Finance Functions of the Business are Declining due to Systemic Underinvestment

Saturday, August 8, 2015 Print Email

In every two finance professionals, at least one claim that annual budgets are usually numbers that have been politically agreed and after being set in, their relevance is ignored. In accordance to research findings of ACCA and KPMG, the processes of getting a plan, budget and forecast for a business do not meet the operational and strategic needs which they are intended to support.

About 900 finance professionals across the globe were surveyed by the Budgeting, Planning and Forecasting report regarding the effectiveness of their plans, budgets and procedural forecasts.

According to this study, the current processes are deemed as outdated and not aligned for supporting operational or strategic business processes. The head of the ACCA corporate sector, Jamie Lyon stated that for processes of good planning, proper budgeting and forecasting to be effective, it is important to have a positive organizational structure. There is need for visible support to integrate and deliver effectively such activities in business. The approach needs to be realistic between the finance and the whole organization at large.

About 2/3rds of the respondents confirmed that urgent change was inevitable in order to ensure that financial planning is jointly done through finance and operations. Out of these, 65 % confirmed that their team in finance spent the better part of their time forecasting and planning while those who play the same role are only 7 %.

This research deduced that respondents were pessimistic regarding the reliability and relevance of the process of budgeting. 46% agreed that this number was politically agreed, not linked to operational reality even though it was generated from the business top. 62% were of the opinion that budgets were just a tool of reflecting on time and as the financial year proceeded, they quickly became irrelevant.

The KPMG head said that the use of obsolete systems and processes which are not helpful to the business in making well informed decisions jeopardizes the business credibility. The board is interested in future looking numbers which may assist in tracking progress as opposed to historically set unchanging figures. This way, the resources and efforts are realigned accordingly.

Source: ReadyRatios

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