Financial executives within organizations face the continual challenge of optimizing working capital (a set, and often decreasing amount year over year) and planning for the future (with an ever-increasing demand for more services). The struggle that accompanies the financial budgeting process comes not only from various departments, but from all levels throughout the organization. Whether it is for sales, marketing, R&D, manufacturing, IT, project or capital expenditures, the demand for budgets must be effectively prioritized by financial executives and allocated carefully to ensure maximum business results that benefit the needs of multiple teams.
These pressures ultimately bring into question the feasibility of plans, budgets, and forecasts. To meet these needs, organizations must work to improve the efficiency and shorten the planning cycle. Yet, even today, many organizations continue to struggle, which often comes down to three issues that must be resolved:
Time involved in the process
The length of time it takes to complete the budgeting and forecasting process is too long. A drawn out budgeting process reduces employee productivity because plans, budgets, and forecasts keep employees from executing other important tasks. This reduction in productivity exacerbates managers, which makes them unwilling to devote the time needed to produce an accurate projection.
I continue to hear about organizations that have implemented sophisticated best-of-breed tools. Tools with unfamiliar interfaces require additional training, or even worse, frustrate users to the point that they revert back to the one tool everyone knows – Microsoft Excel. Microsoft Excel continues to be the standard budgeting tool, yet as a standalone tool it does not address larger process orchestration requirements (e.g., workflow technology), so an organization can end up with multiple versions of the truth.
Reacting to unforeseen events
Organizations are facing an increasing risk of not being able to react to unforeseen events. For example, there are employees who are privy to data and information (actual expenditures, past budgets, human resources, and fixed assets) that managers may not be aware of. And there are complex external issues (fiscal cliff or shifts in the political landscape) that managers must also take into consideration.
Visibility into these factors, while fostering thorough communication throughout the organization, is essential to both the accuracy of the budget and the ability of the organization to improve efficiency. This ensures that all unforeseen events are considered, and employees know exactly what they need to do to produce plans that are actionable. More importantly, this visibility gives the organization the ability to adjust budgets accordingly.
Alignment within the organization:
The Aberdeen Analyst Insight report “Financial Planning, Budgeting, and Forecasting for the SME,” finds that “(i)mproving the alignment of planning and budgeting with corporate goals is the second leading pressure driving improvement (31%).”
Successful alignment works both ways. The plans must be tailored and adjusted to meet the organization’s goals and, at the same time, these goals need to be realistic. Everyone needs to buy-in and agree not only upon the process but also the resulting budget.
Graphic: Budget Planning Hierarchy
With the release of Microsoft Dynamics AX 2012 R2 we address these issues in the budgeting process by combining the power of Workflow and Organization models in Microsoft Dynamics AX 2012 with the power of Microsoft Excel. We have a quick video of how a Dynamic Budgeting Professional addresses these issues on our website.
In this release organizations can utilize Microsoft Excel templates (thus minimizing mistakes) and a central data store for one version of the truth. In addition, you can do “what if” scenarios, which enables you to change analysis to adjust to those unforeseen events and implement changes quickly. Organizations can design structured workflows to create greater alignment so that the process can be less intense and resource demanding. For further justification of budget requests, Microsoft Word documents can be attached directly to the budget to help explain requests.
Furthermore, with the release of budget planning and control in this release you can:
- Associate budget planning processes with budget cycles, ledgers, and organization hierarchies.
- Analyze and update budget plans by using multiple scenarios, and then automatically route the budget plans together with worksheets, justifications, and attachments for reviews and approvals utilizing the workflow capabilities.
Graphic: Budget Planning Workflow to design and assign specific actions
- Consolidate multiple budget plans at one level of the organization into a single parent budget plan at a higher level in the organization. You can also develop a single budget plan at a higher level in the organization and allocate the budget to lower levels of the organization.
Whether your budget process involves Microsoft Excel or a best-of-breed tool, I hope this post shows how Microsoft Dynamics AX 2012 R2 can help you and your organization reduce the time spent in the budgeting process, while allowing you to adjust for unforeseen changes and greater alignment across your organization. Visit the Public Sector section of the Microsoft Dynamics website to learn more.
Todd Bergeson – Sr. Product Marketing Manager – Microsoft Dynamics ERP