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Report: 55% of Businesses Operate With a 12-Month Rolling Bottom-Up Forecast and Budget Process

November 6, 2020 |

Deciding which budgeting process is right for your company entails understanding how your business works and ensuring your budgeting method is a natural extension of it. Typically, most budgets fall under either a top-down or bottom-up category. But as recent survey results published in Vena’s 2020 Industry Benchmark Report reveal, most businesses are opting for a bottom-up budgeting process.

Out of the 350 global business leaders surveyed in the report from across a range of industries, including food service, manufacturing, health care, insurance, technology and more, 55% are operating with a 12-month rolling bottom-up forecast and budget process.

Top-Down vs. Bottom-Up Budgeting

There are advantages and disadvantages to both top-down and bottom-up budgeting. In general, a top-down approach involves your executive management developing a high-level budget for the entire organization. A bottom-up method, on the other hand, involves managers in each department creating budgets that are then sent back up to department heads for approvals.

As managers and department heads play an active role in the budget-making process, bottom-up budgeting gives them a sense of ownership as they work towards providing accurate estimates of costs per department. Once budgets from various departments are collected and approved, an overall budget can be created for the entire organization.

Why Do Businesses Need Rolling Forecasts?

Unlike annual budgets, rolling forecasts give you more than one opportunity to make changes to your budget. Rolling forecasts let you plan continuously over a set period of time. A 12-month rolling forecast, for instance, means you are reforecasting those 12 months at the end of each quarter or even on a monthly basis. And since your outlook is being updated on a rolling basis, you'll be better positioned to respond to any fluctuations to your operational activities as they happen. You’ll also be able to identify opportunities or risks based on recent market changes or trends and tweak your budget to accommodate those changes.

So how can your team get started with a flexible and collaborative approach to budgeting and forecasting that involves automating repetitive tasks, eliminating manual data errors, gaining trust in your numbers and positioning your business for the future on a regular basis? It all starts with making a shift to agile financial forecasting.

Agile Financial Forecasting

Making the shift to agile financial forecasting involves enabling your team with the budgeting, forecasting and reporting tools that will help create budgets based on any requirements (driver-based, zero-based or bottom-up), shorten the budgeting cycles while also making the budgeting process collaborative across the organization. When you can instantly consolidate data from across your organization into a centralized location, your team can spend less time gathering and organizing data and worry less about making manual errors. And when your team can easily leverage existing spreadsheets and models and perform complex calculations with a familiar and flexible interface, such as Excel, improving current budgeting and forecasting processes becomes a natural process and not a steep learning curve.

With faster access to accurate budgeting data and a clearer lens on understanding your business from every angle, this will leave everyone with more time to focus on what matters most for your business—analyzing the drivers behind your revenue.

Whether your budgeting model works from the top-down or bottom-up, the important thing to remember is to create a budgeting process that powers your plan to grow. Your budgeting and forecasting processes should be a regular check up on your business. When everyone has a clearer vision of where your business stands today and where it’s headed, it’s easier to build a blueprint for better learning at the micro and macro levels.

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