This is a question I wanted to throw out there.
After the year we’ve had, we can probably all agree that flexibility in the way we operate as businesses has never been so important.
When the pandemic hit last year, our world literally changed overnight. But one of the few positives to come out of it, has been the speed at which many of us, professionally, have had to adapt. A lot of us have seen those slow decision-making processes suddenly speed up. Sign-offs on digital transformation projects have suddenly been that much easier.
Flexibility has been key. So, taking this to the annual budgeting question. I recently read this blog by Michael Brenner on How to Create Your 2021 Marketing Budget Plan. As he points out, the annual budget process that worked well (I might question ‘well’!) in a pre-Covid and pre-digital world doesn’t necessarily work for the new ‘today’. Do we need to be more flexible, with more regular, short-term budgets?
It got me thinking to my days working in-house. The budgeting period was always a headache. When I look back at the budgeting processes I was involved in, it certainly didn’t provide the flexibility that is needed now. I always used to think doing this planning work once a year, typically in November/December, was counter-productive. The plan would be great from January to March then you know some changes are needed. Then the internal battles would start and you’d be tied to the agreed numbers. The process didn’t always allow for new strategies or the unknowns, during the rest of the year. They’d be minimal wiggle room. Maybe it was worse for me, as the organisations I worked for were typically public companies.
But, the budgets were often built on assumptions and predictions from previous years’ data.
As the pandemic has shown, there are some things that you can simply never predict.
However, my biggest frustration was the use-it-or-lose-it policies. Do you have those? If you’d budgeted during certain months/quarters, and you hadn’t spent it, that was it, that money was lost. It was always a fight to get more or ‘move’ existing budget around during the year.
So, is it time to shift away from the annual budget? Is it now more efficient to be planning in say quarterly cycles? Is it a combination of the two, you know your ‘annual budget’ is x but the breakdown of that budget and plan is agreed quarterly?
As Michael Brenner points out, there is no magic formula, but he does offer some top tips to make sure you’re working within your means to deliver results and ROI, including setting goals over a specific timeframe, mapping your available strategies and tactics, and developing a holistic strategy for your budget, tactics, and goals.
By planning quarterly, it would allow you to measure your performance and look for areas to improve, flexibly and to focus your thinking on 3-month periods. If something isn’t working – you can adjust the budget accordingly.
After the impact of the Covid-19, now might just be the best time to make the case for changing your budget planning to reflect the changing way the world now works. I’d love to hear your thoughts. I’m sure the finance teams will disagree!