All businesses engage in budgeting and forecasting activities to some degree—and if you’re an executive, finance leader or operations professional, improving your budgeting and forecasting processes should always be a top priority. Budgeting and forecasting help you formulate strategies, plan for the future and align your goals across the entire organization. Both processes are crucial components of every company’s growth journey, especially during periods of change. But even though budgeting and forecasting are similar, there are some key differences that set them apart. It’s important for finance leaders to understand these differences so you can prioritize what’s important and allocate your resources accordingly. In some cases, you might even want to assign budgeting and forecasting to separate teams so you can keep a clearer focus on each specific process. So what is budgeting, what is forecasting and why are they both so critical? To appreciate what they are and how they contribute to organizational success, let’s unpack budgeting and forecasting and drill into challenges, best practices and major differences between them. Read on to discover: What Is Budgeting? Budgeting is the process of planning your company’s revenue and expense figures for a specific period of time. It involves identifying available cash flows and allocating financial resources for your company’s required spending.  Here are the primary characteristics of a typical corporate budgeting process: For an annual budget, the process usually takes between three to six months to complete. When finished, the final budget includes detailed financial documents such as the income statement, balance sheet and cash flow statement. The budget provides measurement metrics that management can use to assess financial progress. Employee compensation plans are finalized during the budgeting process. The budget is not normally disclosed to external parties. What Are The Benefits of Budgeting? Budgeting allows you to chart your organization’s path and assist your management team with strategic business planning. The process results in a clearly defined plan that’s reflective of your company’s financial and operational goals. Typically prepared annually, budgets provide important guidance regarding what your business can expect to accomplish that year.  Budgeting also has plenty of other benefits, including: The budgeting process forces management to examine your company’s financial activities and assess the viability of each individual expense. Budgeting requires detailed documentation of all the sources and uses of cash, ultimately enabling management to anticipate cash flows with accuracy. Since budgeting often starts from the bottom up, many cross-functional stakeholders are involved in the process. This instills a sense of ownership among employees and motivates them to meet their budgeted goals. You can periodically compare the budget with up-to-date financial results, providing real-time insight into how your company is performing. (A variance analysis of the actual versus budgeted income statement is a good example of this.) Since individual responsibilities and internal hierarchies are often accentuated during budget season, this clarity of roles can promote rapid responses to challenging situations. Budgeting makes it clear exactly where and when financial resources are needed so you can allocate them accordingly and keep the business on track. However, because budgets are prepared so far in advance and based on a fixed set of assumptions, they can quickly become outdated as soon as those assumptions change. This is where forecasting takes over—when budgeting can’t meet certain time-sensitive needs. What Is Forecasting? Forecasting is the process of analyzing historical trends in order to predict future business results based on your company’s most up-to-date actuals. Done over a compressed time frame, forecasting typically focuses on major expenses and revenue line items.  Here are the main characteristics of the forecasting process: Forecasting is performed regularly after financial statements are released, usually right after a month-end or quarter-end close cycle. Forecasts generally show summarized projections of revenue and expenses. Key performance metrics are updated based on forecasted numbers, ultimately providing insight into how your business is performing. Publicly traded companies must disclose their high-level forecasts to investors. What Are The Benefits of Forecasting? When done efficiently and with reliable data, forecasting gives you the insight you need to reallocate resources proactively and help your managers make data-driven business decisions. There are plenty of other benefits to forecasting, including:  Forecasting reveals business trends that help you determine if you need to adjust course. It’s easier to manage cash flows and capital requirements if you have a well-informed prediction of where future expenses are likely to fluctuate.  You can capitalize on financing and investment opportunities if you present reliable forecasts to your investors. You can draw on your forecasted numbers as the logical starting point for your next budget. Forecasting allows managers to focus their attention where it’s needed, especially in the short term. Budgeting and forecasting are complementary, but they’re definitely not the same. Before we get into best practices and common challenges with budgeting and forecasting, let’s break down the key differences between them. Budgeting vs. Forecasting: Key Differences Explained We already know that budgeting is figuring out how much money your company will need to spend in order to achieve its desired business results. Forecasting, on the other hand, is about proactively analyzing the budget and using both historical and real-time data to predict what those business results will look like. Check out the table below to better understand the key differences between budgeting and forecasting:   Budgeting Forecasting Projected Timeframe: 1–5 years Periodic Forecasts: The rest of the current fiscal year. Rolling Forecasts: Usually the next 5 quarters or more. Average Preparation Time: 3–6 months 1–4 weeks External Disclosure: Not Disclosed Disclosed (at least for public companies) Reliability: Less reliable later in the year when the numbers are outdated. More reliable because they’re based on up-to-date actuals. Best Used For: Formulating high-level strategies and business goals. Targeted decision-making in specific areas. Think of it this way: Your budget is your road map, highlighting key financial checkpoints for every phase of the business journey. But once that journey has started, it’s common for circumstances to change, ultimately outdating the original assumptions that were made when the budget was created. For proactive finance teams, best practices involve regularly reviewing your budget against the changing business environment, forecasting accordingly to determine where the numbers are headed, then adapting your plans as required. How To Build a Budget [In 7 Easy Steps] Budgets should always be as thorough and as detailed as possible. Generally speaking, your budget should include the following information: All planned revenue—including the types of revenue, value and when to expect it. Fixed costs for your business (employee salaries, rent, utilities, insurance, property taxes, etc.) Variable costs (supplies, travel and vehicle expenses, professional services, maintenance, etc.) As you build your company’s budget, it’s crucial that you follow these steps:  Review and understand all the required inputs for your budget (see above.) Analyze previous budgets and other historical data. This will help you determine your expense and revenue expectations for each fiscal month and year.  Consult with cross-functional stakeholders such as sales leaders, budget owners and C-suite executives so you can formulate the plan as a team. Determine if any capital expenditures (equipment, infrastructure, property, etc.) are required during the budgeted period. Prepare financial statements—balance sheet, income statement and cash flow—using your budgeted numbers. Identify KPIs and other performance ratios to see how the budgeted results stack up against previous years or anticipated changes in market conditions. Review the final budget and start looking at opportunities for strategic growth (investment and divestment opportunities, adding or reducing debt/equity, etc.) How To Generate a Forecast [In 5 Easy Steps] As you progress through your budgeted period, you should update your forecasts periodically as soon as your latest actuals are confirmed. This will give you a clearer picture of how your business is performing against your budgeted goals. Here’s how to generate reliable financial forecasts: Identify the key metrics (sales volume, marketing expenses, etc,) you want to focus on with your forecast. Ask yourself: “What am I trying to determine here?” Gather your latest actuals and input them into your forecast template. Determine the time frame for your forecast. (Periodic forecasts typically look ahead to the end of the budgeted period.) Calculate trends based on your historical and year-to-date actuals. Apply those trend calculations to your real-time numbers to come up with forecasted results. If you know of any variables that could skew your forecast (an upcoming influx of cash, merger, geopolitical conditions, etc.) be sure to account for those when you deliver the forecast to your stakeholders. Periodic forecasts are beneficial, but they usually only project out to the end of the current fiscal year. Rolling forecasts, on the other hand, are even more useful because they extend beyond that timeline. Rolling Forecasts Rolling forecasts are generated monthly, quarterly or weekly to help you plan for a defined period that’s beyond the scope of the annual budget—such as the next five quarters, for example. So instead of just projecting out to the end of the fiscal year, most rolling forecasts will predict the next 12 months or more. Once a fiscal month or quarter has been actualized, your forecast just “rolls” over to the next period so you never lose sight of your long-term business trajectory. Rolling forecasts are important for the following reasons: Businesses that prepare continuous rolling forecasts have more reliable information about long-term trends and performance, ultimately allowing you to mitigate risk and plan for the future proactively. Rolling forecasts use real-time data so they stay relevant all the time. You can tweak your forecasts on demand with up-to-the-minute numbers, which is helpful in fast-paced business environments where you might need to pivot on the fly. By projecting out beyond your current year, rolling forecasts ensure your future budgets and strategic plans are as well-informed as possible. How To Do Budgeting and Forecasting [11 Easy Steps] The budgeting process is hard work and there will likely be challenges along the way considering timeframes and all of the variables at play. So focus on the big picture, lay out a plan that makes sense and acknowledge that course corrections will need to occur along the way. Here are 11 key steps you can take to run an effective budgeting process for your business: 1. Assess Current Year-to-Date Performance To accurately assess the future, you need to understand the now. For example, what is your say:do ratio? Did your business lay out operational plans and achieve their respective corresponding KPIs and metrics in the first half of the year? Were goals under or over achieved? You need this context to correctly inform future forecasts and financial targets. Remember—your forecast and budget are just articulations of your operational and strategic plans. Identifying the who, what, where, when and why of your business activities will help guide your budget. 2. Re-Examine Your Long-Range Plan Leverage your long-range plan (LRP), also referred to as a target operating model (TOM), by syncing with your CFO and CEO to provide guidance to the rest of your executive team. Ensure there are no fundamental changes in your business strategy and that this high-level guidance reflects the company’s growth rates and corresponding investment levels. 3. Update Your 18-Month Forecast (2H Current Year + Next Fiscal Year) Update your 2H forecast and extend through next year with bottom-up budgeting. Are there gaps between the bottom-up plan and your long-range plan. If you’re optimizing your business, encourage other leaders in your organization to drive optimal outcomes through your company’s investments. As an FP&A leader, you moderate the organization’s needs between its leaders and investors to determine realistic goals. 4. Summarize Your Plan and Go ‘Sell’ It to the Board Summarize and present your proposed targets to your board of directors. (Get their support—you need it.) 5. Finalize Your Detailed Planning Complete your detailed planning when there are approximately three to four months left in your fiscal year. That’s enough time to incorporate any feedback received from your board of directors. 6. Plan To Grow by Product, Segment and Region As you finalize your detailed plan, ask: Where will our growth come from? How are we going to achieve it? Are we pursuing new channels, developing new products or contemplating new commercialization models? Are these included in your plan? Whether it’s marketing, G&A or another function, plan holistically to align your metrics to drive business forward in leap functions versus linearly. 7. Update Commission Plans (Including Plan Provisions) Update your commission and compensation plans to ensure the general philosophies support the ongoing business strategy. This aligns the corporate strategy, operational plans and the incentivization of your team members. Stronger strategic alignment creates stronger operational alignment. After you’ve established provisions, your FP&A (or often an Ops) team will assume responsibilities for detailed quota planning for the year. 8. Q4 Plan Review In the final month of the year, update your forecast to validate against your budget. If nothing has materially changed since your presentation to the board of directors, proceed. If there are major changes to your business’s trajectory or performance, make the adjustments before your next fiscal year starts. 9. Distribute Finalized Budgets to the Business Align your stakeholders by sending formal communication of the final budget to all budget holders. A CPM software allows every stakeholder works off the same plan and you’ve limited the possibility of misunderstandings. 10. Annual Kick-Off It’s time to celebrate—share your goals, operational plans and annual budget with the company. 11. Make Budgeting and Forecasting an Agile, Ongoing Process Budgeting and forecasting never ends. Review and plan monthly, quarterly and annually to drive your Plan To Grow™, comparing your actuals against your plan to drive an agile, ongoing approach to business planning. Common Challenges With Budgeting and Forecasting Every organization approaches budgeting and forecasting differently, with the complexity and scope of your processes determined by your company’s size, structure and industry. But budgeting and forecasting challenges can persist for any finance team—and the first step toward solving them is recognizing what those challenges are.  Here are some common challenges that might be holding back your budgeting and forecasting efforts: Disparate and Disconnected Data Sources According to the 2020 Vena Industry Benchmark Report, data silos are a challenge for 57% of finance teams. If you’re spending too much time wrangling numbers from your ERP, CRM, HRIS and other data sources, you won’t be able to analyze the story those numbers are telling you. This slows down the budgeting and forecasting cycle and makes it harder to plan proactively when business conditions change. Data silos also make it difficult to collaborate with cross-functional stakeholders, leading to unreliable budgets and forecasts that don’t capture a holistic view of your business. Manual Processes in Excel The 2020 Pulse of Performance Management Survey revealed that 82% of finance teams still use offline Excel spreadsheets for budgeting, forecasting and other core FP&A activities. But the same poll also found that 54% of the Excel faithful aren’t happy with their spreadsheet processes—saying they’re too labour intensive, they take too long to complete and they’re difficult to manage across the entire business. It’s clear that finance teams everywhere are comfortable and familiar with Excel. But once your organization reaches a certain level of maturity, offline spreadsheets won’t have the processing power for advanced budgeting and forecasting. Using Excel alone to manage your budgets and forecasts can lead to version control issues, data integrity problems and formula errors from keying in numbers manually. Ever had a template crash when you’re pushing towards a deadline? (Because that’s what often happens when you treat Excel like a database.)     No Workflows, Audit Trails or Data Validation Measures Budgets and forecasts have a lot of moving parts, which means keeping your contributors aligned is a pretty important job. But if you’re searching your inbox for template files, chasing down colleagues for numbers and constantly losing sleep over whether your data is accurate, it’s tough to keep track of your progress and maintain a healthy work-life balance—especially when you’re spinning over “final” budget version 14.1-a. That’s why you need to have workflows, audit trails and data validation measures in place. Confident budgeting and forecasting is a whole lot harder without them. How a Complete Planning Solution Makes Budgeting and Forecasting Easier According to this report from Deloitte, emerging technologies are reimagining the future of finance—and the teams that don’t embrace this evolution risk falling behind the eight ball. For budgeting and forecasting in particular, a complete planning solution can help you get ahead by making your processes faster, easier and more reliable. Read on to find out how. They Automate Manual Data Entries So You Can Spend More Time on Analysis A complete planning solution leverages both relational and OLAP cube database structures so you can bring all your financial information into one source of truth in the cloud. By integrating directly with your ERP, CRM, HRIS and other source systems, you won’t have to input numbers manually while building budgets or generating forecasts. Instead, the cells in your templates would be mapped right back to your data sources so the values just flow in automatically whenever you need to refresh them.  Here are some other benefits of automated data entries for budgeting and forecasting: You’ll be able to reduce budgeting and forecasting cycle times by up to 50% or more. Your budgets, forecasts and actuals can be viewed from the same template so you can more easily spot variances and identify emerging trends. You can drill down into transaction-level details right from your budget and forecast templates. That way, you always know where your numbers are coming from. With all that time saved, you won’t have to waste days wrangling data for budgets and forecasts. Instead, you’ll be able to focus on what really matters: Planning for the future of your business. They’re Flexible and Easy To Use So You Can Drive Teamwork and Transparency Across Your Business According to the 2020 Pulse of Performance management survey, ease of use is the most important feature for a budgeting and forecasting solution to have. Automations certainly help with usability, but your software still won’t get used if it's clunky and difficult to manage. In order to keep cross-functional stakeholders involved in your budgeting and forecasting processes, you need to choose a solution that’s flexible and accessible for everyone. Here’s how a complete planning solution fits the bill: Some solutions leverage a native Excel interface so you don’t have to abandon your comfort and familiarity with spreadsheets. You can even map your existing Excel templates back to the database, enabling a much smoother transition for you and all your colleagues. Complete planning solutions don't usually require any maintenance or management from your IT department. They are truly “finance owned,” allowing you to organize budgeting and forecasting in a way that makes sense for your business. Cross-functional stakeholders can all work from the same connected template. If somebody needs to change something, audit trails let you track, validate and approve those changes. You can also add commentary so everybody knows what’s going on. They Give You Room To Grow With Scenario Modeling, Dashboards and More If your business is always evolving, your budgets and forecasts are evolving too. However, if you don’t have the ability to level-up your processes as you grow, you’ll have a hard time adapting to the ever-changing needs of your organization.  A complete planning solution makes it easy to facilitate growth with a range of enterprise-grade features that complement budgeting and forecasting, such as: Scenario Modeling: This makes it simple to test your budgets and forecasts against an unlimited range of potential future business scenarios. With more insight into what might happen down the road, your budgets and forecasts will be as well-informed as possible.  Customizable Workflows: Want to add an additional executive review step to your budgeting process? That’s what workflows are for. This feature makes it simple to see exactly who’s doing what as you move through the budgeting and forecasting process. Automated email reminders make sure nothing falls through the cracks. Data Visualization With Dashboards: Let’s face it—graphs are prettier than spreadsheets sometimes. Dashboarding is especially helpful for forecasting because you’ll be able to actually show your stakeholders where your business is headed. Your budgeting and forecasting processes might not require all these features right away, but growing with a complete planning solution makes it easy to leverage them when you need to.

Maybe you love it, maybe you hate it—or maybe you don’t know what to feel. Whatever the case, like death and taxes, there’s no avoiding it. Corporate budgeting is a key finance function—and a successful budget helps drive a successful business. But whether your company budgets annually or on a more frequent cycle, there’s no reason to dread budgeting season—not if you have the right process in place. The best corporate budgeting process for your company will depend on your organizational culture—and when it’s aligned closely to strategy it will elevate your budget from “something that needs to get done” to a driving force for your business. In fact, when approached in the right way your budget has the power to bring your organization together, connect dots and eliminate silos—putting finance at the heart of everything your company hopes to achieve. Continue reading to explore different approaches to budgeting and how to make your corporate budgeting process a success. What Is Corporate Budgeting? Your corporate budget is key to enabling your business operations and executing growth. When built around your organizational strategy, it’s the tactical side of your business plan, ensuring resources are allocated in a way that sets your business up to operate effectively, meet its growth goals and keep up with ongoing market demands. To accomplish that, a corporate budget is made up of a series of lower-level budgets—including revenue forecasts, expenditures, working capital, cash-flow forecasts, financing needs, etc.—that all roll up into a single master budget. By aligning the budget to your strategic business plan, you ensure it consistently meets the needs of your organizational objectives. And that moves it away from just the administrative task it’s often been considered to become an integral part of your strategic planning process—and part of the operating plan that will drive your business forward to future success. How Do You Align Your Business Budget? Ideally, the budgeting process for a company begins with a clear view into strategy and objectives. Without that visibility, it’s tough to ensure your corporate budget meets all of your organization’s needs, with the right resources to facilitate programs, people and initiatives across departments. That’s where budget alignment comes in. Aligning your budget with your business strategy and KPI and goal setting is critical to success—and the more your finance team is involved in your business strategy, the more organic that alignment becomes. But even when finance doesn’t have a seat at the table, the best corporate budgeting process will keep them in the loop on organizational strategy and goals. To accomplish budget alignment follow these three steps:   Step Tactics 1. Keep your eye on the long term Expand the budgeting process past a year using strategic budgeting Break down organizational silos with tools such as scenario modeling or zero-based budgeting, funneling your strategic plan directly into your budget Implement technology solutions that make it easier to visualize your budget over the long-term horizon 2. Get your leaders involved early Whenever possible, get finance involved in building ongoing company strategy and organizational goal setting Use data-driven storytelling to frame your budget within a larger narrative of future company success Make the budget part of senior management’s regular routine—not just a single information dump 3. Measure your success and repeat it Choose the right metrics to track and measure to ensure you’re tying your budget to ongoing performance.  Make tweaks along the way based on your results to course correct for market changes and adjustments to your business goals.  Once you’re achieving budget alignment to strategic goals, consider linking budget performance to individual and team performance as well. Corporate Budgeting Best Practices Aligning your corporate budgeting process with your overall organizational strategy is the first best practice of budgeting. But that’s just the start. There are other ways to also ensure you have a successful budget that empowers business growth and helps your departments meet their individual goals. Consider four best practices for making your corporate budgeting process successful. 1. Connect your data Disparate and disconnected data is one of the top challenges faced by finance teams today—and that can become a very real pain during budgeting season. Data is critical to the budgeting process, allowing you to understand what drives performance, what’s contributing to organizational growth and where you’ve found success before, in order to fuel the current budget, predict its future success and make tweaks based on market and industry conditions along the way. So connecting your data and being able to access clean, current data will in itself build a better corporate budgeting process. 2. Consider the past Traditional budgeting uses your past performance and historical data as a starting point to inform your current budgeting process. Historical data is also critical for predictive budgeting and for understanding what drives your business growth. No matter what budgeting approach you take, though, don’t lose sight of that historic view. Comparing actual performance to past performance will allow you to better predict future performance, just like comparing your rolling plan to your longer-term strategic plan will let you see where you need to make adjustments in order to get to your goals. Model scenarios using that past performance data to understand the potential effects of your budgeting decisions. 3. Understand your critical drivers and KPIs Understanding which factors most contribute to your company’s growth will let you know exactly where to allocate your resources for a better chance of success. It’ll also make it easier to model scenarios to understand how they might affect future performance, so that you know exactly where to focus your budget for the best returns. And remember that non-financial metrics can be just as critical to your organizational performance—and your budget—as financial drivers. Non-financial drivers and KPIs play an important role in helping to keep your budgeting process on track, so always ensure they’re in your line of sight too. 4. Stay agile Finally, having some agility built into your budgeting process will empower you to make tweaks whenever the market or your business requires—ensuring you have the resources available no matter what. Budgets are traditionally inflexible, but finance teams today understand that changes are sometimes necessary—whether that means introducing rolling forecasting or a flexible budgeting process, or using scenario modeling to keep you on top of what’s ahead and letting you course correct your budget when you need to. How Do You Prepare a Master Budget? Your master budget is a sum of all of the parts that make up your business, including the budgets of every individual department and every revenue and spending consideration you’ll need to make. The department, program and line(s)-of-business budgets feed into your master budget to inform how resources are allocated company wide. So how do you do that successfully, so that every element of your business is represented in your consolidated budget? Consider some do’s and don’ts for preparing a successful master budget: Objective 1 Don’t budget in a silo Collaboration is key. For your master budget to be successful it’s going to need input from across the organization—from your department managers to your executive team. You’ll rely on them to provide the information you need to determine the people, programs and initiatives integral to achieving your organization’s goals—and to help you decide where resources should be allocated so that every piece of your business is equipped to contribute to its success. Objective 2 Do have a budget calendar Gathering all of those contributions into a master budget requires a detailed budget calendar that will keep it on schedule. After all, getting to the finish line on time means keeping your process—and all of the people involved in it—on track. Missing something or someone could mean a project, program or team doesn’t end up with the resources they need to make your final goals a reality. Objective 3 Don’t lose sight of the data You’ll need a process by which data is handed off between stakeholders, models to be used by each different part of your organization to ensure everyone contributes their unique information and a method to pull everything together. Objective 4 Do measure and report Use your master budget to measure your company performance and ensure you’re allocating resources in the right way. By comparing budget or forecast data with past performance through financial reporting you’ll better understand whether you’re on track with company goals. Preparing a successful master budget, then, is all about people, processes and tools—as well as the data that underlies all of them. By collaborating across teams, having the right processes in place and using technology to connect data from different formats and across sources, you can create a single version of the truth and ensure a connected, comprehensive budget that takes into consideration every part of the business. Top-Down vs. Bottom-Up Budgeting Will you start your budget from the top-down or take a bottom-up approach? Most types of budgeting fall into one category or the other. Top-down budgeting is a form of budget allocation, beginning with a set amount and allocating resources accordingly across departments. Senior management creates a budget for the business as a whole, allocating resources to each team according to business-wide objectives and targets for the year ahead. They use past performance and existing market conditions to feed the budgeting process—often with some funds set aside to allow for any final shuffles. Bottom-up budgeting starts at the department level. Individual teams prepare budgets based on their needs for the budgeting cycle ahead, with company-wide objectives shared to protect against siloed requests. Departments present their budgets for approval and the budget committee approves or disapproves line items from there. While neither model is inherently better or worse than the other, they each take a different route to budgeting success—and each have their own pros and cons.   Pros Cons Top-Down Budgeting It’s often built around targets based on your company’s long-term plan Executives get involved early—which means their buy-in is built in It can be more difficult to get departmental buy-in It can create an “if you don’t spend it, you lose it” environment Bottom-Up Budgeting It can be more efficient—and accurate— in terms of how resources are allotted It’s more aligned with departmental needs It can lead to over-budgeting It can take longer to complete (unless aided by the right technology) The best approach for you will depend on your organizational culture and whether teams prefer to build their own ideas from the ground up or let leadership guide them. It may even vary from year to year or from budget to budget, depending on the specific goals your business wants to achieve. Finally, some finance teams choose to approach their budgeting from both directions—with a longer-term plan taking a top-down approach, for instance, and short-term budgeting using a bottom-up model. Zero-Based vs. Traditional Budgeting Zero-based budgeting is one example of a bottom-up budgeting process.   As a way of ensuring your budget remains aligned with current financial performance and priorities, zero-based budgeting (ZBB) makes “zero” its starting line. While traditional budgets rely on your current year’s budget as a jumping-off point for the new year’s budgeting cycle, ZBB takes a different approach, wiping the slate clean every time. With traditional (or incremental) budgeting, certain expenses are fixed, while deeper analysis is reserved for new expenses. This can help to quickly seed your plan, but also means you potentially miss out on changes to your business operations, as well as possible cost savings and investments that might help your organization evolve. ZBB, on the other hand, can promote transparency and a holistic, organization-wide view, while giving departments an incentive to look for potential cuts. Every expense is connected to ongoing financial performance and company goals, and new and ongoing expenses are examined with the same level of scrutiny to see where funding should go. By starting at nothing every time, ZBB makes sure every expense is connected to ongoing financial performance and aligned with company goals—an approach that can have both advantages and drawbacks. Pros of Zero-Based Budgeting It can lead to significant cost savings, giving you new dollars to invest in other places while improving operational efficiency as a whole. It gives your team true visibility into your organization—allowing you to establish stronger leadership and insights. It can make for better collaboration organization wide, as you determine the programs that should be prioritized and how they’ll work together to contribute to company goals. It can make your company more agile, keeping teams on top of every expenditure and goal—and giving them the insight to pivot quickly when needed. Cons of Zero-Based Budgeting It can be more complex and costly—requiring more time from your team to complete. It can take specialized training or operational acumen to do it right. It requires complete organizational buy-in—otherwise it may put other departments on the defensive as they try to justify their programs and initiatives. Without the right metrics to analyze, it can potentially impact departments that offer less tangible results.   With the right organizational culture in place, zero-based budgeting can help you move your planning process and decision making forward. But of course, zero-based budgeting isn’t the only option—there are several ways to approach your budgeting, depending on your goals. Driver-Based and Predictive Budgeting What drivers are influencing your business? And how will your budget empower your long-term goals? Driver-based budgeting and predictive budgeting take those questions and center your corporate budgeting process around them. In doing so, they can help focus your budgeting on the things that matter most—and allow you to remain sensitive to what’s contributing to your organizational success. Driver-Based Budgeting Every business has its own unique drivers—both internal and external. Traffic, demand, interest rates and even—in some cases—the weather outside, can all help drive the success of your business in any given year. Driver-based budgeting (DBB) takes those critical drivers into consideration, tying the drivers most likely to influence performance directly into the budgeting process. By doing so, DBB gives you long-term visibility into how those drivers affect your company’s strategy and goals, using a rules-based approach to focus your budget around strategic objectives and tell a story as to what contributes to your organization’s performance and how. To accomplish that, DBB looks beyond your line items to the data underneath—identifying what’s driving your performance, good or bad, how those drivers correlate with the resources you’re allotting and who’s accountable for them. That goes beyond financial, taking into consideration non-financial drivers too and incorporating them into your budgeting process. It also includes both internal drivers and those external to your organization. Some examples of internal and external drivers include: Internal Drivers External Drivers Traffic Market size Demand Market changes Market share Competitor market share Number of customers Buying trends Sales volumes Interest rates Sale price Regulatory requirements Unlike traditional budgeting, which starts with a line item and works its way backward, DBB begins with an operational driver and ends with its financial outcomes—allowing you to look at the business activities and resource requirements needed to accomplish those goals and directly allocate towards them. In doing so, it links your budget items directly to the people and resources connected to them. A driver-based process can help you align and focus your budget and provide you with insights that let you make decisions more efficiently and keep your executive team informed. But it can also get complicated the more complex your organization is and the more key drivers you have in play—and may mean a shift of focus for your individual teams. Introducing it successfully takes executive support and a clear line of sight to the data you require. But with those in place, DBB can help you open up visibility into company performance—and help you better understand what it’ll take to keep building towards success. Learn about how to apply driver-based budgeting to your business. Predictive Budgeting Often used as a system of oversight, predictive budgeting relies on predictive analytics to aid the corporate budgeting process and help ensure long-term alignment with strategic goals. It often lives outside of your traditional budgeting process, and is used as a way to check yourself and ensure your budget is on track with organizational objectives. Predictive budgeting lets you create intelligent drivers or ranges of possibilities by drawing on broad sets of data, leveraging statistical algorithms and applying machine learning to look into the future—determining potential short- and long-term outcomes through the application of historical data. In doing so, it allows you to better understand your budget’s potential flaws: where it may not align with your organizational goals, when department managers might have added extra padding into their resource requests or opportunities you might have missed to support your business’s key drivers. Predictive budgeting can also help to: Make cash-flow projections and better understand the cash flow needed in the budgeting cycle ahead. Identify your critical drivers and better understand the business activities you can invest in for your optimum financial outcome. Recognize areas of the business that need attention and identify any holes in your budget that might set your plans up for failure. But as the next frontier in planning, successful predictive budgeting relies on a specialized team member or extra training for your existing team to get right. The right data is also critical—including, ideally, at least a few years of historical data—as well as the technology that will allow you to access that data across disparate data sources and apply modeling and analytics to see what the future holds. With all of that in place, though, predictive budgeting can help you build a better budget and layer data-driven storytelling into your budgeting process. It can also reduce inefficiencies and ensure long-term budget alignment with your strategic goals. Rolling Forecast vs. Static Budgeting Just as important as staying ahead of your budgeting needs is ensuring your budget is keeping up with ongoing performance. Rolling forecasting can help with that. By adding and dropping a week, month or quarter every cycle, a rolling forecast always has a view into the future, letting you look 13 weeks, 12 months, four quarters or 18 months into the future at all times—whatever makes the most sense based on the business process or planning outcome to which it's being applied. In that way it differs from a traditional static budget, which is tied to a fixed timeframe. By working on a moving timeframe, rolling forecasts help maintain visibility into recent performance while better projecting future needs, allowing you to remain agile to new trends and requirements while continuing to move the planning horizon forward. This is specifically useful if you’re at a high-growth company, have to make medium- to long-term commitments like hiring decisions or inventory purchases, or need to keep up with an ever-changing industry. But rolling forecasts can also work alongside more static budgets, incorporating elements of both so that rolling forecasts become an extension of your annual budgeting process. They may be introduced as a process of review at regular intervals to keep up with current performance and changing market conditions—or may be applied only to certain areas, like revenue or cash planning, with a more traditional approach used elsewhere. For your rolling forecasts to be successful, consider these six best practices: Always keep your business-wide objectives front of mind. Align your rolling forecast with your company strategy and iterate your forecast as those goals and plans change. Choose a timeframe that works for your business. Match your timeframe to the rate at which your company is evaluating progress and the pace of the industry around you. Make a choice on how granular you want to get. Focus deeper analysis on the drivers that promise to most impact your strategic goals and ongoing performance. Choose the right technology to facilitate your forecasts. Choose a tool that ensures your forecast has the inputs it needs to be useful across your business strategy and KPIs. Incorporate the best data available. Leverage areas where your data is clean, then use forecasting to build transparency and accountability, for even cleaner data over time. Measure along the way to track execution. Use dashboards and visualizations to track execution so that you can see how your forecast keeps up with ongoing performance. Just remember: however you approach your budgeting process, keeping it aligned to your organization’s culture, strategy and future objectives will be key to its success—and your business’s continual achievement. Now go out and build your organization a better budget!  

GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) are two key regulatory requirements related to financial reporting. Reporting is one of the fundamental functions of a finance team, but not all reports are created equal. That’s not a snub, either. It’s by design. Financial reporting has different requirements than management reporting, just like tax accounting and auditing have their own forms and functions too. Each has unique uses and applications, and some (ahem, financial reporting), have very specific guidelines. GAAP and IFRS are regulatory requirements and standards that can make financial reporting more time consuming and complicated than its counterparts, often taking attention away from your other reporting needs. More specifically, keeping up with the reporting you do for investors, banks, creditors and regulatory bodies can make it difficult to find the time you need to focus on the management reporting that will help you better understand your organization’s internal requirements.  Let's explore both requirements, and learn how to better balance your financial and management reporting needs, let’s look at each in turn—as well as how GAAP and IFRS factor in, considering the following: What Is GAAP? In the U.S., the Generally Accepted Accounting Principles (GAAP, or U.S. GAAP) is the standard set of rules for financial reporting. GAAP is adhered to by the SEC and issued by the Financial Accounting Standards Board (FASB). GAAP covers topics such as retained earnings, revenue recognition, financial statement presentation, balance sheet classification, liabilities, foreign currency, transactions and so on.  What is IFRS? The International Financial Reporting Standards (IFRS) outline the accounting principles put out by the IFRS Foundation and International Accounting Standards Board (IASB). They’re currently used in over 140 countries worldwide, including the European Union—establishing a common language and standardized definitions across countries and continents. IFRS covers topics such as the presentation of financial statements, revenue recognition, employee benefits, fixed and intangible assets, etc. What Are The Differences Between GAAP and IFRS? The standards you adhere to will differ depending on where your company is listed and where your stakeholders operate—but that’s not the only thing that’s different about them. GAAP: Is rules based, GAAP principles leave less room for interpretation GAAP allows for LIFO (last-in, first out) inventory accounting methods GAAP does not allow for inventory reversals  IFRS:  Is principles based, IFRS leaves door open for more interpretation when compared with GAAP IFRS does not allow for LIFO IFRS allows inventory reversals under specific conditions   As well as some differences, there are also similarities. Both allow for the the first-in, first-out inventory accounting method, and the weighted average cost method. Organizations working across borders, or handling international mergers and acquisitions, may be required to keep up with both GAAP and IFRS, so a knowledge of each—and the similarities and differences between them—is critical. Whether you’re keeping up with either or both, it can be detailed and time-consuming, as you must be careful to format your statements appropriately and make each calculation according to the specific guidelines.  Maintaining Your Financial Reporting Needs While there’s a lot your team can learn from your financial reporting that will help drive long-term strategy and performance, the most regulated of that reporting is specifically designed for external use. Through a standard reporting language, investors, creditors and bodies such as  the US Securities and Exchange Commission (SEC) can discern the health and performance of your company and compare your financial results against other organizations and market norms. In addition to any applicable reporting requirements set by industry-specific agencies, the main standards your financial reports follow will depend on the set of ruling principles you’re applying: GAAP or IFRS. Like all accounting standards, reporting requirements under GAAP versus IFRS are designed to offer a set of general rules and guidelines for reporting. They also make sure everyone is working by a standard set of methods and definitions no matter what industry you’re working in.  Their goal is to make sure nothing is missed, everything from commission tracking to variances in budget vs actuals. Your financial statements should be consistent, comprehensive and comparable. Standards like these maintain transparency and ensure that investors and creditors have all of the information they need in a format they can easily understand.  Prioritizing Management Reporting  Management reporting, on the other hand, isn’t regulated in the same way. That’s because, for the most part, your management reports are used internally, for everything from day-to-day operations to Board of Directors reporting. You’re able to report in a way that best meets your business needs and aligns with the external explanations of how your business runs. And since your audience is also internal, you can organize your information around them.  This means you can include forecasting or predictive data, segment down to different parts of the business or departments and incorporate an operational view for a fuller, more integrated, picture of your business. And while financial reporting can offer internal insights of its own, it’s the information in your management reports that will drive your organizational decisions and help you see whether you’re meeting your business goals. All of which is proof that management reporting is just as critical to your organizational success as financial reporting. In fact, they often work best in tandem, with a second internal view of your financial reporting that’s not for regulators. That view can be more aligned with your organizational structure or a click down from the high-level reporting that you send out. There, operational metrics may be woven in for more of a data-driven storytelling approach, with your management reporting a click or several clicks further down, providing details on KPIs and a deeper dive into your operational numbers for sales, HR, marketing and so on. But even so, when your team’s time is tight and the regulatory needs of GAAP and IFRS prioritized, they can start to take focus from your management reporting needs. So how do you find the right balance between the two, to keep up with GAAP and IFRS while still staying on track with your internal reporting requirements? Finding the Right Balance You want your finance team to have the time to analyze your business while still meeting the reporting and governance requirements of any external guidelines or entities—whether that’s GAAP or IFRS, the SEC, banks or any outside bodies specific to your industry. To accomplish that, start by considering your people, process and technology: Allocate your team accordingly  Traditionally, financial reporting has been the realm of more senior, or at least higher paid, team members, because it does require a certain amount of regulatory knowledge. But since your management reporting is directly tied to your strategy and business goals, it’s imperative in helping to move your organization forward. As such, it may also require executive or a senior member’s involvement, depending on finance’s role in strategy within your organization. So don’t put all of your senior finance team members into one financial reporting-sized basket. Rather, to effectively and efficiently execute both your financial and management reports, treat your reporting like a team sport—allocating senior and junior team members according to their different skill sets. Consider those with technical accounting skills and regulatory knowledge, those who have an understanding of how your organizational data rolls up, team members who can prepare and book journal entries and make sure bills are properly coded, and those who can check and validate numbers and build controls. Then assign those team members as needed, leaving senior leaders to tie your reporting to the organization's strategies and goals. Build a standard process  Create a process that draws data in a uniform way and takes advantage of automation wherever possible. Your processes should also be designed around your goals and timelines so that you’re able to keep on track with your objectives on both the financial and management reporting fronts. Ensure you have the right checks and balances in place as well, especially when it comes to meeting your financial reporting needs. Finally, the right financial and regulatory reporting processes will self-identify errors and make it easy to retrieve the needed data and to build proper documentation and support practices—giving your team the space to concentrate on other things. Find the right technology The right technology will help you automate where possible, ensure data consistency and quality, and keep your reporting running smoothly across the board, facilitating team collaboration and mitigating error. A multidimensional database will also help you bridge your different reporting requirements, rolling up the details you access in a variety of ways depending on your required output and the insights you’re after.  It can be a balancing act to keep up, on a timely basis, with the requirements of GAAP and IFRS and the needs of the external bodies, investors and banks that use them and expect the consistency they bring—all while still prioritizing your internal reporting needs. Especially when new guidelines can be added that require you to go back to your prior reporting and recalculate or roll up data based on newly introduced methodologies—which can be a reality when working with guidelines like these. But the right mix of people, process and tools can help achieve that balance—and ensure you’ve got the information you need to make the right decisions internally while still keeping up with your external reporting needs.

Numbers paint a picture, tell a story, reveal the truth. As such, it's critically important that your financial reporting is accurate, thorough, and up to date. As one of the minds leveraging those numbers, it’s your job, as part of the finance team, to tell that story and paint a picture that helps everyone better understand your company’s financial performance—all to get to the truth behind your organization’s total health. And one of the most important tools you’ll draw on to achieve that is your financial reporting. Financial Reporting Paints a Comprehensive Picture Built around three foundational documents—your income statement, balance sheet and cash flow statement—financial reporting provides a comprehensive picture of your business’s financial results and trends. Doing so helps you deliver insights and informs the decisions made throughout your company and beyond. Everyone from your executives, board members and department-level staff, as well as the regulators, creditors and stakeholders with a vested interest in your organization, rely on the numbers revealed within your financial reporting.  There’s a lot you can learn from the numbers in your financial statements. You just need to know how to look at them. And that starts with the following: What Is Financial Reporting? Financial reporting is a formalized view into your organization’s financial performance. The three most important financial statements for running your business are your income statement, balance sheet and cash flow statement. For public companies, financial reporting is a regulatory requirement with set deadlines in place, but both private and public companies also use it to keep key stakeholders informed as to a company’s current and future financial status. It empowers investors, executives and boards of directors as they assess their ongoing strategy and goals, make investment decisions and decide on any adjustments to the company’s ongoing trajectory. Your Core Financial Statements Three core statements make up the foundation of your financial reporting. Your income statement, balance sheet and cash flow statement provide a key piece of your organization’s story. They’ll become the base of the reporting you file for tax purposes and creditors, the documents you provide to regulatory bodies like the U.S. Securities and Exchange Commission (SEC) and the data you draw on for your Annual Report and internal documents, dashboards and reporting. The income statement, balance sheet and cash flow statement fit together to reveal a big picture view of your business. Here’s a brief description of each: What Is the Income Statement?  Your income statement, otherwise known as your profit and loss (P&L) statement or statement of earnings, tells you exactly what it purports—how much income you’ve got coming in or not. In other words, it shows you how profitable your business is based on the relationship between revenues and expenses. Your income statement outlines revenues and expenses and is used to measure your organization’s profits and losses during the reporting timeframe. In doing so, it helps measure the profitability of your business. What Is the Balance Sheet? Also known as your statement of net worth or statement of financial position, your balance sheet looks at your business’s total assets, liabilities and shareholders’ equity. It allows you to measure rates of return and demonstrates how your assets are financed—whether through debt or equity. Your balance sheet is a key document for shareholders, regulators and tax authorities looking to determine the health of your organization. What Is the Cash Flow Statement? Your cash flow statement provides critical data on how your money is being spent, where it’s coming from and whether there’s enough available to keep up with operating expenses and ongoing debt repayment. It tracks cash movement for stakeholders of all kinds—including investors and creditors, as well as your own team—and must eventually be reconciled to the bank to make sure you’ve covered all your cash transactions. Your cash flow statement can be prepared in two ways: the direct or indirect cash flow methods. Both calculate your net cash flow from operating activities. The main distinctions are the starting point, the types of calculations you use, and the level of detail in the information you disclose.   The 5 Types of Financial Ratios  Those three foundational financial statements provide you with the numbers you need to tell the story of your financial health, empowering you with key data both your internal and external stakeholders will draw on to establish critical insights about your business. But the numbers themselves are just the start—developing true insight starts with some basic calculations, otherwise known as financial ratios. Financial ratios enable you to perform quantitative analysis that lets you understand your organization better. There’s an entire list you can draw from to tell the story of your business better. All of them fall under one of five main categories: 1. Profitability Ratios determine your organization’s ability to generate profit relative to revenue, operating costs, balance sheet assets and shareholder equity. They do this by showcasing how much profit your company can gain from those assets. For example, return On Assets (ROA) measures your company’s efficiency in generating earnings from assets. 2. Liquidity Ratios measure your company’s ability to pay off its current debt without raising extra capital. Your Current Ratio, for example, looks at current assets in relation to current liabilities. This helps investors better understand your organization’s ability to pay off short-term debt obligations. 3. Efficiency Ratios calculate how well your business manages its assets and liabilities internally. Your Inventory Turnover Ratio, for instance, measures the rate at which your company turns over inventory in a specified period. Ultimately helping you better determine pricing and when to purchase new inventory. (Read more about boosting the efficiency of financial reporting in this post) 4. Leverage Ratios determine how much of your organization’s capital is assumed through debt and evaluate how reliant you are on debt for growth. Your Debt-to-Equity (D/E) Ratio, for example, calculates how much your equity is leveraged against your outstanding debt to determine how much of your business is financed through debt. 5. Market Value Ratios calculate your publicly held company’s current share price, helping investors evaluate whether those shares are overpriced or underpriced. For example, your Earnings Per Share Ratio looks at your company’s profit in relation to outstanding shares to let you and your investors know how much money your company earns from each share of its stock. Financial, Operational and Managerial Reporting  Of course, your financial reporting isn’t the only type of reporting happening in your organization. Management reporting (or managerial reporting) and operational reporting are just as important for building your business, moving your organization towards its goals and providing an up-to-the-moment picture of your day-to-day operations. They’ll help you better understand the root causes of your organization’s financial health. Let’s look at each in turn: Financial reporting As outlined above, your financial reporting looks at your financial results and supporting information. In doing so, it provides you with key data that informs your internal business decisions and is shared externally with shareholders, regulators, creditors and investors. As such, it needs to meet certain regulatory requirements and follow a specific format.  Management Reporting This isn’t regulated in the same way. That’s because, for the most part, your managerial reports are only used internally, for everything from your day-to-day decision making to Board of Directors reporting. You may choose to include forecasting or predictive data, segment down to different parts of the business or departments and incorporate an operational view for a fuller, more integrated picture of your business. Operational Reporting This shares the details of your organization’s day-to-day operations with data around such things as production costs, resource expenditures and the processes you have in place. How often you choose to report on each will depend on your organization. But the point is to concentrate on the short term and drill down into the areas that will provide the insights your company needs to operate day to day. Together, this reporting will tell a fuller story of your business and its needs. But keeping pace with those reporting requirements can be a challenge, especially when you consider standards such as the generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS), which regulate your financial reporting and can be time-consuming for your team to maintain. GAAP and IFRS: The Financial Reporting Standards  Depending on the industry you work in, you may have unique reporting requirements you’ll need to adhere to—but two main sets of standards continue to regulate financial reports across industries. Whether you adhere to GAAP or IFRS will depend on where your company is listed and where your stakeholders operate. GAAP and IFRS are both designed to offer a set of general rules and guidelines for reporting and ensure everyone is working by a standard set of methods and definitions. Organizations working across borders or handling international mergers and acquisitions may be required to keep up with both. What is GAAP? GAAP stands for Generally Accepted Accounting Principles. GAAP is the standard set of rules for financial reporting in the U.S., GAAP, is adhered to by the U.S. Securities and Exchange Commission (SEC) and issued by the Financial Accounting Standards Board (FASB). GAAP covers topics such as retained earnings, revenue recognition, financial statement presentation, balance sheet classification, liabilities, foreign currency, transactions and so on. What is IFRS? IFRS stands for International Financial Reporting Standards. The IFRS Foundation and International Accounting Standards Board (IASB) is currently used in over 140 countries worldwide, including the European Union. It establishes a common language and standardized definitions across countries and continents, covering topics such as the presentation of financial statements, revenue recognition, employee benefits, fixed and intangible assets, etc.  Your Financial Reporting Timeline  Of course, the timing of your operational reporting and managerial reporting is up to you. And it will depend on your goals, processes, and the resources you have to draw from—financial reporting has a cadence of its own. For public companies, the timing of some filings are regulated by bodies such as the U.S. Securities and Exchange Commission (SEC). For others, they are set internally and will depend on your organization and stakeholder demands. Here’s a rundown of some of the key dates in your financial reporting timeline: Annual Reporting  What Is Form 10-K?  Produced annually, Form 10-K is an SEC filing required of all publicly held companies and designed to comply with specified guidelines. In addition to your audited financial reports, it includes detailed information on operations. It provides discussion points that help investors assess your business performance and the risks facing your company. When is Form 10-K Due? Due within 60 to 90 days of the closing of your fiscal year. What is an Annual Report? Your Annual Report is designed largely for shareholders and is often featured on your corporate website. It can be glossy, colored and dynamically designed and is usually an abbreviated version of what’s included in your Form 10-K. It features information on company activity and finances, including your balance sheet and income statement. When is an Annual Report Due? Usually published within three to four months from the end of your fiscal year. Quarterly Reporting What is Form 10-Q? Your 10-Q is filed quarterly to the SEC and is another standard requirement for publicly held companies. It offers a view of performance over the quarter that’s passed, with fewer details than Form 10-K and financial statements that are usually unaudited. It can offer insight into the changes your organization is experiencing and provide a timely sense of any legal risks that might be forming. When is Form 10-Q Due? Due within 45 days from the end of each quarter. What Is A Quarterly Report? Your Quarterly Report collects your ongoing, unaudited financial statements on a three-month cycle—including your balance sheet, income statement and cash flow statement. In addition to giving stakeholders a sense of your quarterly figures, it may also include year-to-date information and comparative data from past quarters. When Is A Quarterly Report Due? Usually shared a few weeks after the end of each quarter. Monthly Reporting What Is A Month-End Report? Your month-end reports help you stay on top of your financial performance and ensure everything continues to run smoothly. Done largely for internal use, monthly reporting doesn’t have the same external uses as the reporting above. This means the form and timeline it takes will vary based on your company’s needs. You’ll usually want to include your balance sheet, income statement and cash flow statement. But depending on your business may choose to supplement those with additional reporting, such as a bank covenant report, an analysis of inventory, your debt/EBITDA ratio, working capital analysis and so on. This monthly reporting helps facilitate ongoing decision-making and ensures you’re working towards your company goals. When Is A Month-End Report Due? Produced anywhere between a few days and a few weeks after the end of each month. Financial Reporting Challenges and Examples  Financial reporting is a basic requirement of your finance team. At the same time, it's clearly a critical part of business activities such as strategic planning, investor relations, taxes and SEC filings. But just because it’s so critical and pervasive doesn’t mean it isn’t without its challenges. Here are a few examples of common issues your team may be facing as you work to meet your financial reporting needs. Time It can be manual and time-consuming. Reporting can take a lot from your team, both in terms of time and effort. This is true even if you’re using software like Excel. As you push beyond what Excel was meant to be used for—from sourcing and manipulating your data to sharing your reports with applicable stakeholders in a variety of formats—it can start to get tedious for your team. It also drains the resources you have. More scalable technology and automation will help you get more value from your finance team. At the same time, cut down on the work spent on repetitive, manual tasks. Inaccurate There’s potential for inaccuracies. With all of that manual labor comes the chance for— even the inevitability of—mistakes. Those could come in the form of information that gets lost in translation. Or, they could be the result of data that is entered incorrectly. Whatever the reason, those mistakes can be more than just a nuisance. They can have serious repercussions on your final published results and the accuracy of your regulatory and stakeholder reporting. Incompatible Yes, the data your financial reporting offers will be integral to your organization’s success. But when it exists in a silo, it’s harder to apply to the deeper analysis you need. It can be incompatible with deeper analysis. By bridging your different types of reporting—and using technology that allows you to drill down into deeper levels of detail, apply real-time forecasting and visualize your data in various ways—you can start to build more powerful insights from your numbers. The right tools can help you improve your financial governance to build a more efficient and accurate process for your financial reporting—and ensure it’s offering you the chance to dive into the insights you need. Find out how Vena customer PRGX Global overcame their reporting hurdles.  Exploring the Numbers With Financial Dashboards Better tools can help you build a more efficient financial reporting process. At the same time, they will enable you to share your results organization-wide, so everyone is working towards the same goals. One such popular tool is the dashboard. Dashboards are a powerful snapshot of your business, made by tracking holistic metrics and KPIs—from financial and operational metrics to those that look at sales and marketing, HR and customer success. They communicate your performance against your strategies and values and track the ongoing health of your organization. They do this by pulling from many data sources—including your financial reporting data—to offer a single view. In doing so, dashboards help you leverage your data to drive your business forward, facilitate collaboration and transparency and communicate performance to your executive team and organization as a whole. They also empower finance teams to focus on key company metrics and help your entire organization better understand how those metrics affect its bottom line. When produced effectively and efficiently using the right technology, dashboards can provide transparency and access to your entire organization. What are the three key dashboards? The right dashboards will help you track and evaluate your entire organization’s financial performance—giving you more relevant and reliable visibility into the business’s health as a whole. And for many companies, that visibility starts with three key dashboards: 1. Business Health Dashboards: Business health dashboards evaluate both short- and long-term financial metrics based on your company’s short- and long-term goals. For full transparency and visibility, they should also include budget to actual variance analysis. 2. Employee Health Dashboards: Employee trends and behavior affect a company’s bottom line and, as such, are a vital measurement for finance teams. Effectively tracking and acting on employee health findings means working closely with HR and syncing HR data with financial data to determine what the numbers mean for your business. 3. Customer Health Dashboards: Measuring how existing customer relationships impact your bottom line can help sales and customer success teams understand where they should focus their efforts and resources. Customer health data also provide insight into the stability of your company’s customer service function. Read more about these three critical dashboards. Essential Financial Dashboard Metrics By offering ongoing financial data, dashboards help you keep on top of your organizational performance. They let you dig deeper into that data and connect it with your operational and management reporting, so you have a holistic, connected view of your business. At the same time, they make sure everyone is working off the same information and building towards the same business goals. So what financial metrics should you focus on as you populate those dashboards? These five: 1. Operating cash flow: This is a measurement of how much money your business brings in from its daily operations. Your operating cash flow offers insights into whether your organization is in a good position for growth. It also tells you whether you’ll be able to maintain a positive cash flow. 2. Operating expenses: These are the expenses your organization incurs through standard operations. They include rent, inventory costs, payroll, insurance, inventory costs, etc. Your operating expenses (OPEX) help determine where you might be able to make cuts during tighter times. 3. Net profit margin: This shows you how well your business is building profit compared to revenue and what percentage of each dollar earned is actually profit. Ultimately, your net profit margin determines how fast your organization is growing and how well it’s meeting long-term goals. 4. Working capital: By tracking available cash, short-term investments and accounts receivable, your working capital tells you how well your business can generate cash quickly. They also tell you whether you’re able to meet your short-term financial obligations. 5. Sales growth: By measuring your sales team’s ability to increase revenue over a certain period, sales growth offers insight into your organization’s profitability. It also offers insight into whether your business is growing or stagnating. Just as important as choosing the right metrics for your business is ensuring everyone has a clear definition of each and knows why you measure it. By putting everyone on the same page, you’ll keep everyone working towards the same goals. Learn more about how to use your financial reporting data to fuel operational success. The Benefits of Automating Financial Reporting  The right tools can help your team streamline your financial reporting and your managerial and operational reporting—and bring everything together through effective and meaningful dashboards. By automating repetitive manual tasks, you’ll also get more done in less time and free up your team to focus on analyzing the numbers, uncovering new information and shaping the strategic direction of your business. In doing so, automation can help you: 1. Better ensure accuracy and data integrity. You’ll be able to ensure your data is sourced accurately and nothing gets lost in translation or gets missed due to human error. 2. Make better, faster decisions. You’ll be able to turn your data into insights—and put those insights into action—faster. 3. Boost stakeholder satisfaction. Automation will help you get more accurate data and more powerful insights in front of your stakeholders more quickly. 4. Turn information into action. By automating the repeatable tasks, you’ll be able to spend more time developing actionable insights for your business. Automation can also help you build a better audit trail by creating a log of your data, workflows and processes. This gives stakeholders a lens into the data you pulled from and the calculations you performed and helps identify any potential errors that might have happened along the way. You’ll be able to highlight any red flags early and deal with them before they become more serious problems. All of which can help you up your financial reporting game. And, of course, getting to the truth behind the numbers faster and more effectively. Find out what other benefits you can gain by automating your financial reporting.

This is the third installment in a series of blog posts based on Vena’s ongoing “Women in Finance” video series. Each post corresponds with a different interview with a woman in financial leadership. Watch Episode 3 below.   For Muneerah Kanji, the definition of good work-life balance comes down to one thing: having enough time for all of the important things in your life.  Over the years, Muneerah’s ability to actually accomplish that, though, has been a little hit or miss. “It’s never perfect. Work-life balance is not 50% here, 50% there—it’s a sliding scale,” she says. “Some days you devote more time to work, some days you devote more time to family. But as long as you have that flexibility, you have that even-keel balance.” By taking that approach, Vena’s Vice President of Finance has been able to find her way to the top echelons of finance success—all while raising a family of her own.  It hasn’t been a direct path, though. In fact, she pursued a career in pharmacology and toxicology before even deciding to pursue her MBA and CPA designation. She’s worked across industries since, and over that trajectory, she’s learned a few things about establishing boundaries and building positive work-life balance. Muneerah shared those experiences in Vena’s third Women in Finance video, Finding Work-Life Balance in the Hybrid Workplace. And during the interview with Wendy Braithwaite, Chief Financial Planning & Orchestration Officer at Microsoft Canada, she offered some tips on achieving better work-life balance.   Let’s take a look at some of the benefits of setting boundaries and achieving positive work-life balance first. Then we’ll see what advice Muneerah offers on how to achieve that balance while still building towards your leadership goals. 💡Key Takeaways: Setting boundaries and establishing good work-life balance can have a positive impact on long-term career success, helping keep burnout at bay, teaching you to communicate your needs and instilling the traits of good leadership early on. Establishing work-life balance isn’t always easy—especially early in your career. Being more intentional with your home life, by making plans and keeping to them, can help, as can staying mentally present wherever you are. Also important is learning how to say no when things get to be too much, finding a flexible workplace that prioritizes work-life balance and taking the long view of your career so that you’re not trying to take on everything at once. The Impact of Setting Good Boundaries So why is good work-life balance even important? If you’re starting out your career and are eager for leadership opportunities, why worry about building that balance into your career?  The truth is, learning how to set good boundaries early on can help you throughout the trajectory of your career, and actually benefit your leadership ambitions. And there are several reasons why. Here are three: 1. The Threat of Burnout Is Real You may think you can do everything. You may even think you have to do everything if you want to get noticed and make your goals a reality. But a lack of work-life balance can quickly lead to burnout, especially when you’re in a workplace where you don’t feel supported. Establishing boundaries early on—and finding a workplace that honors those boundaries—will go a long way in ensuring you don’t burn out before you even get a chance to shine. 2. You’re Learning To Communicate Your Needs As your life progresses, your needs will change and the boundaries you set in the workplace will have to change with it—becoming more flexible or rigid depending on your life circumstances. Whether you’re starting a family, experiencing mental or physical health challenges or going through a personal or family crisis, work won’t always be the most important thing in your life. Learning early on how to set boundaries and communicate your needs will prepare you for when it’s not, ensuring you always have the work-life balance you need to stay on top of work and life—no matter what. 3. The Best Leaders Lead by Example The best leaders understand what it takes to build both a productive and happy team. And they know that’s not going to happen if everyone is on the brink of burnout. So helping everyone set their own boundaries is simply part of being a good leader. But so is showing them how to do it by leading through example. Learning how to set boundaries early on, then, will let you achieve better work-life balance when you do achieve those leadership goals you’re looking for—empowering you to become the leader your future team deserves. 5 Tips for Establishing Better Work-Life Balance But the question is, how do you establish those boundaries—and good work-life balance in general—while still demonstrating to your managers that you’re the right fit for leadership opportunities? All while also building the skills you need to make those goals a reality. In her interview, Muneerah offered some tips leaders-in-the-making can use to put that work-life balance in place: 1. Be More Intentional About Taking Time for You It can be easy to forget about work-life balance if work is the only thing you have in your calendar. And that’s how burnout happens. So one of the keys to finding balance is to intentionally put aside time for your own life. This is especially important in the new remote and hybrid work environments, Muneerah adds, where work and life are both happening in the same space. “For me, we’ve started doing date nights—dates with family, with friends, my kids and with my spouse,” she says. “I think that’s important. [As is] taking family vacations. Part of the joy is planning ahead so that you can have something to look forward to, then taking that time.” 2. Stay “Present,” No Matter Where You Are Of course, when you do take that time for yourself, it’s just as important that you’re able to enjoy it—and use it to focus on yourself and the people around you. That means staying present in the moment—whether you’re on a family vacation or taking care of a new baby—rather than splitting your focus with thoughts of work. “Make sure you’re there, as opposed to not, and not letting that attention wander,” Muneerah says. “As humans, we have to be self-aware enough to not feel guilty that we’re taking that time. That is your time and make sure you prioritize it.” Of course, sometimes that’s easier said than done—and there will be times when you’re going to fail. But by trying, you’ll not only be able to share more meaningful memories with the people in your life, but you’ll be rejuvenated when it’s time for work as well. That means you’ll be better able to put your full self into your work goals too. 3. Learn How To Say No When you’re first starting out but have big ambitions going forward, it can be easy to get into the habit of saying yes to everything. This can set unreal expectations, though, on the amount of work you’re able to take on. And that’s not fair to future you, who’s likely to burn out. That’s why it’s important to learn how to say no. Saying “no” doesn’t have to be confrontational, either. It just means learning to communicate with your managers so that they understand your limits, as well as your goals—and prioritizing your opportunities around those. “For me, the keys to successful work-life balance are, first, the ability to prioritize and create boundaries [and], I think, open communication with your leader and your team about your requirements,” Muneerah says. 4. Find a Flexible Workplace In our last Women in Finance post, we talked about the importance of finding a workplace that supports you along your leadership journey. That’s true when it comes to work-life balance, as well. It’s easier to balance boundaries with leadership ambitions when you find a workplace that supports both. A flexible workplace and a culture that supports their employees’ home lives can go a long way in avoiding burnout and staying on track.  “It's the culture of the company that you're in—the way your leader is and what their expectations are,” Muneerah says. “If they have unrealistic expectations, unrealistic priorities or deadlines that you cannot really meet, that causes that imbalance to happen.” 5. Take a Longer View Finally, don’t be afraid of saying no or speaking out for fear of missing out on a project or other opportunity. Because there are other projects and opportunities waiting around the bend.  “Your career journey is a marathon, it’s not a sprint,” Muneerah says. “Things will come, and as long as you are following your heart and following your priorities, things will happen as they should.” By taking the long view, you can pursue the opportunities that best fit your goals, workload and current availability—as opposed to every opportunity that’s put in front of you. And by doing that, you can still have time left for other things—including family and home life. Conclusion The world of finance is competitive. We know that. But you still shouldn’t have to sacrifice your life and mental well-being for your work goals. A positive work-life balance and the right set of boundaries will help you stay on the leadership track—with a focus on the long term—without burning you out along the way.  And that’s going to help you become a better leader once you get there. The full "Finding Work-Life Balance in the Hybrid Workplace" video is now available, featuring an interview with Vena Vice President of Finance Muneerah Kanji. And stay tuned for the next interview, with Larysa Melnychuk, Founder and CEO of the FP&A Trends Group and Managing Director of the International FP&A Board. It’s scheduled for release March 29, 2023. 

French icon Edith Piaf once said, “When you reach the top, you should remember to send the elevator back down for the others.” So we wanted to know, how are the women on Vena’s Executive Leadership Team (ELT) sending the elevator back down? Barriers for women in the workplace can come in multiple forms. From lack of access to opportunities to unconscious bias at work, these barriers prevent women from progressing forward in their careers. It's crucial that women have a network and community to help foster their development. Our women executives had mentors and champions along the way and now, they show up for women on the rise. Find out how in this blog series. As we celebrate Women’s History Month in March and beyond, we’ll be highlighting Vena’s women ELT members—Tina Goulbourne, Melissa Howatson, Debbie Lillitos, Tracey Mikita, Allison Munro and Le Truong—in a series of Q&A blog interviews and finding out what career advice they have for you to put you on the path to success. For this blog, we asked them the age-old question:  What advice would you give your younger self?    Women make up 60% of Vena’s ELT, in comparison to an industry average of 24% representation of women in tech C-suites.    What Career Advice Would You Give Your Younger Self? Tina Goulbourne Chief Operating Officer at Vena Don’t let fear of failure be the reason you don’t even try. Know what you care about and what energizes you. Trying to be exceptional at everything will only make you feel like you’re failing everywhere. Spend your time and energy on the things you most care about. Surround yourself with people who genuinely care about you and bring out your best. This greatly impacts your success in life and in work as a result. Be strong enough to walk away from toxic relationships—whether it’s a friend, a partner, a family member or a job. Don’t let anyone undermine your self-worth. Don’t let fear of failure be the reason you don’t even try. If you’re achieving all your goals, you’re not setting your sights high enough. Celebrate the knowledge you gain from the experience and that you had the courage to try.  Stay humble. Period. Remember that your best IS enough. Whatever you are doing, do your best. When you can honestly say that you’ve done your best, you can hold your head high, no matter the outcome. You will always learn something about yourself by doing this. Melissa Howatson Chief Financial Officer at Vena Ask for feedback. Sometimes it's uncomfortable to do so, but it’s so valuable to receive.   Soak it all up: When I was at KPMG, I wish I’d paid more attention to the operations of the various companies I was auditing rather than just focusing purely on the audit. It was such a great opportunity to learn how things are done at different companies, departments, etc. Find mentors: Ask them for advice and bounce ideas off them to learn. Ask for feedback: Sometimes it's uncomfortable to do so, but it’s so valuable to receive.   Debbie Lillitos Chief Customer Officer at Vena Be OK with change—if you need to shift directions in your career a few times to figure out the right path for yourself, that is completely OK and healthy to do. It’s important to start by picking something that you enjoy. Here are some things to look for: Something that you can foresee will give you real satisfaction every day. Something that plays to your natural strengths. Trust your gut (we often have the answers we’re looking for, if we just tune in).  As you navigate your career, work hard with a giving attitude, and be open to learning as much as you can along the way. Lastly, be OK with change—if you need to shift directions in your career a few times to figure out the right path for yourself, that is completely OK and healthy to do. The bonus? You will be more well-rounded as a professional because of it.    Tracey Mikita Chief People Officer at Vena Don’t worry so much about the end goal. Your end goal is going to be an evolving target … Focus on and really enjoy the journey. Don’t worry so much about the end goal. Your end goal is going to be an evolving target, and the experiences you have along the way are going to be really impactful to who you become. To be honest, the “end goal” for me just keeps pushing out! As I look back on my journey so far, the best experiences for me, the things that really pushed me to grow personally and professionally, were the times I took risks. When I went back to school full time in my late 20s. When I made a number of industry changes (from manufacturing to financial services to retail to tech). When I  took roles in a different function. When I pushed myself to take on projects that have been outside of my comfort zone.   Allison Munro Chief Marketing and Ecosystem Officer at Vena  The important thing to remember is to focus on “the thing”—the task, the project, the conversation ahead; not your fear of it. Keep doing the uncomfortable things in your day-to-day. The important thing to remember is to focus on “the thing”—the task, the project, the conversation ahead; not your fear of it. When you use discomfort as your beacon forward, it will truly become your navigator for growth.  Le Truong Senior Vice President, General Counsel & Corporate Secretary at Vena  Be less worried about not getting everything right all the time. Everyone is in the same boat. Be confident. Not just in what you know and bring to the table, but in your ability to learn what you don’t. Be less worried about not getting everything right all the time. Or what it might look like to others when you don’t get it right. As you get further along in your career and life in general, you’ll start to realize that everyone is in the same boat. The problem set may change or look different in some scenarios, but the feeling of not having all the answers never goes away—especially if you are intentionally putting yourself on a path of consistently challenging yourself to learn and grow.    Tune in for next week’s blog to find out what the women on Vena’s ELT have to say about their success habits. Come grow with us! Vena is hiring. We have offices in Toronto, Canada and in London, England. Visit our Careers page for current job openings or follow us on LinkedIn, Instagram, Twitter or Facebook to learn more about life at Vena.

Finance FTEs—or full-time equivalent—are one of the crucial performance indicators organizations use to determine their employees' workloads. The goal is to see how many part-time employees you have and the hours they worked in any given period.  The breakdown is an average, and this data enables you to make better financial decisions for allocations, labor costs and workforce distributions.  💡Key Takeaways:  Finance FTEs calculate the total number of full-time workers based on hours worked instead of the precise number of employees. The benefits of calculating your finance FTE include performance analysis, improved decision making, easier time planning projects and more accurate comparisons regarding performance and labor costs. You can calculate your FTE in four easy steps using formulas, which you can use as a basis for calculating annual FTE. What Is Finance FTE? Finance FTEs is a metric that calculates the total number of full-time workers based on hours worked instead of the precise number of employees. When it comes to the FTE, every hour worked by a part-time employee counts based on their average working hours. Source: YouTube Knowing your FTE is required under the Affordable Care Act (ACA) and when filing for certain tax credits. Full-time equivalents are calculated slightly differently for each of these uses, and you will need to know how to calculate the FTE for each form.  Benefits of calculating your finance FTEs include: Improved Decision Making: Use calculated values to make important personnel and workforce planning decisions. Allocate more or less toward labor costs and work with HR to assess necessary team changes. Is hiring a part-time worker better than a full-time one? Your finance FTE can answer that and many more questions about your workforce.  Performance Analysis: FTEs help ensure adequate employee performance management. They give you a precise view of employee performance. FTEs are also more valuable than knowing how many employees your company has because it indicates whether a full-time employee is necessary to produce the same results as a part-time worker.  Respect for Legislation: Finance FTE determines the labor and compensation laws that apply to your company. For example, if your state requires that all full-time employees receive specific benefits, you can use the FTE to segment workers that sometimes work a 40-hour week, but generally only work part-time.  Easier To Plan New Projects: Easily assign projects to employees with various employment contracts when you can better calculate employee performance regardless of how many hours they work each week. Accurate Comparison: FTEs go beyond comparing the number of employees to productivity. By comparing performance with your FTE calculations, you can optimize production capabilities regardless of industry. How To Calculate and Minimize Finance FTEs  To calculate your annual FTE, begin with 2,080 annual working hours (equivalent to 40 hours per week for 52 weeks), excluding holidays and absences. Using this figure, you can calculate the finance FTE quickly with these four steps, beginning with the following FTE formula: Final finance FTE = Total Part-Time Employee Hours + Total Hours for All Full-Time Workers / Calculation Period (8 for daily FTE, 173.33 for monthly or 2080 for annual FTE)   For example, for daily FTE, your calculation would look like this: Total PT hours + Total FT Hours / 8 = Daily FTE.  Monthly FTE: Total PT Hours + Total FT Hours / 173.33 (the average number of working hours in a month of 40 X 4.333). Annual FTE: Total PT hours + Total FT Hours / 2,080    Step 1: Determining Part-Time Numbers   You first need to figure out the number of hours your part-time employees worked. To do this, multiply the number of part-time employees by the number of hours they worked per week. Then multiply your answer by the number of weeks worked. For example, if you have two part-time employees that worked 10 hours a week for 25 weeks and five part-time employees who worked 25 hours a week for 30 weeks, your calculations will look as follows: 2 x 10 x 25 = 500 hours  5 x 25 x 30 = 3750 hours  3,750 hours + 500 hours = 4,250 part-time hours Step 2: Determine Full-Time Numbers Next, define the total hours your full-time employees worked over the given period. In this example, we are calculating the annual FTE. Full-time workers work more than 120 days a year and about 40 hours per week, so make sure to include all full-time employees that fall within that parameter. Use this formula for the full-time numbers:  Total Full-Time Working Hours Per Year = Number of Full-Time Employees x Weekly Working Hours x 52 weeks For example, if you had seven full-time employees working 40 hours per week, you would have 14,560 full-time employee hours.  (7 employees X 40 weekly hours) 52 = 14,560 Step 3: Determine Part-Time and Full-Time Numbers   Add the total number of hours worked by full-time employees to that of the part-time workers for the total number of hours for all of the company's employees.  Here is that formula: Total Hours Worked by All Employees Per Year = Hours of All Full-Time Employees + Hours of All Part-Time Workers  Using the numbers from steps 1 and 2 above, we would have: 14,560 (full-time) + 4250 (part-time) = 18,810 total hours Step 4: Divide the Total Numbers   Divide the number of hours of part-time and full-time employees by the standard full-time hours. The answer would give us the FTE for any given period. That formula would be: FTE = Total Number of All Employee Hours / 2080 (total full-time hours per employee per year) For example, using our calculation examples from before: 18,819/2080 = 9.04                                               Image Source: Finance-Led Planning | Vena Solutions Better Understand Your Numbers With Vena     To quickly and easily access the data to determine your FTE, you need FP&A software solution powered by Excel. Vena’s free Executive Dashboard Template allows you to review the total hours each of your employees worked to give you a streamlined approach to minimizing your finance FTEs. Want to learn more about other essential metrics your company should track? Check out these articles: How To Find New Revenue Streams From Your Analytics How To Improve Your Financial Forecasting Accuracy in 30 Days 7 Financial KPIs Your Management Teams Should Monitor

Headcount planning and forecasting have a broad influence, impacting everything from production and customer service to employee morale and turnover, as well as job market trends and budget planning. Without the right tools, headcount planning and forecasting can be faulty and inefficient, making it difficult to fill workforce and skill gaps.  Workforce planning connects directly to recruiting intelligence and acquisition strategies to build a future-proof workforce. It helps organizations meet short-term and long-term business needs while remaining within specified workforce budgets. To operate efficiently and save resources, every organization requires just enough skilled employees to meet its goals without overhiring. These goals and required skills may often change, so it's essential to accurately anticipate future employee needs and plan to meet them. Headcount forecasting and planning are more than just filling vacancies. We use these strategies to identify current and future skill needs, attract and retain the right talent to meet those needs and plan to reduce attrition across the organization.  Improving the quality of hires is a top priority for recruiters worldwide. In fact, 59% of L&D professionals say they have their focus on reskilling and upskilling moving into 2023. Without this approach to headcount planning and forecasting, the skills gap widens.  To meet your business goals and recruitment needs, combine workforce forecasting strategies with employee L&D. Let’s review the most common workforce planning reports to help you determine the best way to build your headcount planning model.  💡Key Takeaways: Build your headcount planning models on organizational data and involve all department heads, senior management, HR and finance professionals in the process.   The most common reports you will need to generate from your workforce planning and forecasting model will include headcount reports, compensation reports, performance reports, recruiting reports and variance analysis reports.  Effective headcount planning strategies include gathering all applicable data, analyzing current headcount statuses, evaluating your current workforce, developing a headcount plan and executing strategies. Benefits of effective headcount planning include better budget adherence, improved workforce management and streamlined headcount reports. Headcount planning enterprise analytics help your organization create a single source of truth (SSoT), harness the power of data visualization, unlock augmented analytics and predict future outcomes more accurately.  Headcount Planning Models Building headcount planning models require the most accurate organizational data. These models combine and analyze required data points, including: Number of workers needed to cover labor hours to optimize productivity Anticipated new employee growth through the next year Expected churn over the next year Costs per new hire Time investment in hiring Current and predicted skills gaps Skills potential Hiring sources Labor budgets Worksite occupancy You need to involve all department heads, senior management, HR and finance professionals when developing your headcount planning model to ensure an easy transition to the new model. These entities can offer invaluable insights into which data sources are the most reliable and accurate for building these models. When developing your model, begin a new tab on your forecast spreadsheet and label all named positions by division. That way, all payroll and benefits changes in this tab flow through the predictive model.  A workforce planning template will simplify this process. However, you can set these functions on any spreadsheet. Once you have done this, group each department into rows and place inputs on the left side of the tab and outputs on the right (i.e., wages, taxes, other payroll liabilities and FTEs).                                                                                                    Source: YouTube Headcount Model Inputs If you are following our model so far, the left columns should include department, name (from the employee roster), position/title, full-time or part-time, hours, wage, benefits rate, payroll taxes and medical rate. You must also include the start and end dates of employees (we’ll explain shortly).  Some organizations calculate medical expenses according to headcount using forecasting models. We discourage using the percentage of wages to calculate medical expenses. It isn't accurate and will cause faulty numbers.  Whether an employee makes $20K or $200K annually, providers set medical premiums under fully insured plans. To determine the average rate for every employee, divide the total medical expenses by the number of plan participants for a more accurate figure. Required Fields You can customize this model to suit your organizational needs. However, your headcount planning tool must have fields such as full- or part-time, total hours, wage rates, taxes, start and end dates, and medical and benefit rates.  Start and end dates are critical to your headcount planning and forecasting model. If an employee begins on the 15th, the model will calculate earnings for the days remaining in that month. The same is true for ending dates should an employee leave the company before the last day of the month. With these required fields, you can also easily aggregate worth and income inflation surges in their own row for straightforward and accurate reporting. Headcount Model Outputs Once we complete the inputs, the headcount planning model will forecast monthly wages along with the headcount, any FTEs and medical premiums. If you are building your own model, place a total row at the bottom of the model and sum these outputs by department using the Excel function SUMIF.  A template should have summed this up for you. Double-check to ensure this calculation is correct. If the cell reads an error, it means some data is missing in your model.  5 Workforce Planning Reports Your Organization Will Need  Now that we have collected the workforce planning metrics, we can create our reports. Workforce planning reports serve two main purposes: to determine if we have enough human resources to meet productivity needs and to provide insights for informed decisions on labor and costs quickly and accurately. Let’s look at the reports you can create to assess workforce requirements and labor costs. Headcount Report Your company's most essential resource is its employees. That's why acquisition and retention are such high priorities for senior management. A headcount report does more than tell you how many employees you have, their tenure and turnover and retention rate by department. It also shows the average cost per employee, which is around $5,000 before training.  It can help you decide whether to allocate funds to recruitment or skills development based on which will best suit your organization's needs at any given time.   Compensation Report Regardless of your organization's headcount, compensation reports are valuable tools, especially compensation structures that vary by employee. These reports will deliver insights on the salary, paid overtime, commissions, bonuses and benefits of all employees. We create these reports to determine payroll deductions and when and how much PTO each employee has taken.  Performance Report Performance reports deliver valuable insights regarding what value new employees bring to the table. These reports indicate whether they are meeting or exceeding position objectives and expectations.  It allows you to see which team members consistently reach their goals without exceeding their budgets. It also delivers critical insights into each employee's performance.  Additionally, performance reports identify which staff display the greatest potential for advancement and which managers develop their teams' talents best.   Recruiting Report Recruiting reports provide critical data regarding open assignments, recent hires and the number of applications and prospects interviewed for each position.  The report also provides the average time to fill each position and the average cost per hire. It ensures that talent acquisition teams can identify qualified candidates faster and on budget. Variance Analysis Report Creating a headcount planning model will enable your finance team to put together a variance analysis to help senior management and stakeholders determine whether their budgets match their actual expenses. Inevitably, the CEO will ask questions such as: Which teams have the most top performers compared to our predictions?  How much are we spending on talent acquisition next year? How does that compare to last year's budget?  With a variance analysis, you can obtain these answers quickly and accurately.                                                                               Source: efinancemanagement.com 6 Effective Headcount Planning and Forecasting Strategies The key to headcount planning and forecasting is to avoid being reactive and to be proactive. If you desperately need new hires and staff turnover is outrageous, you're going to have a hard time keeping up.  Tight labor markets often spell disaster as skilled talent is scarce and the recruitment door widens, impacted by the rolling recruitment door. Being future focused and playing the long game of talent acquisition and retention will help in this case. Templates are a good starting point. Get the numbers to predict your staffing needs for next year while tracking hiring progress by department, recruiter and hiring stages with a customizable, downloadable, free workforce planning template. Your strategy should have carefully laid steps to get your business from point A to point B. Follow the steps below for your workforce and headcount planning strategy.  1. Gather Applicable Data In this first step, collect and access the short-, mid- and long-term corporate plans for the organization. Examine the strategic goals and budget to establish noteworthy insights on critical headcount metrics. Review the following datasets as you build your headcount planning and forecasting model: Position requirements Income data Worker data including skill sets and diversity stats  Departmental performance ratings   Organizational hierarchy   Frequency of attrition rates   Benefits and retirement eligibility Once your teams have established these benchmarks, track critical metrics over time. Doing this will make your headcount planning and forecasting more accurate. 2. Analyze Current Headcount State  Get a 360-degree picture of the current state of your workforce by running a headcount planning exercise. You will be able to present a clear visual of your employees’ skill gaps, the organization's hiring priorities and the total costs of your workforce to help you predict future headcount challenges and needs.   3. Evaluate the Current Workforce  Build a profile of what your organization's ideal employees look like for each department and in every role. This allows you to drill down and granularly evaluate your current workforce. Use the following items to build an employee profile: Departments with critical roles that remain empty for too long Attrition patterns Competitive salary and benefits What employees to consider as "flight risks" Potential or current workforce skill gaps Promotion opportunities 4. Develop Headcount Plan Identify exact business challenges that can impact the organization’s headcount needs in the coming months or years. Consider the following: Shifting consumer trends and demands New methods for identifying top talent Talent source and availability Regulatory industry changes Planning for scaling and growth   5. Align Execution Strategies Before executing strategies, determine if your budgets align with your workforce requirements. If not, you will need to make adjustments and tailor strategies for special circumstances.  Close any skill gaps and offer upskilling and reskilling opportunities to retain high-value team members. Furthermore, close any temporary or seasonal headcount gaps with part-time employees, temps or contracted workers.  6. Evaluate, Revise, Repeat Monitor your organization's workforce and headcount planning and execution over a set period. Evaluate progress against set benchmarks and revise plans as needed for a demanding and ever-changing market.  Evaluating, revising and repeating these steps can simplify headcount allocation, and redeploying forecasting and planning strategies can maintain job quality and suitably fill all positions.   Benefits of Effective Headcount Planning and Forecasting Keeping your organization's productivity in line with business goals requires headcount planning. Here are some immediate benefits of implementing strategies based on the headcount planning models above. Better Budget Adherence Sticking to a budget goes beyond keeping new hires' salaries at a specific level. Headcount reductions, new hires and lost productivity can create additional labor costs and drain your budget.  If you struggle to keep recruiting in line with approved workforce budgets, it’s time to develop a headcount planning strategy that puts finance leaders and recruiters on the same page. Your headcount planning and forecasting model will ensure that you spend only what is necessary for every employee and project.  Improved Workforce Management Space is a common challenge that organizations face when in growth mode. Restrictions on available workspace and equipment make scaling difficult, even in today's flexible work models that incorporate work-from-home schedules.  Headcount planning models can provide you with an at-a-glance view of what personnel work where and during what schedule. This allows you to budget for your organization's real estate needs, equipment requirements and IT infrastructure investments.  The planning models also aid recruitment efforts. For instance, you can negotiate with potential hires who might jump at a 5% pay cut in exchange for a remote or hybrid work schedule. Studies show that companies that offer these scheduling benefits retain their employees for the long term.   Streamlined Headcounts  Many staffing strategies fail when employee types and schedules don't match the expectations of a standard 40-hour week. Proper headcount planning takes a holistic view of an organization's needs, leaving room for staff downtime and diverse schedules and employee classifications.  Some companies discover it is cost effective to hire seasonal workers or contractors during production peaks. Others find it more cost effective to reduce staffing needs and free up workers for more demanding tasks. Some companies are turning to automation for this.  Top Talent Acquisition Organizations risk misaligning their talent acquisition strategies without proper planning and forecasting models. The execution of those strategies without effective headcount planning and forecasting models increases these risks.  This workforce planning makes it easier to recognize and fill available positions with the best hires and prevents the position from becoming vacant before the end of the year. It suits your hiring strategy and helps you build talent pipelines that deliver top candidates virtually on demand.   Making Headcount Planning Agile and Inclusive Companies that have a formal headcount plan generally conduct these reports annually. However, due to COVID-19, we learned how quickly markets can change, so a truly strategic approach must be agile, comprehensive and iterative. In other words, headcount planning should be a living document.  Ideally, senior management should use real-time data to review and adjust their strategic workforce plans regularly. This allows organizations to respond more quickly to internal and external factors that might otherwise be disruptive. Headcount planning teams should regularly seek insights from department and business unit managers, as well as HR, to uncover short- and long-term skills needs.  Headcount Planning and Enterprise Analytics Headcount planning is essential for financial planning and analysis. It includes setting hiring goals, upskilling and reskilling employees, reducing churn and offering insights on recruitment practices.  Automation improves headcount planning accuracy and provides you with better employee analytics insights. It takes productivity and performance to the next level. Let's examine how. Create a Single Source of Truth Begin by connecting your organization's finance and HR data. Create a single source of truth (SSoT) for all datasets by integrating your FP&A tools with a central cloud-based database. Your database will house both live and imported data connections, giving your teams a holistic and harmonized view of your data sources.  With this seamless connection between finance, HR and your headcount planning model, you can consolidate your entire enterprise data. This promotes data governance compliance and establishes an SSoT enterprise wide.    Harness Powerful Data Visualizations Open the pre-built HR headcount dashboard and begin analyzing your datasets using advanced analytics and visualization tools. By looking at various reports, you can evaluate the following: Expected headcount and costs Year-to-date time-offs  Training spendings Diversity details Trends in hiring and attrition  You may soon see a high-level overview of your employee count. You can learn more from your headcount dashboard by adding country, location and department filters to your model. You can take your analysis even one step further by analyzing specific data such as experience and other qualifying factors to understand your headcount landscape better. As you may have noticed, most staff training courses focus on managers and accounts, neglecting new hires who may then perform poorly due to insufficient training. You can then use these insights to develop fresh training programs for these employees. These insights will also indicate which employees could use reskilling or upskilling. Unlock Augmented Analytics For more insight into your workforce planning, harness the power of AI and machine learning (ML) in your headcount planning model. Insights from AI and ML can help you understand the key drivers of a given data point more quickly without manually analyzing your datasets. For example, AI and ML can use data from your headcount planning model to assess appropriate labor costs. If your model indicates that administrative support and executive level are the biggest contributors to labor costs—and they are—you can reduce headcount costs.  To reduce labor costs, consider increasing the number of account managers for lower-level management duties. AI and ML can automatically run these scenarios for you.  Evaluating your data will also help you understand attrition rates and their impact on performance and costs. Ask yourself questions such as the following: What is each quarter’s target attrition? What is each age group’s target attrition? What are the total salary and bonuses per age group? Using your model, search for insights that provide answers regarding charts or numeric values. Add them to your current dashboard to get the data you need for making data-based decisions on the fly. Predict Future Outcomes Picture having your headcount plans and performance in one location that enables continuous, event-based churn and budget forecasting rather than quarterly or annual planning cycles.  Predicting staff turnover with features that lead to meaningful conversations with management is the number one driver of turnover. It drives more discussions between employees and managers across the organization to guide leaders to make better personnel-related decisions.  With the tools to better anticipate unpredictable losses, you can improve headcount forecasting, giving you the tools to research crucial influencing factors to take immediate and proactive action. How To Use Workforce Planning Tools To Grow At Vena, we leverage Excel and combine it with advanced modeling capabilities to streamline your headcount planning processes. Through data integration and our Executive, HR and Workforce Management templates, we help you automate your manual processes. Here's how Vena Workforce Planning Solutions will help streamline your organization's growth:  Integrate Data From Your HRIS Vena allows you to integrate employee data with your HRIS into your processes and templates. Using our headcount planning models, you can deliver more accurate FTE tracking and improve labor cost predictions and manage your employee data easier than ever.  Plan for any scenario and gain confidence in your numbers by connecting your cloud applications with your source systems, including: Workday Ceridian Peoplesoft Paycomm Paylocity Bamboo Report and View All Your Key Metrics Visual dashboards enable you to view labor costs enterprise wide, discover underlying employee data, forecast revenue per team member and report on all employee expenditures. You get all of this from pre-built templates that you can customize to meet the needs of your organization.                                                                              Source: Vena Automate Tasks and Protect Your Data Data governance continually evolves—with unique challenges, new methods and technological advancements that change how we view and manage data. Headcount planning models can help protect your data while also automating tasks to streamline workflows.  Our workflows enable your organization to distribute templates to every entity and control the submission and review processes. Vena's best-in-class data security restricts access to sensitive employee information—such as payroll data—to help you remain compliant with all data governance regulations.   Plan for Any Scenario With Dynamic Modeling Capabilities To boost efficiency, we integrated our Workforce Planning platform with the most dynamic modeling capabilities available and used dynamic modeling to map out changes to your organization's payroll, taxes and benefits packages. With Vena Workforce Planning Software, you can evaluate the role of reorganizations and notice how changes within salaries or driver rates impact your bottom line.  Improve Headcount Planning Processes With Vena Discover a more intuitive way to manage your workforce with headcount planning and forecasting solutions from Vena. Vena's V365C Excel Add-in makes it easier than ever to manage labor costs while streamlining planning in areas such as ad hoc, variance analysis and reporting. Our collaborative Workforce Planning Software can help your organization predict recruitment needs while ensuring quality of hire and improving retention. It enables you to manage employee transfers, report labor expenses and cost allocations while improving workflows with more detailed employee-level planning.  You can build a talent acquisition pipeline and remain proactive against churn with better tracking of upcoming hires, transfers and terminations across your entire enterprise. Vena’s Excel interface delivers advanced data integrations, modeling capabilities and easy-to-use dashboards to help with your headcount planning and forecasting processes.  Learn more about workforce management and effective headcount planning and forecasting with the following articles: The Ultimate Guide to Workforce Planning 5 Workforce Planning Reports You Can Run Using Vena HR Data Visualization: 10 Insights Impacting Your Bottom Line