picked up by reports and system routines. So if you make a change in one place, it will be populated in other reports.

• Implement a multi-dimensional approach. A multi-dimensional reporting model enables different accounting coding schemes so you can view and measure financial data in different ways. For example, different lines of business can create reports to measure profitability differently, while maintaining a single ledger that’s always in balance. This will give you the flexibility to analyze financial information across multiple dimensions – e.g., multiple currencies, account balances, budgets, forecasts, supplier activity, customer activity, and other business statistics.

• Make it easy to involve others in the budgeting process. Leverage centralized and devolved budgeting to enable budget managers to securely access the budget remotely. Create multiple budgets and “what-if” scenarios to gain greater insight and flexibility in the budgeting process.

• Drill down into the details. Make sure that you are able to dig as deep as you need to go to view profitability, for example, by salesperson, state, product line, etc. This will also help you determine the root cause behind the numbers on your ledger, so you can uncover problem areas and opportunities and better plan and forecast.

To create an accurate budget you need visibility into a single set of data and the ability to see clear across your organization – regardless of geographic locations, currencies, and other barriers. By implementing a flexible accounting structure and financial management best practices, you will gain the visibility to see into the financial past, and present so you can accurately forecast the future.

About the Author: Peter Witham is director and financial services lead of UNIT4 Business Software , the North American subsidiary of UNIT4, a $624 million global business software and services company that creates, provides and supports software for businesses managing change, delivered via the cloud or on-premise.