The majority of financial executives are unhappy with the way their companies prepare the annual budget, according to a report by Grant Thornton LLP, an audit and tax firm, and the American Productivity and Quality Center, a research organization.
Only 37 percent of chief financial officers and finance leaders say their organizations’ approach to annual budgeting is valuable and, of those, all think it needs improvement, the report says. An additional 25 percent say it is somewhat valuable but the annual budget quickly becomes obsolete.
The survey, Financial Planning and Analysis: Influencing Corporate Performance with Stellar Processes, People and Technology, included 130 financial executives from companies around the globe.
This widespread dissatisfaction with the budgeting process could be due to the fact that 70 percent of finance leaders use a “last year plus percentage” budgeting technique, which is based on prior year figures plus a percentage to take into account planned business growth and inflation, says the survey. This method does not take into account fast-moving business risks, according to the report.
Pointing out another problem, 62 percent of the finance officers say their staff is too buried in basic financial management duties to improve the budgeting process, the report says.