On May 11, 2011, NSS held a CEO Workshop concerning Budgeting and Forecasting. The group discussed the different measurement criteria, value drivers and how to lead an ongoing budget process within your business. Flexible budgets, annual budgets and rolling forecasts were compared. Here are two articles you may want to read that are relevant to this topic.
Contact Ben Weller, BD & CFO of NSS at email@example.com or call at 617-449-7728 ext. 710 for a consultation.
- Let It Roll: Why more companies are abandoning budgets in favor of rolling forecasts by Russ Bangham of CFO Magazine, May 2011
- Use a Rolling Forecast to Spot Trends by Harvard Business School Working Knowledge, March 13, 2006
Budgets and Forecasts represent two parts of a business management continuous improvement process. A successful enterprise must first have a clear understanding of its strategic plan. In fact Budgets and Forecasts are the financial GPS tools that carry strategy through to implementation.
How do you communicate and manage the goals for your team?
The workshop posed the following questions to our CEO participants;
- Do you see a budget as a Strategic or a Tactical tool?
- How can your budget reflect your strategy?
- Do you see your budget as more of a tactical tool, i.e. the performance yardstick for annual goals and compensation plans?
- Is the budget made up of strictly financial metrics?
- Where do you capture operational goals and performance measurement metrics?
- Is your budget implementation process a reflection of your company’s culture or is it a process within itself?
- Do you recognize your business and industry drivers within your budget?
- Does your budget have an expiration date, or do you keep it alive through continuous improvement forecasting?
Ben Weller, BD & CFO for Next Stage Solutions compiled the following check list as a hand out:
The measure of how you execute strategy is captured in the topic of Budget. But different areas of your business require different measurement criteria.
Budgets can refer to:
- Marketing Strategies
- Sales Plans
- Operational performance
- Human Resource development
- Capital Investment
- Financing Strategy
- Ownership Return
And can take on many measurement dimensions
- Continuous Improvement goals
- Key Performance indicators
- Strategic Planning Milestones
- Benchmarked Metrics
- Customer Satisfaction
Budget Implementations can take on the personality of the organization
- Size of Company and distribution of authority
- Top Down versus bottom up management style
- Fiscal Micro management vs Strategical Macro management
- Cash Flow is Primary Focus
- Performance vs External Expectations is a Priority
And all methods and uses need to focus on Business Drivers
- Variable Sales and Cost (Marginal Profitability)
- Fixed Costs
- Project Costs (New Product Introduction)
- Occupancy Costs
- Variable Energy Costs
- Average Selling Prices (Competitive Positioning)
- Efficiency (Labor and Machine Operations)
What Profiles of budget design fit with various industries
- Life Science
- Medical Device
- Food Production
- Professional Services
What are the various focuses of forecasting and where do they apply
- Traditional Rolling 12 Month forecast
- Sales Driven Top down vs trend based
- Cash Flow vs P&L
- Analysis vs Plan
- Current State vs Future State (This involves lean accounting and is a whole other topic)
If you are interested in this topic and would like to explore rolling forecasts further for your business, NSS provided a customized one-day workshop.
Contact Ben Weller, BD & CFO of NSS at firstname.lastname@example.org or call at 617-449-7728 ext. 710