Set and forget budgets don’t cut it. Business success demands budget forecasting.
![Set and forget budgets don’t cut it. Business success demands budget forecasting.](https://www.phocassoftware.com/hs-fs/hubfs/%5Bactive%5D-Blog-Images/Forecasting-explainer-1.jpg?width=821&height=456&name=Forecasting-explainer-1.jpg)
When expectations built into budgets are not delivering, then it’s time to revise. Often business people don’t realise there is an issue for weeks because viewing budget vs actual numbers can involve a lot of manual work - so it’s put in the too hard basket. Finance pulls the actual numbers from their ERP to close the month end, then manually add them to the budget figures in spreadsheets and do the comparison. That same team who has spent two months bedding down a budget won't be keen to poke the ‘budgeting’ bear so soon after it's been approved. Yet the budget is rapidly becoming out of date.
Complex business conditions are precipitating the need to share regular budget performance companywide and to be able to re-forecast based on these results. Set and forget budgets using historical data and some generic percentage change formulas don’t suffice anymore. These static budgets also render a business plan to be ineffective to which your business partners pay little attention to - which is the opposite you want from a budget.
Fortunately, BI and financial planning and analysis platforms are making companywide budgeting and forecasting more efficient. The platform automates the flow of data, enabling finance to collaborate with business partners throughout the development of the budget model as well as connecting to financial statements. When all elements of the plan integrate, finance can share regular results and budget forecasting can be completed each month.
What is Budget Forecasting?
So, what is budget forecasting? The simplest way to explain the term is the intersection between actuals/current, budget and forecast numbers at any point within the fiscal year. It's more useful when business people can view these three metrics together:
- Actuals - represent the real numbers achieved to date
- Budget - is a company’s financial plan of intent for 12-months
- Forecast - is a more detailed financial plan for for a set amount of time such as for the last 6 months or 3 months of the financial year
Budget forecasting benefits
Phocas Budgets and Forecasts allows your business to create a connected and collaborative budget as well as regularly track how it is performing in real-time. To do budget forecasting on this platform, a template is selected for the budget model. This provides flexibility to represent the detail and complexity of your business, enabling finance to easily roll it forward for continuous monthly forecasting.
Budget forecasting is a massive step-up from annual budgets that often act as a barrier to quick and direct action.
Phocas Budgets and Forecasts provides a simple way of using actual data and budgeted values to compare actual performance to budget and re-forecast the remainder of the budget period. Budgeting this way reflects the nuance of your business and encourages greater buy-in and support.
Building a model and forecasting with consolidated data
In the below video, Dan, a business owner, chartered accountant and subject matter expert to Phocas, provides an overview of how finance might approach building a budget model in Phocas for the first time showing how the data automation works and the built-in tools for collaboration.
![](https://embed-ssl.wistia.com/deliveries/f6c8c182cf6ad6b2e04942a171af7cfc.jpg)
There are also some extra total columns and buttons where the user can select;
- total budget and see budgeted values for the entire period
- actual + budget and see up-to-date actuals and use the flagpole to see the budgeted numbers for the rest of the period
- actual and forecast where cells turn yellow and can be edited for the future period.
![Forecasting-explainer-1](https://www.phocassoftware.com/hs-fs/hubfs/%5Bactive%5D-Blog-Images/Forecasting-explainer-1.jpg?width=753&height=424&name=Forecasting-explainer-1.jpg)
Review, understand budget variance, and adjust on the fly
When creating the forecast for the next 6 months, the user can review key actuals and see how they are performing to budget. It is straightforward to compare actual results to budgeted values but the most useful information comes from the analysis of the budget variances.
In some instances, income might be doing better than planned, if this is a result of a unsustainable activity you can choose to bring the forecast back to the budget totals using the Snap back to budget button. This aligns the forecasting period with the original budgeted values.
You may alternatively decide that the increased income achieved in the early months of the year is indicative of how the business will continue to perform and therefore decide to use the Follow actuals which averages out the new performance or positive variance for the remaining period.
Once you are happy with the new forecast you can publish it with a new name and do further analysis of the new figures in your Financial Statements. Importantly you can analyze performance against budget and forecast and see how revenue targets and sales targets are also tracking.
Budget forecasting and variance analysis helps you adapt quickly, make changes when necessary and align your goals across the entire organization.
![Katrina Walter](https://www.phocassoftware.com/hs-fs/hubfs/phocas-velocity/images/resources/blog/authors/trene_walter.jpg?width=64&height=64&name=trene_walter.jpg)
Katrina is a professional writer with experience in business and tech. She explains how data can work for business people without all the tech jargon. She is always on the look out for new ways data is being used by business people to know more and be sustainable.
![FP&A (Financial Planning & Analysis) software versus Excel](https://www.phocassoftware.com/hs-fs/hubfs/phocas-velocity/images/blog/fp-and-a-software-versus-excel.jpg?width=160&height=89&name=fp-and-a-software-versus-excel.jpg)
FP&A (Financial Planning & Analysis) software versus Excel
What tools are necessary to carry out financial planning and analysis (FP&A) in a mid-size business? The safe answer is Excel spreadsheets. Yet the real requirement for running a business with a $5 to $50 million turnover is a planning tool that allows team members to improve decision making rather than build cumbersome financial models.
Read more![#1 for predictive planning in budgeting and forecasting](https://www.phocassoftware.com/hs-fs/hubfs/phocas-velocity/images/blog/n1-for-predictive-planning-in-budgeting-and-forecasting.jpg?width=160&height=89&name=n1-for-predictive-planning-in-budgeting-and-forecasting.jpg)
#1 for predictive planning in budgeting and forecasting
Phocas ranked #1 in predictive planning in the “integrated products for planning and business intelligence and analytics category” in the recent BARC The Planning Survey 24. This is a big deal in the planning sector. This survey is the largest and most comprehensive in the world where more than 1000 professional users of budgeting and forecasting software share their real-world experience of these products. The results are analyzed and expertly interpreted to help other business people with their software decision-making.
Read more![Excel-based vs web-based budgeting and forecasting](https://www.phocassoftware.com/hs-fs/hubfs/phocas-velocity/images/blog/Excel-based-vs-web-based-budgeting-and-forecasting.jpg?width=160&height=89&name=Excel-based-vs-web-based-budgeting-and-forecasting.jpg)
Excel-based vs web-based budgeting and forecasting
For decades, Excel spreadsheets have been the trusted companion of finance teams. Their flexibility, ease of use, and low cost have made them a go-to tool for budgeting and forecasting. However, as businesses evolve and complexity increases, so too have expectations on financial planning. There is greater demand on the finance team and CFO to be more strategic, efficient, and accurate when it comes to financial planning, as well as steering the business towards sustainable growth.
Read more![What is strategic budgeting and how to implement it](https://www.phocassoftware.com/hs-fs/hubfs/phocas-velocity/images/blog/What-is-strategic-budgeting-and-how-to-implement-it.jpg?width=160&height=89&name=What-is-strategic-budgeting-and-how-to-implement-it.jpg)
What is strategic budgeting and how to implement it
Growth by design is straightforward when aligning business goals with your financial targets and incorporating them into a budget model. Among the various types of budgeting, strategic budgeting serves as the ultimate roadmap for achieving long-term financial goals. When done well, the budgeting process ensures that everyone is aware of the strategic priorities and is more likely to actively participate in the agreed budgeting strategies. Conversely, when this process is not well-executed, people tend to become disengaged and distance themselves from plans in which they do not feel involved.
Read more![Key data in one easy to understand view](https://www.phocassoftware.com/hs-fs/hubfs/phocas-velocity/images/common/get-a-demo-dashboard.png?width=363&height=207&name=get-a-demo-dashboard.png)
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