Pain-Free Annual Budgeting

Greetings, I'm Doug Llewellyn. I'm on business planning and financial planning here at ZDNET. Today over the next few minutes, I'm going to talk to you about the pain-free annual budgeting process. Hopefully, you're all clapping right now because you realize how bad it is to come to the office and think about those six-hour meetings, where you're sitting there and negotiating, struggling to find one set of numbers that you're going to live with for an entire year. It scares me. It scares everybody. But guess what? It doesn't have to be that way. You can take this 'set in stone' budget that you've been dealing with year over year and its entire process with the CFO and the central planning committee and you can throw it into the recycle bin because I'm going to entrust you in new concept today called the 'rolling forecast.'

What does a 'rolling forecast' do? It allows you to actually think about your numbers with today's business needs in mind. In the old way, you got completely strangleholded when you got a delay in a new business concept. So the 'rolling forecast' institutes several key things that I'm going to call the three C's that you'll work on with other budget owners, the CFO and the central planning committee. Communication, we all like it. We're all told we need to be better at it. We all tell our managers they need to be better at it. No one does it enough. Collaboration, what does this mean? It means you actually talk to people and think about the way to improve the business. I can't imagine anybody not wanting to do this. But guess what? There's a lot of processes out there that sort of hint at collaboration and finally these two lead in the control. We all want it. We feel important, I feel important, you feel important when we have control.

So let's give a real-world example of this. So you have run a company that has two key departments: a logistics department and a channel department. Logistics has been run the same way for many years. Channel always changes. They get a lot more money. Logistics starts out the year with a million-dollar annual budget. Channel starts with two million. Well guess what? Logistics may get to delay. Communicate upward to the CFO and everybody else that they found a revolutionary way to improve the company's bottom line through a new process. In the old way, they'd say, "Well, let's think about it next year before I can't afford it now because I need $250,000." In the new way, the two budget owners work together. They work upwards with the CFO and other people on the central planning committee and they think about the fact that Channel doesn't need to use all this money. They can take $250,000. They can transfer to Logistics. Logistics is happier. These guys are still hitting the goals they need to hit and the CFO has just added incremental value to the bottom line of the company.

So how can technology help you do this? Well, everybody has the Excel spreadsheets, but they're not always the most efficient way. Let's look outside and see what's out there from a software perspective. I happened to have found three that maybe helpful for you and your company. Lawson Budget and Planning is one, Hyperion Software, which many of you have probably heard off and the new one I just found, little bit of a corky name, Budget Maestro. Now, I doubt you guys are all going to be there like a maestro conducting the process. But it may be very helpful for you to learn how to throw the old one away, pick up the new one and increase the revenue production of your company.