Planning and Budgeting in European Companies
Planning and budgeting are indispensable tools for managing companies and pave a solid foundation for driving business performance. The ways that companies approach planning and budgeting in real-world business scenarios are various. While some companies only conduct high-level financial planning, others concentrate on detailed sales budgets without taking integrated financial planning into account.
A common point of criticism is that planning processes are too rigid and time-consuming. In order to create budgets, companies need to devote considerable time and resources to collecting and processing plan data. Although companies need to be very flexible in today's dynamic business world, rigid processes often make this difficult. This especially applies to companies that have subsidiaries and must merge the data into a single master budget. In addition to planning in departments and subsidiaries, companies must also consolidate this information to plan on an enterprise level.
The BARC - Business Application Research Center - institute, an umbiased market analyst has conducted a study on how companies troughout Europe approach planning and budgeting. The study analyses the planning methods, planning periods, forecast cycles, changes in the planning process, regulatory requirements and planning and budgeting software that companies use. Moreover, the study gives an overview of the satisfaction levels with the current planning and budgeting tools.
Read more to view the main highlights of the study and to download the complete BARC study. The study is distributed free of charge thanks to a sponsorship of Tagetik.
Main conclusions 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 just under 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 (78 percent) and rolling forecasts (60 percent). 18 percent of the companies intend to use rolling forecasts in the future.
With regards to content, cash flow planning clearly dominates with 68 percent. Although companies are least likely to use a balanced scorecard, 30 percent of respondents stated that they want to deploy a balanced scorecard at some point.
Few companies plan more than five years in advance. While companies without subsidiaries plan for a period of one to two years (67 percent), corporate groups predominantly plan 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 analysis comprises a third of the overall planning effort. Collecting and processing data make up the bulk of the time.
| File | Beschrijving | File size |
|---|---|---|
 Planning_and_Budgeting_in_European_Companies_final.pdf | 1264 Kb |
You need to login or register to post comments.
