Better Planning and Budgeting

Over at Intelligent Enterprise, an article entitled “How to Get to Better Planning and Budgeting” provides five questions every finance organization should ask:

  1. Is the planning and budgeting process as strategic as it could be?
  2. Are the budgets as accurate as they should be?
  3. Does your planning really help increase your company’s agility?
  4. Could your process provide deeper insight to more people?
  5. Is the process itself of high quality?

The article is based on a Ventana Research study which finds that “less than half of companies are at a mature strategic or innovative state [of performance management] and 20% at a primitive tactical state”.  As a discipline, we clearly have a long way to go. Not surprisingly, the biggest gaps appear to be around creating a repeatable process and using to support it.

The article also reinforces my long-standing belief that budgeting is not the same thing as planning. In Ventana’s words:

Recognize that planning and budgeting are not the same. While these two activities are related, there are important differences between the two. Planning is about creating a program for action; it’s part of an overall design to achieve specific objectives. Budgeting is about creating a statement of the financial position of an organization for a specific period of time based on estimates of revenues and expenditures. Planning is about things such as activities, people, resources needed and time spent. Budgeting is about money.

And this clincher:

Ventana Research believes that companies spend too much time budgeting and not enough time planning.

My sense is that companies spend more time on budgeting than planning because money is more concrete than objectives. Money is easily counted; not all objectives are quantifiable. As I’ve said on many occasions:

Not everything that counts can be counted, and not every thing that can be counted counts.

All of this is an important reminder that true performance management is still in its infancy.

 

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2 Responses to Better Planning and Budgeting

  1. Edoma May 28, 2009 at 12:56 pm #

    I found a little gem of a website for free budgeting online and it’s anonymous too. It’s called Out Of The Dark (OOTD).

    It literally transformed me financially.

    Happy budgeting

  2. Terri January 26, 2010 at 7:09 am #

    I enjoyed your article on budgeting.

    I also have a few articles on my blog on budgeting. You can check out my articles on budgeting, personal finance, and money management at http://yourpersonalfinances.wordpress.com

    Great article!

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