The digital transformation of the age-old budgeting process
As a C-level executive, you are expected to do more with less. Finances are always tightly managed and keeping track of what you need to invest in, i.e budgeting is a crucial function. What makes the effort more complex today is the fact that the budgeting ecosystem is evolving at a great pace. A voluminous amount of data keeps streaming in from so many sources that to analyze, collate, clean, validate, and process it all to help drive budgetary allocations becomes a massive pain-point.
Conventional process of budgeting :
Strategic and comprehensive budgeting is a must to ensure the optimum execution of a business plan. To meet the objectives in the strategic plan of your business, you need a detailed roadmap of the funds you intend to allocate to various tasks mapped to the business plan. In effect, the plan must be backed by proper budgeting.
Traditionally, for most organizations, the budgeting process commences three to four months before the end of the financial year.
The challenge has been the time it takes to gather information from so many sources, the complexity of ensuring that only high-quality data finds its way into the plan, and getting all the relevant people to contribute to the exercise.
How the digital age transformed budgeting:
The arrival of the digital age opened up a plethora of new marketing, collaboration as well as customer interaction opportunities, transforming business. The most profound impact of the digital age on budgeting was – it made the budgeting process more data driven. To an extent, budgeting was dependent on gut feeling of the executives before the arrival of data analytics. They based their decisions on excel sheets. Sophisticated data analytics tools took the budgeting process to a completely new level.
Budgeting backed by objective, fact-based analysis:
The data can be analyzed in multiple ways to give executives a deep insight into various factors related to business processes. Combined with the experience of managers and the companies’ subject matter expertise, data analytics helps more effective budgeting.
Transparent assessment of budgetary vulnerabilities:
Cloud-backed digital tools allow more relevant people to contribute information in real-time. This ensures more representative and valid data, accelerating decision-making, and making it more current.
Thanks to instant access to fact-based data such as industry benchmarks and key performance indicators, executives can assess any budgetary vulnerabilities. This helps in the early detection of troublesome parameters for fixing with appropriate allocations.
Elimination of low-value applications:
The failure of businesses to reduce the size of non-performing items and consolidating redundant applications in their portfolio is a key cause for the wastage of funds. This inaction can be attributed to the lack of reliable data which allows CxOs to compare applications and portfolios objectively. With analytics, objective comparisons become easier and budgeting priorities can be more aligned with areas with higher likely impact.
Deep visibility into processes:
There could be processes and applications that might be eating into budgets, yet they are invisible to the decision-makers.
By deploying cutting-edge data analytics, executives can shine a light on processes that were invisible previously. They can take a more holistic approach to issues and take precise, data-driven decisions. Based on real-time data, they can quickly identify the requirements for budgetary allocations.
Dispose of technical debt:
Powerful data analytics tools can provide a financial review of application quality issues that may cause business disruption. These tools will generally measure technical debt against industry standards and present a clear picture before executives regarding the steps needed to fix the issues, thus boosting the quality of decision-making.
The digital transformation of the age-old budgeting process is not an option any longer. Rather, it has become imperative for companies that want to ensure timely, participative, comprehensive, and effective budgeting.