Every budgeting season brings a chance to push your business forward into the new year. Of course, there are plenty of challenges to juggle as you balance all your company's needs and goals.
With 2024 coming to a close and the 2025 budgeting season around the corner, the pressure is really on you and your finance team!
Common Pitfalls Ahead
Familiarizing yourself with these challenges will help you prepare for the 2024 budgeting season and set your organization up for success.
Ongoing Talent Crunch
Seventy-six percent of employers in accountancy and finance report that their greatest challenge in recruiting is the lack of qualified candidates. This shortage of skills has persisted for an extended period. As CFOs and controllers finalize their 2024 budgets, allocating resources to tackle ongoing talent shortages is essential without resorting to mere salary bidding wars.
Instead, adopt a balanced approach that includes funds for upskilling, onboarding, training, and recruiting. Invest in fostering a positive company culture and explore retention incentives beyond salary, such as additional paid time off, enhanced benefits, and flexible work opportunities.
Breaking Down Data Silos for Smarter Budgeting
Thriving in the current 2024 budgeting season requires unified, accessible, and accurate data. Investing in cloud-based, unified data solutions can support decision-making processes and enhance organizational agility.
While transitioning from legacy systems to modern solutions can be costly, especially amid economic uncertainties, the long-term benefits justify the investment. Gaining buy-in from the C-suite may be challenging, but highlighting the future dividends of these investments can facilitate this process.
Leveraging Automation
Automation is a viable solution for organizations struggling with staffing shortages. However, implementing automation at scale requires an upfront investment. Finding cost-effective automation strategies will be a key challenge for controllers and CFOs heading into 2025 and beyond.
Concerns about how automation might impact job security among staff can also be a hurdle. To overcome this, allocate additional resources toward employee training and upskilling, ensuring they view automation as a tool to enhance their roles, not replace them.
Proactive Strategies for Cybersecurity
CFOs and controllers, as economic guardians of their organizations, must stay vigilant against cybersecurity threats. Part of this vigilance involves identifying impactful and cost-effective cybersecurity investments. While finding these solutions can be difficult, outsourcing select cybersecurity responsibilities to third-party providers can help mitigate costs.
Staying Ahead of Evolving Compliance Challenges
The compliance scene is constantly evolving. CFOs must budget for technology investments that support compliance, allocate funds for employee training, and ensure organizational flexibility to adapt to new regulations. Also, the Environmental, Social, and Governance (ESG) frameworks have added a new layer of complexity, requiring strategic budgeting and support from the C-suite.
Future of Flexible Work Models
While many executives prefer a return to office-based work, employees are increasingly advocating for hybrid and remote opportunities. If your organization opts for hybrid work at scale, you'll need to account for additional expenses in the 2025 budget, such as office equipment stipends, internet service costs, and technology investments.
Embracing hybrid work can help overcome talent shortages, providing a competitive edge in the job market.
Best Practices for Success in the 2025 Budgeting Season
As you and your team gear up, we outlined the challenges CFOs and controllers are likely to face during the 2024 budgeting season. Now, let’s explore some established best practices and insights that can guide you through these hurdles.
Start Fresh with Zero-Based Budgeting
CFOs often hesitate to adopt zero-based budgeting due to its arduous nature, requiring every expense to be justified for each period. However, leveraging this concept during the 2025 budgeting season can provide a fresh perspective on financial planning.
If your organization hasn't returned to pre-pandemic spending levels in areas like training or travel, zero-based budgeting can help determine whether reinvestment in these areas is viable.
Analyze Core Assumptions and Anticipate Critical Risks
As finance executives, it’s your responsibility to prepare for the unexpected. With economic uncertainty lingering over 2024, it's important to stress-test your assumptions and various scenarios while budgeting for 2025.
Involve other teams, such as sales, marketing, and legal, in exploring potential challenges that might arise in the coming year. Integrating contingency plans into your 2025 budget will reduce response times and facilitate quick adaptation to unforeseen economic changes.
Financial Flexibility
While traditional budgets are often fixed, it’s advisable to introduce secondary spending control strategies like cash war rooms or control towers. This approach offers financial flexibility in the face of cash flow disruptions or supply chain challenges.
Define triggers that indicate when reserve funds should be used and develop a system where unneeded reserve funds are reallocated toward R&D projects, hiring initiatives, or capital expenditures.
Optimize Talent Allocation
The shortage of professional finance talent is an ongoing issue. Even if your business has been minimally affected, optimizing talent resources remains vital. Assign top performers to high-priority tasks and projects. Implement agile methodologies to structure teams effectively and use automation tools to handle tedious tasks, freeing up staff for dynamic, strategic work.
From a budgeting perspective, investing in project management training and technologies will transform your department into a more adaptable and efficient team.
Essential Strategies for Improving Your Budget Forecast
Delivering a compelling budget forecast presentation can significantly impact how stakeholders perceive your financial insights. Whether you’re speaking to a board of executives or department managers, your goal is to communicate complex financial data clearly and persuasively.
Understand Your Audience
Before you dive into crafting your presentation, take a step back and consider your audience. Different stakeholders have varying levels of financial expertise, and their priorities will differ. A senior executive might focus on how the forecast aligns with strategic goals, while a department manager may be more concerned with the immediate impact on their team’s resources.
Tailor your message to meet the needs of your audience. For example, keep the big-picture, and strategic insights for the executives, but dive into more granular details for those managing day-to-day operations. The more personalized your presentation is, the more engaged your audience will be.
You can gain insights by conducting informal meetings or surveys before the presentation to better understand their concerns and priorities. This helps ensure that your presentation resonates with every attendee.
Use Clear, Simple Language
Financial jargon can be intimidating and lead to confusion, especially for those not versed in finance. Simplify your message by avoiding technical terms where possible. For instance, instead of using acronyms like "EBIT," explain it in plain terms: "earnings before interest and taxes."
Using analogies or relatable examples can also help make abstract concepts easier to grasp. Clear communication ensures that everyone, regardless of financial expertise, understands the key points and can make informed decisions.
Visualize Data Effectively
Numbers alone can be overwhelming. Using charts, graphs, and infographics can make complex financial data much easier to understand. For instance, instead of presenting a table of monthly sales figures, use a line graph to show trends over time, making the data visually digestible at a glance.
When incorporating visual aids, remember to keep them simple and relevant. Choose the right type of chart for your data—line charts for trends, pie charts for budget allocations, etc. Label everything clearly, so stakeholders can quickly interpret the visuals without needing extensive explanations.
Highlight Key Metrics and Assumptions
Not every detail in your forecast is of equal importance. Focus on the key metrics that matter most to your stakeholders, such as revenue growth, profit margins, or cash flow. These indicators give a clear view of the company's financial health.
Additionally, be transparent about the assumptions behind your forecast, whether they relate to market trends, economic conditions, or internal business strategies. This transparency helps build trust and confidence in the data you’re presenting, as stakeholders will better understand how you arrived at your projections.
Your Data Tells a Story
Transform your data into a compelling narrative. Rather than presenting a string of numbers, craft a story around the data to engage your audience. For instance, start by identifying a challenge—such as a downturn in the market—and then show how your budgeting strategies addressed that challenge.
Incorporate real examples, such as how reallocating resources led to a specific increase in revenue or cost savings. Back up your story with hard data, using charts or graphs to visualize the results. This approach not only captures your audience’s attention but also makes the financial data more relatable and actionable.
From Routine to Impact
The budgeting season is set to bring its own set of difficulties, such as staffing shortages, economic instability, and strict compliance requirements. Through thorough planning and close collaboration across all departments, CFOs and controllers can successfully overcome these hurdles. Each challenge encountered is also a chance to advance your organization toward its growth objectives.
As we approach the 2025 budgeting season, there is an opportunity to put these strategies into practice, establish a solid financial groundwork, and secure your organization's success. Budget forecasting should not be a repetitive chore each new financial year; instead, it should be an engaging, insightful, and effective presentation that equips stakeholders with a clear understanding of the company's financial status and confidence in the numbers presented. By adopting our suggested tips and thoughtfully crafting your presentation, your financial data can truly stand out. Use this opportunity to create a captivating narrative with clear visuals and relevant context that connects with your audience.
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