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Optimizing Your Budget for Success in Challenging Times

bshepley
Certified Master Anaplanner

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In these challenging times, corporate balance sheets have been stressed, the way people work has been turned upside-down and the future for many businesses has never been more uncertain. This has created greater urgency for companies to look at how they spend their money and find new and better ways to plan for the future.

This is why more and more companies have been turning to the zero-based budgeting (ZBB) methodology. By using ZBB, finance executives can help ensure that every dollar their organization spends is justified and scrutinized and that budget lines aren’t simply being arbitrarily carried forward from one period to another.

With ZBB, companies don’t simply keep their historical budget framework and push it forward, but instead break their budget down into individual buckets of revenues and expenses, at their most granular levels. This type of deep-dive allows companies to focus on the areas of their business that drive revenues while scaling back spending on expenses that don’t.

At Cervello, we have created a tool that allows companies to implement a zero-based budgeting methodology to help them manage their budget in an uncertain future. The tool allows users to dynamically create cost drivers and rates and modify them to fit their needs. Users can break their budget planning down by division, location, or at any other level of their hierarchy, allowing for planning at the lowest level, with greater transparency. With our ZZB tool, management is able to highlight the most well-performing areas of the business and scrutinize the less optimal areas. This leads to a more effectively run business that is ready to face the challenges of our current times and prepare for whatever the future may bring.

A major component of ZBB is the idea of bottoms-up planning. This concept means that the budget is essentially being created from scratch, at the most granular level, across the organization. Instead of simply looking at last year’s spending and rolling budget items forward, each expenditure is able to be evaluated individually, on its own merits. Businesses can then create cost drivers and rates that are modified to fit their needs. After working with your organization to define your company hierarchy and integrate it into our tool, the budget can be evaluated at every level of that hierarchy (division, region, etc.). The tool allows executives to view reporting at all levels, with the ability to drill down into expenditures at the lowest level as well.

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Successful ZBB planning revolves around solid organizational data and Anaplan allows businesses to leverage disparate, siloed data sets by bringing them together in one place. Combining data sources such as HR and sales planning allows for real-time visibility into the performance of all areas of the company against the predefined metrics from the budget planning process. Monthly and quarterly reviews can highlight areas where performance is outpacing, or falling behind, the plan. Highlighting these areas allows for re-forecasting and budget adjustments to ensure the most optimal outcome. There’s no limit to what data can be leveraged in this process and the fuller the picture that can be captured, the better the decisions that can be made.

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Another reason ZBB is so successful in Anaplan is the advantage of Connected Planning. Businesses have a lot of data that is often disjointed and disconnected, with finance executives often working in multiple, disparate systems, creating a major barrier to transparency. This is never more apparent than when budget season comes around and people scramble to pull reports together. Unlike in many current corporate workflows, using Anaplan to connect the different areas of your business provides increased flexibility, transparency and allows more time to be spent on planning, and less on fiddling with data. With our ZBB tool, users can take advantage of Connected Planning to tie their budget to their sales model, P&L, SWP, and others.

Moving to a ZBB methodology can help increase the profitability of your organization and better prepare you for the headwinds of our current environment. With our ZBB planning tool and Anaplan, you can unleash the power of Connected Planning to optimize your business and meet your long-term organizational goals.

We want to hear what you are looking for in a zero-based budgeting solution and what your experience has been. We invite a discussion, so please leave your thoughts in the comments below.

1 Comment
einas.ibrahim
Master Anaplanner/Community Boss

Great job Brian. 👌