Success in today’s rapidly shifting economy depends on a lot of external and internal factors. When you measure those factors — also known as drivers — it gives you greater insight into how they affect your organization, leading to more efficient analysis, budgeting and reporting.In this blog, we show you how to make your sales database the driver of your budget process.
This budget example is built to account for a business with three divisions located in Australia, UK and America. Then in each country, there is a single account for sales. For many companies, a single line of sales information is not enough detail to generate accurate sales projections for the budgeting process.
To address this lack of information shortfall in the budget process, Phocas Budgeting and Forecasting software allows you to connect the sales database to the budget so people can benefit from incorporating more in-depth sales information.
To bring in this sales data, you create a new tab in the budget worksheet, with ‘database’ as the driver type and select ‘sales’ or ‘revenue’ as the database. You can also select how you’d like to build the budget, whether sales by product, product class, sales rep, or customer, and do some mapping to align your measures and values. In this example, Dan has chosen to budget by product class.
The mapping steps to connect the sales and finance databases include:
- Country to Country
- Product class to general ledger accounts
Once this is complete, you have all the sales information by product class included in the central budget. The finance team can send this section to the sales branch manager to crosscheck, and when this is complete, the information will automatically flow through to the central budget workbook.
In the above video, Dan also shows how you can add more levels to the budget, making the database driver even more powerful. Dan adds sales rep and product class to each country.
There are many benefits to using drivers in the budget process:
Puts the focus on the key metrics that affect organizational success. For example, with the help of driver-based budgeting, you can study how certain factors like sales influence financial performance. That allows you to make critical budgeting decisions such as allocating more resources, in order to meet business goals.
Helps you adapt to changing conditions on the fly. Driver-based budgeting enables you to run rolling forecasts and predictive models so you can be better prepared for any business scenario.
Aligns finance with the entire company. This model incorporates key drivers from other departments, which means folks across the organization can have a say in creating an effective budget that improves business performance.
Enables more efficient planning. Employees spend their time focusing on the most important data.
To learn amore about using your sales database to drive your budget, download the Modern financial planning and analysis ebook.