The Collaborative Budgeting Process Your Finance Team Needs

Emily Mason | Senior Content Writer

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Preparing your annual budget. It’s usually a time-consuming, iterative process that requires significant manual orchestration and direction from the finance team. You may have cooperation from every department leader, but it probably feels like a stretch to call the process collaborative budgeting. It usually goes something like this:

  • Extract each department’s model assumptions from your “master” model.
  • Initiate endless emails and in-person meetings to share “actuals” analysis and gather forecast assumptions.
  • Ensure that each department’s new assumptions combine into a logical, consolidated budget.

When you mix in missing data and delays, the process is clunky and beyond frustrating.

Collaborative budgeting takes a different approach. It builds stronger connections between FP&A and each department, increases the financial literacy of non-finance stakeholders, and results in an annual plan that’s achievable, without overloading your finance team in the process!

Your team needs a collaborative budgeting process, and the right FP&A software solution supports and enables your success.

What is collaborative budgeting?

Collaborative budgeting is a ‘bottom up’ approach to budgeting where department heads actively partner with the finance team to build a data-backed annual plan.

What makes it different?  

  • It’s cross-functional – a buzzy way of saying that FP&A doesn’t create the plan in a vacuum. All budget owners should be engaged as active participants in the process. Ideally, they can view and contribute directly to edit the plan and complete tasks assigned by finance.
  • It aligns the budget with business goals – The executive team still hands down annual revenue targets and cost constraints. The finance team takes those and works with sales, operations, R&D, or marketing to be sure that each department’s plan works for their team and supports the wider organizational goals.
  • It’s all about transparency and accountability – There’s no hiding in a collaborative budgeting process; all spending decisions are up for debate. But the end result is a plan that everyone has agreed to and can reference as they make purchases and strategic decisions at a department level throughout the year.

4 Benefits of a collaborative budgeting process

A collaborative budget is built with stakeholder input right into the plans. That means a lot of time savings for financial analysts (who no longer need to track down data). But there are four other surprising benefits you may not have considered:

  1. Drive higher levels of ownership

Business partners may seem hesitant to get involved at first, but most department leaders do want to have some say in the budget process. They may only be accustomed to hearing from finance 2 or 3 times a year. Maybe they didn’t feel included in the planning process before.

The collaborative process promotes accountability and ownership as each business leader negotiates and advocates for what’s best for their team and the business. Bonus – they’re often much more willing to stick to a plan that they helped create!

  1. Improve accuracy

Strategic FP&A leaders need a working knowledge of operational drivers to the business to provide leadership with data-informed recommendations.

A collaborative budgeting process helps your analysts to organically gather those operational insights right from the source. Marketing or manufacturing leaders will be most-informed on their unique KPIs. Budgets developed in close collaboration with stakeholders will be more accurate, aligned with business goals, and realistic for that team to achieve.

  1. Break down data silos

Errors multiply when each department is tracking their budget in disconnected spreadsheets. Pulling all that data together just to complete baseline analysis is incredibly inefficient.

Collaborative budgeting uses a cloud-based FP&A tool to integrate data from key business systems into a unified plan. Stakeholders can view the plan and their actuals without needing to go through finance. And the finance team can point to the shared platform and plan as the source of truth when it’s time for hard conversations around spending or budget cuts.

  1. Position FP&A as the strategic finance business partner

The collaborative budgeting process will give you firsthand knowledge of the challenges and opportunities for each department. Plus, your business partners often have ideas to increase efficiency that come directly from their daily workflow and their own challenges.

Without these insights, your FP&A team would be stuck in the stereotypical past of number crunching, functioning as the traffic light for purchasing decisions. With them, you can embrace strategic finance opportunities. Transfer your time savings from collaborative budgeting into higher-value analysis and scenario modeling as you support agile decision-making.

Finance teams deserve better from their tools

Current manual processes are impractical and inefficient. They limit the finance team to a mostly administrative role, including tracking down assumptions and data entry. Midmarket FP&A teams often have 30+ different budget owners to engage with. Emailing different spreadsheets around to capture their input is painful. An automated, software-enabled workflow would change the game entirely.

The problem? Previous budgeting and forecasting software solutions have not truly enabled cross-functional collaboration. To them, collaboration means allowing a few well-trained finance team users to access and edit the same version of the budget in a cloud-based application. The idea of engaging your CRO or head of product directly in the application to proactively participate in the budgeting process has been non-existent.

Most finance leaders want to directly engage P&L owners across their organization in the budget process. But without a modern FP&A tool, there are significant challenges:

  • Legacy budgeting solutions use proprietary modeling frameworks, so they require significant end-user training to navigate and use the application.
  • There are valid concerns about exposing users to highly sensitive information within the budget.
  • Without the right access controls, non-finance users may accidentally make changes that impact the finance team’s master model.

FP&A software for truly collaborative budgeting and planning

FP&A teams have an increasingly important role as a critical strategic partner. They deserve modern tools to address these challenges and enable integrated communication and cross-company collaboration. Stratify is the FP&A platform designed for collaborative stakeholder planning. Our proprietary structured data model and persona-based design gives you real-time analytics of financial and operational performance through a user interface that all users can navigate easily.

You’ll experience the biggest difference through our “Tasks” feature, which allows you to tag your sales or marketing leader, ask them questions, and direct them to input their data – without dropping them into complex financial models full of highly sensitive information. Role-based access controls ensure data integrity and track user changes far better than spreadsheets do. This brings your teams, processes, and data together so you can make better, faster business decisions.

Walk through the collaborative budgeting process in Stratify.

Last Updated:
May 17, 2024

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