Organisations spend up to six months a year on their main budgeting processes, according to research by Deloitte. But the effectiveness of these processes is undermined by last-minute changes, which result in reduced stakeholder buy-in.
On the other hand, some savvy organisations (16%) are managing to carry out budgeting within a month.
The level of detail demanded from planning, budgeting and forecasting activities remains consistently high, regardless of company size or industry, Deloitte found. One of the reasons for this is that finance is still the primary owner of these critical business processes in 86% of organisations. In addition, more than 60% of respondents only look at financial outcomes rather than other corporate performance indicators.
Nearly two-fifths (39%) of companies still rely on spread sheets as their primary budgeting and forecasting tool, with just a quarter using rolling forecasts. Over a third (37%) of respondents admitted a failure to align planning, budgeting and forecasting with overall corporate strategy.
Although 61% of respondents recognised the importance of forecasting as a way of compensating for the static nature of budgeting, very few appreciated how forecasting can enhance corporate agility.
Meanwhile, nearly a third of respondents have no formal mechanism for monitoring and managing forecast quality, while less than half of respondents are able to forecast either revenue or costs to within a 5% variance.
Simon Barnes, partner in Deloitte UK's finance transformation team, said: "It is clearly an unacceptable waste of time, effort and resources to spend up to six months preparing a set of numbers that few in the enterprise believe and even fewer use. Businesses need to understand these processes are a key component to how information is generated and processed."
Simon Kerton-Johnson, partner and UK finance leader at Deloitte, added: "Many organisations are undertaking significant finance transformation projects, but often neglect the planning, budgeting and forecasting process.”
Sally Percy is editor of The Treasurer