Planning and budgeting are indispensable but also time-consuming. Although companies need to be very flexible in today's dynamic business world, rigid planning and budgeting processes often inhibit flexibility.
The BARC - Business Application Research Center conducted a study on how European companies approach planning and budgeting. The study looks at the planning methods, planning periods, forecast cycles, changes in the planning process, regulatory requirements and planning and budgeting software solutions that companies use.
Main findings of BARC study:
Excel is the most commonly used planning tool (82 percent of the companies use Excel for planning purposes). Companies, however, rarely use just a pure Excel-based solution or a specialized planning tool. Most rely on a combination of several different solutions.
Companies need an average of 42 work days to conduct planning on each single organizational level (i.e. operative, corporate and / or group). This median rate increases to 55 days in corporations with subsidiaries and drops to a mere 25 days for single companies. This shows that planning and budgeting involve a tremendous amount of time and effort.
Companies that use a specialized, central planning tool spend less time on planning (25 percent less than with Excel-based systems) and have higher satisfaction levels.
The average number of planning tools used per company is around three.
Companies who use four or more planning tools need twice as long per organizational level (60-day average) than companies that use one or two planning tools (30-day average).
Despite the increasing requirements on corporate governance, process documentation and risk assessment still play a relatively small role for companies during the planning process.
- 75 percent of the companies use mixed planning, a combination of a top-down and bottom-up approach.
- 44 percent of the companies follow "beyond budgeting" principles - mostly, however, in combination with traditional planning methods.
Most companies base their planning on historical trends and rolling forecasts - mostly focusing on cash flow planning.
Few companies plan more than five years in advance.
- one to two years (67 percent),
- three to five years in advance (52 percent).
Planning processes are highly dynamic.
- 77 percent of the companies modify their plans at least once a year and 36 percent do so every six months.
- 66 percent of the companies make forecasts every one to three months.
Data collecting, processing and analysis comprises a third of the overall planning effort.
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