Manage budgets and forecasts
- Helen Gosper
- Denise McGettigan
If you have permission to manage budgets and forecasts, you can become a budget owner and therefore, you can create and manage budgets and forecasts for your business.
Phocas supports a range of hybrid budgeting models, so you can combine elements of the different budgeting methods to suit your specific business needs and circumstances. Your budgeting structure can be across the divisions of your business, such as countries, states, or branches. You can either budget at a finance or sales level or as most companies like to do, create one main model that connects to all your data.
Budgeting methods
Historical/incremental: Pull in data from past years. This is the most common and simplest way to budget.
Zero-based: Build a budget from scratch each year, in which each expense needs to be justified and analyzed.
Driver-based: Identify the key drivers of sales, such as product mix and pricing, and allocate resources accordingly.
Activity-based: Focus on cost drivers of various activities and allocate resources accordingly.
Rolling forecast: Continuously update the budget by adding a new month as the current one expires, allowing for ongoing adjustments.
Data integration
The vital part of any budget model is the data. You build and connect to databases to manage the flow of data required for your budgets and forecasts. That data can come from multiple sources, such as your Enterprise Resource Planning (ERP) system, human resource information system (HRIS), customer relationship management (CRM) system, and even individual spreadsheets.
Often two databases are enough. One database usually has all the financial information and the other typically has sales and operational data, allowing you to budget in significant detail. Throughout the process, you might also want to connect more data to your model, such as employee costs and benefits. The databases can store both historical and current data, automatically populating budgets, forecasts, and financial statements.
User access, security, and collaboration
It is the budget owner who creates and manages the budget model and forecast workbook. As a budget owner, you can populate all or part of the model. Other budget contributors, such as specific business partners, gain access to the workbooks either as administrators or being assigned tasks in the workflow. Security and permission control are defined at a user level to protect sensitive information, such as salary data, so it is only visible to the relevant people.
Inbuilt workflows enable a collective approach, helping everyone in the process to have an active role in the budget. Tasks are worked on by one user at a time and then reassigned to others before ultimately being submitted back to the budget owner. An audit trail of all changes and decisions made is saved for future reference.
Performance tracking and benchmarking
The budget model integrates with Financial Statements, for ongoing measurement, comparison with actuals, and deeper analysis. You can visualize the budget figures and actuals in charts, segmented into branches and divisions, so you can constantly connect all your people to financial performance. You can measure relevant financial and operational ratios for your business and benchmark them against other similar businesses or industry figures.