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Planning, Budgeting and Forecasting Best Practices

Planning, Budgeting and Forecasting Best Practices

How much should you budget for marketing your product line next year? Perhaps the budget should reflect sales figures. How much do you think you can sell? Well, that depends on how much we spend on marketing.  And, so it goes. The planning and budgeting process relies on forecasting of sales, which is itself affected by budgeting and planning. It’s an iterative process, reliant on technology but requiring a lot of basic thinking and good practices to work properly.

Overview of the Planning, Budget and Forecasting Process

We all know intuitively about plans and budgets. In a business, the meaning is a little more specific. In all but the smallest companies, managers are expected to develop plans for upcoming business time periods, such as a quarter or a year. The plan establishes the details of what the manager’s group will do during that period. From there, the manager can develop a budget that matches the plan. All managers’ plans “roll up” to the C-suite, which gets an overview of the entire budget and forecast for the business.

For example, a product manager might plan to launch a new product in the upcoming quarter. The plan includes activities like exhibiting at a trade show, buying Google ads and printing brochures. Each activity comes with an expected cost. Added to this are ongoing costs like staff salaries and facilities overhead. To justify the plan and budget, the product manager forecasts sales revenue for the new product. It will usually take a number of iterations to get the plan, budget and forecast into alignment.

Tools and Data Supporting the Process

You can create a plan and budget on a legal pad with a pen. In some cases, this is absolutely the right place to start—spitballing ideas and informally running numbers. From there, the next stop is usually a spreadsheet, depending on the sophistication of the company’s planning and budgeting software.

Budgeting and forecasting packages like Microsoft Dynamics FRx and Microsoft Forecaster let you use historical business data to refine your plan and budget. For example, you may be able to look up accurate trade show exhibition costs from previous projects. You will see just how much it actually costs your company to attend the show, including travel and so forth. On the revenue side, the tool can give you a sense of much product you can realistically sell.

Planning, Budgeting and Forecasting Best Practices

Over the years, we have worked with many companies on their planning, budgeting and forecasting processes. In so doing, we’ve developed a number of proven best practices for this area of work. They include:

  • Aiming for flexibility and adaptability – Your company might have an annual planning cycle, but your industry may not. In our experience, a long planning cycle can have managers predicting events that may be as much as 18 months in the future. That’s an eternity in some businesses. The best tools and practices are able to adapt to changing assumptions and new data.
  • Including non-financial data in the process – Financial returns on a budget investment are critical, but so are non-financial data points. These might include customer sentiment analysis, brand recognition rates, customer service cases opened and so forth.
  • Budgeting for your company culture – If your business features big personalities with big ideas, then plodding along with a structured budget like a Fortune 500 company is probably going to be a waste of time. If Ms. Or Mr. Bigshot has to approve your budget, invite them into the process early and listen to what they have to say. Get their buy in. Otherwise, you’ll create a wonderful but meaningless budget.

We can help you define and implement an effective planning, budgeting and forecasting process with best practices. Our expertise includes working with FRx, Management Reporter, SQL Server Reporting Services (SSRS), BI360 and Host Analytics. To learn more, visit http://www.brittenford.com/software-solutions/planning-reporting-budgeting/



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