Www.pwc.co.il Best practice in the budget and planning process
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Best practice in the budget and planning process
June 2017
Robert Lanzkron Management Consulting, PwC Israel
Top 10 reasons why budget and planning stakeholders hate the process
1. It takes too @"!%?# long!
2. Doesn't help me run my business
3. It's out of date before it's even finished
4. Too much game playing
5. Too many iterations
7. It involves too many people
6. Cast in stone although business conditions are always
changing
8. Includes allocations that I can't control
PwC Israel
9. By the time it's done, I don't even
recognize my numbers
10. Doesn't match the objectives to which I'm held
accountable
Common Challenges in Planning
Strategically disconnected ? Most companies report either "no link" or a "weak link" between the strategy and budget
processes... ? Whereas more than half reported that creating closer links between strategy and operations was one of
their top two priorities.
Slow ? Completing an annual budget can take too many months (best practice is 28 days*)
Expensive ? Finance departments alone spend considerable corporate revenue on budget creation each year ? Yet less than 50% of the budget and forecasting process is spent on analysis, strategy
development and target setting.
Unreliable ? Management and investors are routinely surprised by the variances between communicated
expectations and results ... ? No wonder if you have a high prevalence and dependency on spreadsheets for example.
*APQC 2016 survey: Cycle time in days to complete the budget
PwC Israel
What happens when the planning process is broken?
Functional plans out of sync with business strategy
Too much inventory ? but never where or when it's needed
Cash flow and/or working capital crisis Poor customer service
Inability to respond to changes in the market and new sales opportunities
Lost sales resulting in missed revenue goals
Lack of financial insight to make effective decisions
Inaccurate financial projections leading to ? PROFIT WARNINGS ? INACCURATE INFORMATION TO INVESTORS ? PwC Israel INABILITY TO RAISE FUNDING
Every business is different and we do not propose or support a one size fits all solution to planning and budgeting
4.5
1,000+4.0
1
1
2
2
1
3.5
200 ?
1,000 3.0
5
9
2.5
3
5
50 ? 2020.0
4
13
5
1
6
SCALE# E&MCPOLOMYPELEESXITY
1 ? 50 1.0
0.5 0.5
R1e.t0ail
6
12
2
2
1.5 Tech2n.o0logy1 2.5 Heal3th.0care2 3.5
Fina4n.0cial services3
4.5 Indu5s.t0rials4 5.5
PACE OF PIRNODDUUSTCRTYCHANGE
1 Includes software / semiconductors / electronics / IT / analytics / cybersecurity / online marketing, 2 Includes biotechnology / medical devices / kuppot holim / pharma 3 Includes banking / insurance / investment advisory / fintech 4 Includes energy, chemicals & mining / industrial manufacturing / construction & engineering
Sample size is 80 companies
...there are common processes and principles that apply
PwC Israel
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