Financial planning and analysis is an important business process that can help gain insight to a company’s ﬁnancial stability. The importance of a streamlined budgeting process can save a company tremendous amounts of time. Many companies spend the majority of their time gathering data and transferring it from spreadsheet to spreadsheet and template to template. They end up losing time which should be spent analyzing the data, understanding what the data means, and producing useful ﬁnancial reports to drive a company’s management decision-making process.
Everyone knows that towards the end of each year, a company will go through a budgeting process. The budgeting process can be a complex, daunting, and time consuming process; however, it serves a purpose. A budget is important because it:
- Sets target on proﬁtability
- Communicates priorities
- Controls spending
A budget is a blueprint for a company’s ﬁnancial well-being, which sets goals and evaluates a company’s ﬁnancial health. It is a ﬁnancial foundation to measure progress and identify new opportunities. It allows companies to plan for expenditures and avoid surprises that may put a company out of business.
In order to make the budget process eﬃcient and eﬀective, the company needs to focus on streamlining the process to align with the business area’s needs. For example, forcing a sales team to budget based on headcount, just like the number of accountants needed to process monthly ﬁnancial close, isn’t operationally eﬀective. A sales team should be budgeting based on the projected sales, which drives the number of sales representatives needed to meet the sales quota for the year. An ineﬃcient process requires a budget analyst to do more work and combine numerous spreadsheets to ﬁt that budget process. With an eﬃcient process, a budget analyst can use the time to analyze the data, understand the data, and provide guidance to management for a decision.
After taking the time to comprehend the data, spending the remaining time creating useful reports for management is important. Painting a picture to tell a story guides management in the proper direction for making decisions based on the company’s ﬁnancial well-being. The ﬁnancial reports need to be clear, concise, and transparent. Accurate ﬁnancial reports are imperative because they allow a company to gauge its proﬁtability and control expenses. They represent a company’s ﬁnancial position and performance and can identify any risk to internal and external stakeholders.
Financial reports are a powerful communication tool to provide stakeholders with adequate information to guide their decision making process.
With a streamlined budget process and the right tools to analyze and report on data, a company can begin to see the adequate beneﬁts and cost eﬃciency of having a resourceful ﬁnancial planning and analysis business process.