A cornerstone of financial planning and budgeting, the financial year, has arguably come to the end of its lifespan. Today, we’re hearing from CFOs that even quarterly budget cycles are not frequent enough to course correct in the face of rapid, unexpected change.
Today, forward-thinking CFOs have adopted a far more rapid budget cadence—sometimes as short as four weeks—supported by weekly review sessions. In addition, they are revising budgets overnight after receiving feedback from leadership and the board, and presenting new figures based on updated assumptions the very next day, massively speeding up decision-making time.
As you might imagine, these CFOs are not supporting this rapid-fire budget cadence with the same financial processes they have always used. They are certainly not doing the soul-destroying spreadsheet shuffle, eventually coaxing numbers out of non-financial managers. Attempting to do this would be a mission impossible: they’d need to start working on subsequent budgets before finalising previous ones, because the traditional way of doing things simply takes too long.
Instead, by rethinking and restructuring their budgeting and scenario planning approach, and supporting this with new processes, procedures and cloud-based technology that is friendly to non-financial managers, CFOs are able to turn on the proverbial dime. They can achieve up-to-date, standardised figures that can easily be rolled up into a single source of truth and be presented to the board at short notice. And then, when assumptions change, strategic decisions are taken, or the world throws another curveball at us, CFOs and their teams can rework their budgets overnight to present this new reality.
Additionally, a very welcome consequence of this updated approach is the increased transparency and communication with the rest of the organisation that is built into this way of working. In times of rapid change and upheaval, maintaining clear, two-way lines of communication with the organisation is critical. Management need to reassure their people, even if what they are communicating is “we don’t know yet but are working on finding out”, “we’re not sure but this is what we’re thinking about” or “these are what we think is important, what do you think?” Equally important, leadership needs to tap into the insights and observations of their people at the coalface, which will allow them to make better decisions, and spot opportunities fast.
With change the only certainty in life and business, it is vital to change-proof your organisation as far as possible. And for accountants, that means bidding farewell to the traditional financial year cycle and old ways of doing things. Instead, they need to make their mission possible with a more agile, fit-for-purpose ways of working underpinned by the tools and processes needed to achieve this.
Leaning into change
Scottish poet Robert Burns wrote: “The best-laid schemes of mice and men go often awry.” Never has this been more true than today. We’ve experienced a year of rapid, dramatic, sometimes illogical and erratic change that has left all of us reeling. Plans, predictions and assumptions we made at the start of 2020 read like fairy tales today. We have little choice but to lean into the uncertainty rather than resist it, and, find the opportunities that do exist to give our customers what they need today, not what they needed last year or even last month.
As published AccountancySA - March 2021