Agile budgeting best practices
Four key practices can help organizations adopt agile budgeting processes and overcome typical challenges.
Realigning the organizational culture: Better leadership and management, starting at the board level, can help build a flexible, and agile budgeting approach. Many can relate to the situation of a large-scale organization implementing a program that is designed to alter the way its teams look ahead and forecast. Companies urge their budgeting teams to develop six-month forecasts in just one week by planning ahead in shorter cycles using an agile mindset of controlled experimentation and innovation. The forecasts are then consolidated in the second week and presented to the executive team in the third week. Such disruptive practices cannot flourish without the support of top leadership.
Begin with the end in mind: Understand the key drivers of success for the organization and maintain budgeting rigor around these drivers. Organizations generally begin building KPI dashboards based on the availability of data or current demand. These short-term agendas often fail to achieve a significant change in how companies operate. Focusing on a limited set of key value drivers, on the other hand, can help achieve better budgeting outcomes.
Adopt a short-term mindset: Shooting for a full-year budget with more than 90% accuracy may not be the ideal way to approach budgeting. Instead, it helps to focus on flexible, iterative planning to increase accuracy. Shorter iterations and adjustments will increasingly help predict short-term events with more frequent forecasts.
Focus on capability and knowledge building: For modern organizations, the ability to predict and rapidly respond without disrupting business as usual is a key competitive differentiator. It is therefore best to focus on building an optimized finance and budgeting process as a core capability, rather than evaluating the success or failure of each iteration.