Upfront: Blasting the Budget

Big changes in budgeting and planning processes are on the horizon for most companies, according to a survey of 778 finance staff, managers and executives conducted by consulting firm Ventana Research Inc., based in Belmont, Calif. More than 70 percent of respondents' companies intend to make major changes to their budgeting and planning systems and processes within the next year. Nearly one-quarter of respondents described their budget's accuracy as below average.

Budgeting and planning, together with reviews of corporate results, eat up more than one-fifth of CFOs' time and nearly 30 percent of finance managers', on average. More than half of companies with 1,000 or more employees indicated they spend too much time on these processes. But the real motivation for changing current performance management systems is to make them more effective, according to Robert D. Kugel, vice president and research director, financial performance management, for Ventana. "CFOs want to move the budgeting processes beyond a reporting mechanism to a real management tool that improves business effectiveness," he says.

Sixty-four percent of surveyed companies use spreadsheets for budgeting. This reliance on spreadsheet technology is the root cause of both the ineffectiveness and the inefficiencies of current budgeting and planning methods, according to Kugel. "Twenty years ago spreadsheets revolutionized this corporate function," he says. "Today they are as obsolete as the adding machine for this purpose. They are technologically unsuited for enterprisewide collaborative tasks."

Companies that have implemented dedicated budgeting and planning software achieve greater accuracy and consistency and react faster to deviations from their plan, the study showed.