What is budgeting?
Budgeting is the strategic implementation of a company’s strategy or strategic plan. To deliver the financial and operational goals in the strategic plan, an organization needs to interpret its long-range plan into a detailed set of expected revenues and expenses that can be measured to monitor performance. In order to monitor the achievement of the desired business outcomes, these can be improved and adjusted throughout the process.
Budgeting Process
The typical budgeting procedure consists of adapting the year's operating plans to cover funding, lines of business and operations by interpretation of a longer range plan or corporate strategy. This means that the financial objective is communicated from finance to operations in all areas of business within an organization. The targets can be financially and operationally aligned, including revenue and expense budgets, HR costs, marketing expenses, project costs and expenses, capital expenses, and so on.
In order to determine how expenditure should be allocated for the organization in order to achieve its budget targets, the budgetary process calls for analysis and comparison of actual versus expected finance performance.
Effective budgeting and forecasting help you create goal-oriented plans that are consistently updated and analyzed. The elements are as follows:
Detailed manufacturing budgetsExpense budgetsCapital expenditure budgetsDetailed revenue budgetsCash-flow budgetsBudgeting and planning software has evolved widely over the last few years. The FP&A department is now expected to collaborate with lines of business to build a fully integrated enterprise plan that integrates finance, line of business, and operational plans, rather than just maintaining a financial plan, as a result of changes in how businesses plan and budget. Prior to the availability of on-premise programs like SAP Business One, finance and operations created and tracked budgets using spreadsheets.
In the present, the cloud is the actual standard for delivering budgeting and planning software. SAP Business One is the most complete budgeting and planning platform delivered in the cloud. SAP Business One has the breadth to manage any planning requirements with built-in best practices and efficiencies for planning as well as embedded emerging technologies, such as AI and data science.
Budgeting and planning software is equipped to make the process of budgeting and planning as capable as possible for finance and operations. Today, budgeting and planning software delivered in the cloud enables finance and operational budget stakeholders to easily collaborate on one platform to ensure that they are working on a single, connected, enterprise-wide plan and budget.
Today, in order to help budget stakeholders spend less time on low-value tasks and more time managing businesses, budgeting and planning software need to be intelligent, make use of predictive forecasting techniques and have embedded Artificial Intelligence (AI) and data science. When looking at selecting budgeting and planning software for your organization there are major things you should consider:
A budgeting and planning software should not only have the potential for modeling, but it should also contain planning intelligence and purpose-built efficiencies for predictive planning, driver-based budgeting, robust “what-if” scenario modeling, sandboxing, top-down and bottom-up budgeting, and approvals and workflows as best practices that you can start using right away.
Expect purpose-built and supported modules as well. Some examples of these include workforce planning, capital asset planning, project financial planning and long-range planning. These modules should be fully functional, interoperable, and easily integrated with the customer's current planning processes.
For the management of lines of business like human resource management, information technology, supply chain and sales, you should look for an integrated budgeting and planning platform that provides not only financial planning but also operational planning and modelling. This should be developed and maintained by the vendor, not only an add-value available in a marketplace.
The demands of today’s fast-paced, flexible business models require the ability to model financial and operational scenarios easily. The system's ability to take and process large volumes of data that will be used in the free-form modelling is a key factor for its efficiency.
It is important to have a powerful back-end engine to manage the huge amount of data that businesses use for such analytics today. Also, ensure that scalability across large volumes of data and users can be easily managed. Your budgeting and planning solution must be able to live up to the vendors’ promises about ad-hoc modeling.
Reporting can be a catchphrase for doing various things. You might want to do ad-hoc analysis as well as slice and dice your data. In order to update status, you may want to use a standard dashboard. You will possibly still require a standard pack of pixel-perfect reports that can be easily printed.
Many organizations are looking to modernize and facilitate their management reporting by adding collaborative narrative elements when preparing their reporting packages. Ensure that planning systems can do all of these not only as a demo as with imposter planning systems.
All your reporting needs, including dashboards, ad-hoc analysis, pixel-perfect financial statements, complete narrative reports and all of them should be available via browsers, mobile devices and other familiar tools through an integrated EPM solution like SAP Business One. All reporting requirements, from complex budget books with narrative to ad hoc analysis, should be included in the spreadsheet interface used by financial professionals who are well acquainted with and can take advantage of it. This kind of flexibility is crucial because the fast-changing nature of global business requires a lot of ad-hoc analysis and must not ruin data security.
Technological developments that are rapidly changing the way businesses operate include, for example, machine learning technologies. Predictive analytics uses data science to identify correlations, outliers or exceptions that cannot be identified by an individual. It can materially enhance the accuracy of planning, better reduce time spent in planning processes and also minimize time spent on analyzing data.
SAP Business One has embedded efficiencies in the form of SAP Business One HANA Intelligent, which allows finance and operational budgeting and planning stakeholders to focus on taking action on anomalies and outliers and eliminating bias from your forecasts by influencing built-in data science without the need for data scientists. Zyple Software is providing an affordable budgeting and planning software to business or industries.