The Community Roundtable is back with the first installment in the series focusing on monthly budgeting. We've asked two participants, Griffin Knight, Senior Consultant with Lionpoint Group, and Connor O'Brien, Director of Business Operations at Anaplan, to share with us their background in budgeting, what processes and methods they use to develop their budgets, what challenges they face, and what recommendations they have when it comes to developing a budget.
Check out their thoughts below!
In what capacity do you budget monthly? (Personal or for your Employer)
GK: I have developed a variety of budgeting solutions for clients utilizing Anaplan for FP&A, with monthly, quarterly, and yearly timeframes.
CO'B: For both personal and professional purposes, I use Anaplan. Anaplan allows me to easily augment and maintain my budgeting/planning models quickly and efficiently.
How long have you been budgeting for yourself or within your career?
GK: I have been working on budgeting solutions for almost a year now, for a variety of use cases and industries.
What prompted you to start a monthly budget? What methods, programs, and/or processes do you use to map out your budget?
GK: I am primarily assisting a client move their budgeting process from Excel over to Anaplan.
CO'B: From a personal perspective, I use a hybrid of driver-based and zero-based budgeting methodologies. This is a natural choice as it allows me to blend what I know I typically spend (driver-based) every month with the known unknowns (zero-based) that pop up throughout the year like weddings, un-planned travel, etc. to ensure I’m meeting my financial goals.
What do you like about your process and/or tools? What challenges do you have?
GK: Doing budgeting on Anaplan allows for flexibility in comparing different versions and time. The time aspect of Anaplan is especially useful. It allows the business to seamlessly transition to the next period along with storing all previous budget and actual information.
CO'B: The easy stuff to budget for are the fixed costs like my monthly mortgage. That doesn’t change. By setting up a simple assumption that always accounts for that cost, I can be sure to never miss it. Where things get trickier—or more interesting— are with variable costs like eating out, concerts, football games, and the inevitable destruction of some of my property by my dogs. This is where the driver-based budgeting becomes so important. The most difficult things to plan and budget for are the known unkowns. Zero-based is the way to go to ensure I don’t overspend in this category.
Have you used or created an Anaplan model for your budgeting needs? If so, how has it differed from other methods you’ve used?
GK: Anaplan works great as a budgeting tool, as the built in versioning and time dimensions allow for real time variance analysis. As I mentioned in the previous question, the native time dimension of Anaplan allows the client to move easily to the next budgeting cycle. The dimensionality of Anaplan (specifically versions) allows for different budgets at different times of the year.
CO'B: I use my historical monthly frequency and spend to get an understanding of how often and how much my wife and I eat out and spend every month. I can also account for more irregular expenditures like seeing a concert roughly every other month by smoothing out these assumptions over a couple of months so while I may be above or below my budget one month to the next, overall, I wind up within my budget for the full year.
How do you compare and integrate the monthly budget with a yearly budget?
GK: In Anaplan it’s quite straightforward. Maintaining a consistent time dimension, you can copy the budget to different versions for different budget cycles.
CO'B: I’m at the time of life where it seems everyone I know is either getting married or having a kid. As a result, I know there are a lot of trips, presents, and events that I would like to participate in. I know these expenses are coming at some point throughout the year, I just don’t know exactly when. So, by having a strong understanding of my monthly fixed and variable costs, I can allocate blocks of cash to individual events that are easy to move around month to month that still keep me under my annual budget limit. Life, as with business, is tough to predict. Having several methods to try and account for it and predict it are imperative if you want to be able to responsibly save while also living your life.
Is it more efficient when both budgets (monthly and yearly) are built in the same model/step/process, or different methods?
GK: As far as the calculation drivers it is best to get both the monthly and yearly budgets in the same module. By utilizing filters and views you are then able to display the budget in any format that the user would like to see.
CO'B: Probably could answer more directly above, but yes. Have both monthly and yearly budgets allows for more flexibility and the ability to have “high spend” and “low spend” months not affect the way you live month to month as you can account for the natural ups and downs of life.
More About Connected Planning:
What recommendations would you have for those looking to prepare a budget for themselves?
GK: Maintaining the history of previous budgets allowing for continuous improvement of the budgeting process. This is very important to do at the beginning because once the data is lost it is hard to recreate. By having a picture of historical accuracy can allow you to identify the areas that need the most improvement.
CO'B: Just doing it. Often times, from a personal perspective there is an “ignorance is bliss” mentality when it comes to personal budgeting. If you don’t pay attention to it you don’t have to know how much you spend and then you don’t have to feel bad for not responsibly budgeting. My advice to people who don’t have a budget is just to start. It doesn’t have to be detailed, it doesn’t have to be perfect. It just as to exist and you have to stick to it. There are all kinds of tools out there that are free to use to do this: Mint.com, Excel/Google Sheets, etc.
We'd like to thank our participants for their excellent feedback. If you are interested in participating in this series, or would simply like to suggest a prompt for us to feature in the future, let us know in the comments below or email us at firstname.lastname@example.org. Stay tuned for our next installment of the Community Roundtable where we'll tackle planning for the holidays!