Planning, Budgeting and Forecasting (PBF) sits within a performance management framework.

The framework has three components. The other two components are Performance Reporting and Profitability and Cost Analysis.

Organisations should seamlessly link top-down strategic targets to financial and operational forecasts. Performance should be measured against those targets.

Planning

A top-down strategic plan defines:

  • the strategic aims of the enterprise
  • the high level activities required to achieve the goals.

Financial and operational planning should be brought closer together.

A company should create an integrated business planning process rather than discrete, function-based activities.

Enterprises require agility in planning to enable quicker and more accurate decisions across the organisation.

Budgeting

A budget enables the allocation of resource to be aligned to strategic goals and targets for the entire organisation.

Technology is creating budgeting tools that can deliver more self-service budgeting and forecasting responsibilities into line operations.

This allows the whole enterprise to see the core assumptions on which budgets and forecasts are based.

Forecasting

A forecast tracks the expected performance of the business. This allows:

  • timely decisions to be taken to address shortfalls against target
  • the business to maximise emerging opportunities.

Organisations need genuinely forward looking finance leaders to phase out traditional, rigid point-in-time planning and forecasting practices.

Finance leaders should help the business deploy effective rolling forecasting with moving targets that reflect real-time changes in external factors.

CFOs should be prepared to be resolute in championing a more enlightened and integrated approach to PBF. This will ensure they are involved in the broadest planning and strategy discussions within the business. 

About Jamie Lyon, lead author, ACCA

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