Planning and budgeting are essential processes for every organisation, but often organisations spend large amounts of time to produce a plan that quickly goes out of date and ends up being an ineffective management tool. We work with clients to make the planning process more agile and able to respond to changing business conditions.
We believe that there is no single method that is right for every organisation so we work with you to build a solution that fits your business circumstances and aligns with the management culture you want to engender.
We will use a combination of a number of different techniques and blend these according to the business improvement you are seeking:
We strongly advocate the use of rolling forecasts rather than fixed annual budgets, These will generally allow a reduction of the level of detail of planning and accommodate mid-year strategic plan adjustments if required. Our approach utilises non-financial performance measures, which are generally output based, to flow into operational plans and budgets which are geared to achieving strategic goals.
Rolling forecasts can be combined with a variety of other planning and budgeting techniques. If the main business imperative is to deliver significant savings Zero-base budgeting is a very effective tool to reduce cost. Expenditures must be rejustified during each budgeting cycle, rather than basing budgets on previous years or periods. This avoids building on the inefficiencies and inaccuracies or previous history. If the business model is to deliver a portfolio of services Activity-based budgeting coupled with Output Costing will help you understand how costs vary with changing demand patterns and give a good way of allocating overheads across the service portfolio understanding of costs are driven by the volumes of those services. Value-based management. can provide a formal and systematic approach for managing the creation of shareholder value over time. All expenditure plans are evaluated as project appraisals and assessed in terms of the shareholder value they will create. This approach helps to link strategy and shareholder value to planning and budgeting. Where the organisation has a portfolio of businesses or operations Profit planning may be appropriate; this profit-wheel method for planning future financial cash flows of profit centers assesses whether an organisation or unit generates sufficient cash, creates economic value, and attracts sufficient financial resources for investment. It ensures consolidation of an organizations short and long term prospects when preparing its financial plans.
Contact us to learn how we might be able to help.