Best ways to optimize your budgeting, planning and forecasting processes

How does your financial institution approach performance management? Are you still taking a silo approach to the key aspects of successful PM, including planning, budgeting, and forecasting (PBF)? Are you trusting the way you’ve always done PBF will keep your organization moving forward in today’s faster, streamlined marketplace?

Performance management is evolving, and financial institutions can no longer rely on yesterday’s tactics, strategies, and tools to carry them to success in a continually changing market. Achieving high performance requires a measured, strategic approach to evolution; success doesn’t happen by chance. PBF must keep pace with changes, or financial institutions will find themselves struggling to achieve tomorrow’s results using outdated strategies. 

Adapting to the environment

Market volatility is the greatest planning challenge bankers face, according to nearly half of the financial institution professionals polled by the Aberdeen Group for the report Dynamic Planning: Live in the Moment to Succeed in the Future. Financial institutions that are struggling with inaccurate or inadequate PBF may be in need of an updated approach to planning, budgeting and forecasting.

In our recent webinar, Strategic Responses to the Rising Rates Environment, Orlando Hanselman, managing director of Alligators Overhead Strategy and Risk Advisors, pointed to multiple factors that are driving uncertainty for financial institutions, including an unemployment rate that’s approaching the Fed’s target of 4.5 percent, inflation approaching the Fed’s 2 percent pivot point, the likelihood the Fed will increase rates again this year, and its plans to reduce its balance sheet by shedding Treasury and mortgage bonds.

Financial institutions that are still relying on outdated PBF strategies in a marketplace this volatile are like smart cars trying to tow a one-ton boat in a race against turbo-charged pickup trucks.

Focus areas for evolution

Many financial institutions are still putting finance departments and CEOs at the helm of planning, budgeting, and forecasting. The KPMG and ACCA Thought Leadership Report Planning, Budgeting and Forecasting: An Eye on the Future found that while 77 percent of financial institutions polled said PBF processes should be a partnership between business and finance, 65 percent also report finance spends the most time on PBF work, and 41 percent say the CEO has the final say on planning, budgeting, and forecasting.

These old processes are no longer the optimum way to plan in today’s constantly evolving marketplace. As with all aspects of performance management, the entire financial institution should be contributing to PBF activities, with finance and operations taking equal roles in striving for accuracy and efficiency in planning.

Changing the culture, changing PBF

PBF best practices of high-performing financial institutions will be the focus of an upcoming Deluxe webinar, which will feature insights from Deluxe’s own Barry Adcock and Keith Jennings, CFO of Bryant Bank. The webinar will focus on helping financial institutions evolve their planning, budgeting, and forecasting to remain competitive in today’s ever-changing market. We’ll explore:

• The importance of creating a performance culture that puts the CFO in the starring role for PBF activities.
• Why data must drive your planning, budgeting, and forecasting.
• How to leave behind old processes that don’t work or aren’t optimized for today’s marketplace.
• The importance of top-down and bottom-up accountability, and how to communicate, measure and incentivize the performance of all players.

Financial institutions have a wealth of high-quality data, but many still struggle to reap the greatest benefit from the information they possess. Too often, key segments of the organization have limited access to the numbers they need to make smart decisions. The success of the PBF process depends not only on the quality of data available, but also on ensuring that data is available to everyone who needs it and that they know what to do with the data once it’s in their hands.

We’ll discuss how to incorporate external data into decision-making, what data you need to accurately plan and forecast based on a variety of ever-changing factors, and the importance of migrating from traditional budgeting processes toward using rolling forecasts.

Technology is front and center for financial institutions, and the webinar will explore why continued reliance on spreadsheets is holding too many organizations back; KPMG says 41 percent of financial institutions still have not invested in a planning application outside of Excel. New planning, budgeting, and forecasting tools are coming to market that can help finance people and the wider enterprise better understand the opportunities available to them, and achieve a more collaborative approach to value creation and goal achievement.

This content is accurate at the time of publication and may not be updated.