Budget Creation Cycle: How to improve this metric?

We enter the last quarter of 2022 and companies begin to go through the Budget Creation Cycle. Regrettably yes! or not? Well, maybe we exaggerated a bit, but… isn’t it true that it is an extremely exhausting task?

Doesn’t it happen to you that this time of year arrives and the finance team begins to escalate the stress level? That the telephone calls between the internal numbers increase, the taking and bringing papers, the shipments and answers of e-mail and all that?

At Plika we know that the time involved in generating a budget is one of the great pains in the financial areas of companies. Faced with this, implementing an FP&A solution can be a great leap for your organization.

Why do we say this? Well, because a Financial Planning and Analysis software will help you optimize and improve the time of the Budget Creation Cycle. As it does? Making things easier for you in various ways. But let’s not get ahead of ourselves! Let’s see below in detail how an FP&A solution speeds up the creation of a budget and improves the numbers of this metric.

The Context: Why Companies Still Use Excel

According to a study by the accounting firm Weisermazars, 87% of companies in the United States still use Excel in financial management, such as activities related to budgeting. Why are spreadsheets still so widely accepted and used? Well, because they work, they are quickly adaptable and because they are already part of a culture known to any professional.

«The good is the enemy of the best» Voltaire

However, the good is often the enemy of the best. And in finance we see it: the adoption of FP&A software provides a superior experience that does not replace the spreadsheet, but complements and enhances it to obtain better results.

However, the fact that the annual budgets start 3 or 4 months before closing, explains why at a certain stage of a company’s growth these spreadsheets become a snowball that gets bigger and bigger, with more sheets, more formulas. , connections and complications in its future management.

Now, how do we see an FP&A like Plika improve the time of the Budget Creation Cycle? Let’s boil it down a bit to numbers which, after all, is what we’re talking about!

Time spent on repetitive tasks

Recently, the renowned APQC business survey revealed that, on a sample of 130 US executives from companies linked to the finance sector, 62% of these companies fail to improve the quality of staff training or the finished product or service due to Because you spend too much time doing repetitive tasks.

Here an FP&A solution facilitates the automation of these processes brought to the digital world. You can finish with the papers, forms and mails in a short time if you decide and dedicate yourself to it. You can free up your team’s time now spent copying and pasting just by making a resolution.

We invite you to do an introspection: how much time does it take for the team to upload paper documentation to the software? How much in minor administrative tasks such as ordering a table, applying the corresponding color schemes or putting together a presentation that is predetermined and you only have to update data?

Our own studies have shown us that automation through FP&A in finance gives the team between 60% and 80% of the time previously spent on operational tasks. No more no less! Think of it like this: for every 10 hours you spend today on tasks related to the Budget Creation Cycle, you can regain control over 6-8! It’s worth looking into, right?

Time spent on simple administrative tasks

As we said before: an FP&A solution does not compete with a spreadsheet, but complements it. When creating a budget we will use Excel or its similar from another manufacturer: do not despair or throw all your current files into the Trash.

However, there are some procedures where you can encourage yourself to think about replacing the classic software with the benefits of an FP&A. And, perhaps, leave spreadsheets for data storage or archiving as a database. This is a good practice that we recommend.

Recommendation based on what? You may be wondering. Well, in data. Take a look: did you know that editing Forecast in FP&A software is much faster than in a spreadsheet? And what about configuring security levels on a universe of data? You can do it in a few clicks.

Imagine these returns multiplied by the number of simple administrative tasks we have when it comes to budgeting. Now imagine the result that your organization will obtain in the Budget Creation Time metric if they manage to bring the simple and repetitive operation to an FP&A software!

Time spent in the Budget iteration

Budget iteration is inevitable and is part of the process, no doubt. Due to changes in definition, strategy, situation or error by the financial team, the budget must go back and forth between areas and the executive department several times. Stage also known as «challenge» or «round».

Don’t you think that a software solution designed for this can benefit this communication and make it more efficient than a back and forth email with an Excel attached? From our experience with our clients we have seen that it is not only faster: it also substantially improves communication, reduces risks and lowers the number of unforced errors by only using suitable software.

In this way, iterations are reduced and, logically, the budget creation time is improved.

Time spent on records

Lastly, time spent on check-ins is another big bastion where we see an FP&A solution can improve your budgeting metrics. According to the CFDDive portal, the biggest frustration of CFOs is that time is spent when budgeting for tasks that do not add value in terms of records.

For example, budget assumptions are recorded that will not be used later (29% of CFOs said this) or typing or projection errors are made that later require rework. Another scourge is the preparation of the data, its ordering, correction and versioning of the records, where it is estimated that 42% of the total time of budgeting goes.

An FP&A solution reduces this type of task by up to 40%, thanks to its agility to import spreadsheets and manage them from the online website. In addition, it requires less induction, since it generally offers a friendly and intuitive user interface.

Control and audit tasks

Data-by-data visualization of a spreadsheet panel involves a huge risk (we recommend you read our interesting and fun post about #ExcelFails and how this great software can lead us to error by clicking here). But also, a major waste of time.

How fast and easy is it to access spreadsheet change tracking? In an FP&A like Plika, you are 2 clicks away, accessing details about what time, which user, did X action in the collaborative work environment.

And yes, we say loss, without euphemisms. Because if you have the option of using an FP&A solution that guarantees the same result with 60-80% less time, it is clear that your team is spending time on tasks that could be optimized.

Other aspects that you can consider!

According to a statistic from the Association for Financial Professionals, the main contributions of adopting an FP&A solution are to the Budgeting (41%) and Strategic Planning (41%) processes. This survey was conducted on companies that had already adopted a computer system of this type. In the same report, 56.4% of those surveyed responded that FP&A had represented a significant improvement in the performance of the company’s financial team.

In Plika’s own study, we have found that companies that use advanced technology in the annual Budget Creation Cycle save between 60% and 80% of the time allocated. They are shocking numbers!

Finally, we share with you another piece of information that we handle through field studies: FP&A teams that invest less than 10% in technology require an average of 60 days of full-time employees (human effort) (FTE) to complete the processes of collection and management of data and records necessary to make the budget. On the other hand, those who invest more than 10% per year, require only 14 days of FTE to obtain the same results.

Final comments

We have given many numbers today: we know. This is simply because the intention was always to try to truly show the ROI of implementing an FP&A solution when making a quote and how this can optimize the Time to Quote metric in our companies.

Analyze it, share it in your organization, discuss it with your peers or managers. An FP&A solution will empower the financial team of the company, will reduce the Total Cost of the Financial Function and will improve the overall results of the organization when making the budget for 2023.

And remember that you can always contact us with questions or experience a free demo!