Checklist to Streamline the Annual budgeting process

By David Parmenter

Many accountants find themselves having to maintain an annual budgeting process even though they would rather be doing quarterly rolling planning. This checklist is designed to help make the antiquated process quicker and at the same time plant the seed for quarterly rolling planning. This checklist assumes you have a robust planning tool.

Run a workshop to analyse the annual budgeting pitfalls and sell the concept of quarterly funding

Notify those who should attend
CEO to send e-mail stating permission is to be sought from CEO if not attending workshop
Organize outside facilitator and presenter to give the annual budgeting better practice stories
Lock in decision that:

Annual budget is not to be broken down into 12 monthly targets
Annual budget does not appropriate funding to budget holders for 12 months, this is to be done on a quarter-by-quarter basis
There is to be a ten-working day time scale and there is a ban on travel or holidays during these two weeks
Each budget holder has one chance to discuss their annual budget with the Budget committee and the decision from the meeting is final
There is no need to have a budget for every account code in the general ledger (G/L)
Each budget holder is only to have up to 12-15 category headings (each category is a group of account codes)
Each budget holder is only required to forecast a category heading that represents over 15% of total revenue or total costs, whichever is relevant

Perform pre-work

Automate as many expense categories as you can (e.g., where trend analysis is as good or better than a budget holder’s estimate)
Establish a calculator for travel and accommodation so budget holders can quickly work out their travel costs (using standard costs)
Download all payroll details so budget holders can quickly and accurately calculate their salaries and wages
Issue annual budgeting timetable on the intranet
Obtain up-to-date demand forecasts from key customers where possible
Set key assumptions and materiality levels
Prepare presentation for budget holders (slides and handouts)
CEO to send invitation to attend annual budgeting presentation
CEO to send e-mail stating permission is to be sought from CEO if not attending presentation
Deliver presentation 1—explanation to all budget holders of how it is going to be done
Organize additional support to help with one-to-one support (using local accounting firms—their staff would have to attend the presentation)
Provide briefing to new support staff from the local accounting firms
Establish schedule of who is to provide who with one-to-one support during the data input four days
Update revenue and expenditure trend graphs, where necessary
Establish a Budget committee (CEO, two general managers, and CFO) and explain their responsibilities

Support budget holders during budget preparation

Provide one-to-one support
Provide a daily progress report to CEO of budget holders who are running late—the “shame and name” report
Provide incentives for prompt budget returns (e.g., movie vouchers)
Ensure budget holders have provided insightful commentary
Provide budget holders with comparison graphs so they can see how reasonable their forecast looks against the past trends

Complete quality assurance (QA) procedures

Ensure all budget returns are in
Check all forecast key ratios for reasonableness of forecasts
Review all revenue and expenditure graphs to ensure the trends look reasonable
Ensure all key papers have been filed on the annual budgeting master file
Rework budgets where forecasts have known and agreed errors—with budget holders’ permission
Check correct treatment of costs on major projects (particularly consulting fees)
Look for missed major expenditure items

Budget committee

Advise budget holders of times for them to turn up and present their annual budget to the Budget committee
Budget committee confirmed their attendance
Budget committee interviewed all relevant budget holders
Adjust annual budgets based on feedback from the Budget committee
Budget committee confirm consolidated annual plan

Presentation of annual budget to budget holders

Delivery of presentation the final annual plan numbers to budget holders

Review process: Lessons learned

Set up intranet-based feedback survey on annual budget process
Plan next quarterly rolling planning forecast run
Check for any timing differences when the last year-end numbers are finalized (budget holders have forecast prior to year-end so they did not know the final numbers)

The toolkit is on sale (over 40% discount)

The reasons why annual planning and budgeting needs streamlining is further explored in “An Annual Plan in Two Weeks or Less Toolkit” (Whitepaper + e-templates).

To look inside the toolkit and buy the toolkit

I would recommend you view Bjarte Bogsnes’ presentation on ‘Beyond Budgeting – business agility in practice’

Beyond Budgeting – an agile management model for new business and people – Bjarte Bogsne, at USI