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The Unpainful Budgeting Process: How to Plan with More Collaboration and Agility

Finance leaders have been trying to transform the budgeting process for decades. It’s a painstaking and time-consuming process. Learn why a solid budgeting process is important and what steps you can take to make it more agile, collaborative—and enjoyable.

Carly Miller

Content Marketing Writer

Published on July 1, 2021
Strategic Planning
The Unpainful Budgeting Process: How to Plan with More Collaboration and Agility

Finance leaders have been trying to transform the budgeting process for decades. But for many, the process still boils down to cobbling information together, whether it’s from a mess of disconnected spreadsheets or long, detailed emails with various files attached.

Maybe you’ve tried one of the more modern budgeting methods. Zero-based budgeting, activity-based budgeting, better budgeting, beyond budgeting—they all promise you and your organization greater agility in planning. And they all seem to fall short.

Brian Weisberg, Head of Finance and Business Operations at Tidelift, saw how painful the financial planning process was for all involved and looked for ways to change it. The way to strike the pain away from the budgeting process and make it smoother and more effective is to rebuild it with collaboration and agility in mind.

Table of Contents

Why a Solid Budgeting Process Is Important

A solid budgeting process empowers decision-makers to be more engaged with the numbers and aligns the entire business on the plan.

It Empowers Decision-Makers with Information

Not everyone thinks in terms of spreadsheets and numbers. Finance’s job is to converse with their partners, understand what matters most to each department, and relay those conversations to the appropriate parties. From there, finance weaves the budget together to tell the story of the company’s plans.

“Data is great, but it’s better to go a step further and abstract that data from bits into insightful decision-making ability,” said Weisberg. The budgeting process goes that next step further by driving business awareness. The budget serves as validation for what’s going on in the business’ day-to-day while tying each decision to its impact on the overall business.

It Enables More Agile Planning

A strong finance leader needs to be someone that can both look backward and forward simultaneously. To do that, they need budgeting processes built on real-time data. When you have that foundation, you can support more agile rolling forecasts, course-correct faster, and have proactive conversations about budgeting needs sooner.

It Reflects Day-to-Day Operations with More Accuracy

The budget relies on the finance team’s ability to build a model that truly reflects the business and keeps everyone on the same page. You don’t do that by starting in spreadsheets. Instead, finance benefits from prioritizing deep conversations with business partners.

Once you understand what each department wants and needs, you can translate the information into numbers and create a model that reflects how the business operates, how it scales, how departments interact, and what it needs to do to grow.

The 5 Most Important Budgeting Process Steps

The following five steps will help you run a smoother, more effective budgeting process that sets your business up for success in the months (and years) ahead.

Get your complete guide to a smooth financial planning process

1. Model Revenue

Modeling revenue makes broader budgeting conversations with other department leaders align around the business’ goals. That’s why it should always be the first step of your budgeting process. There are three ways you could go about it:

  • Top-down. You consider the big-picture revenue goal—your outcome—and work backward from there. If you want to double your business every year, how many sales reps and supporting staff will you need to hire to get there? In something like an ARR snowball model, revenue goals come from executives, and finance works with sales department leaders to find the right path to meet them.
  • Bottom-up. This budgeting model starts with details: It looks at how you get your revenue to grow, which determines your revenue number. You want to start with your customer acquisition journey (from website sessions to leads to qualified leads) and grow your customer base toward referrals, upgrades, and expansions into other products. You’ll also focus on past performance data for deeper insights into your revenue patterns and forecast from there. Think of this as your sales capacity model.
  • Pipeline. You could also model your revenue based on trending pipeline data in your CRM. You can analyze sales pipeline metrics to determine how long it takes for customers to close and ramp up on your product or service, then how they continue to engage with it. Having conversations with the entire sales team is essential, as you need to understand how the pipeline shapes out and what the sales team needs to ensure success.

It’s easy to reduce your options to a top-down vs. bottom-up budgeting debate, Weisberg encourages using all three models to triangulate an accurate revenue number.

Each model requires a strategic approach and multiple conversations. Done well, they help you create a budget that serves as a solid foundation to continue collaborating and updating the business plan.

Get ahead of planning with an expert-approved sales capacity model template

2. Run Headcount Planning Across the Organization

The most significant driver of cash consumption at an average SaaS business is headcount.

That’s why, after the revenue modeling process, you should focus on sales headcount planning. Having salespeople in-seat drives revenue and enables hiring for other essential departments—factor in sales ramp to determine the right timing for your hiring plans.

With headcount, you need to pay particular attention to understanding team ratios: How many sales development representatives or business representatives do you need to secure quality leads within the pipeline for every account executive?

Consider technical knowledge here as well: Can your sales team drive technical conversations about the product, or do you need to build out your customer success team?

You’d think that customer success teams grow in proportion with your customer base.

Running scenario analysis examples forecasts that growth. But, if you’re not at the stage where customer support is necessary, you want to ensure that your salespeople can support onboarding customers.

Ideally, your engineers make the onboarding process for your product easier, so your growth margins start in the positive. But, you need that engineering support to make that happen.

Headcount planning must align with your ARR goals, so collaborating with leaders from every corner of your business is essential.

3. Create Department Spend Plans

Once you have headcount plans in place, the next step is to plan department spending.

While budgeting processes end in numbers, to get there, you need to create a common language with each department to determine their needs. That starts when you ask department leads what their plans and goals are for the year as a team.

Maybe the marketing team wants to double inbound referrals. Customer success may want to cut support ticket turnaround times in half. Another department may need a new director. Understanding the goals of each department will help you align their budget allocations to the overall business.

Also, ask them how they think about department spending. If they have their own budget spreadsheet, what categories of spend do they look at most? Their categories probably won’t line up exactly with your general ledger (GL) account-based data. And that’s okay. Instead of pushing them to align with your GL account structure, focus on translating your data into a format that makes more sense to them.

4. Combine Department-Level Plans and Build the Overall Budget

After these essential conversations, it’s time to create the budget. As long as you don’t lose sight of the outcomes while planning and reporting on results as the months pass, you’ll remain aligned with business partners toward overarching growth goals.

Your finance team creates a general overview, which accounts for:

  • Fixed costs (such as office space mortgage, website maintenance, salaries)
  • Cash flow (any funding, sales, etc.)
  • Additional spend per department (buying or updating tools and systems, headcount)
  • Variable costs (bonuses and commissions, one-off events, etc.)

Finance then organizes these considerations into cash (such as department spend on software) and accruals (the annual expenses broken into months).

Your annual budget should never grow stale—plan to maintain a rolling forecast for the year ahead. Your finance team will proactively and continually adjust your budget projections based on your actuals.

5. Align with Executive Leadership for Approval

Executive leaders have a lot going on beyond the budget. As the budget serves as the business’ foundation, finance leaders need to drive the budgeting process and act as a true contributor to the business’ vision.

Setting the budget is finance’s way of understanding what’s driving the business through collecting feedback from different department leads and stakeholders. Finance turns the data from just bits of information into an actual narrative that determines what’s unique about a business.

Prioritize showing the budget to your CEO at least a week before sharing it with other stakeholders in a board deck, for example. The CEO needs to agree with the outlook and trust the numbers as deeply as finance, which strengthens the business and the accuracy toward a successful year.

How to Improve Budgeting Processes

Anybody can build a spreadsheet. You don’t improve budgeting processes by getting better at that piece.

Instead, budgeting process improvements always come down to how well you can collaborate with all key stakeholders. Take advantage of these tips for improving your workflows and making budgeting season as painless as possible.

Stay Focused on Business and Individual Department Goals

Think about one key question: What must be true in the budget to reach business and department goals? It’s great to hit your numbers—but only if hitting the numbers means you’re also hitting the right performance goals at the department and company levels.

This is where Weisberg’s advice toward triangulating multiple business models comes into play. A top-down approach happens when you know your planned outcomes for the overall business, so you can start working with individual department leaders to plan the more granular details. The bottom-up approach is the opposite—when department leads know what they’re looking for and how it can tie back to the big picture business goals.

Modernize Your Systems and Processes

A collaborative budgeting process depends on finance having the right systems and data infrastructure to create a common operating picture with business partners.

Have you designed workflows in a way that makes finance’s processes as repeatable and scalable as possible? Have you put the right systems and workflows in place to automate data capture, so you always have a real-time view of your actuals?

Without taking these two steps, you may have to spend more time collecting, cleaning, and organizing data than actually collaborating with stakeholders on the budget. Modernize your underlying systems and data infrastructure so that you can prioritize collaboration in the budgeting process.

Proactively Share Your Timeline for Updates

Budgeting is an iterative, back-and-forth process—especially if you’re prioritizing strong collaboration with business partners. But the whole thing falls apart if you’re consistently making last-minute requests of department leaders who are already busy with their day-to-day work.

As you run through the budgeting process, make sure you’re proactively sending a timeline to department leads that clearly explains when you’ll need certain updates. This shows your stakeholders that you respect their time, which will help you build trust for your finance department. And that trust will carry through to future planning processes, creating a stronger foundation for your role as a strategic partner in the business.

Craft Your Narrative with Numbers

Your budgeting process should be a conversation between finance and department leaders—not an opportunity to throw numbers in the faces of stakeholders. The best finance teams go beyond the numbers to paint a picture of what the numbers really mean.

Telling the story behind your numbers means asking department leaders deeper questions. Who are their top 5 vendors? What annual events is the team attending? How are employee reimbursements tracking toward the plan?

Focusing on these deeper questions will build a stronger shared understanding of a department’s spending. That shared understanding enables you to have more strategic discussions about adjusting plans moving forward with department leaders.

And when you bring the conversation to your C-suite, don’t just send it as a spreadsheet with your ARR numbers. Schedule a call or write up a summary in a Google Document or email. Embrace these strategic conversations as opportunities to sync with your business leaders to find the best path toward seeing the budget come to life before everyone’s strategic eyes.

Modernize Your Budgeting Process with Mosaic

A modern SaaS business budgeting process needs to be flexible and collaborative, and so does the modern finance leader. Mosaic’s tools are about democratizing and modernizing the budgeting process because complex spreadsheets don’t cut it in today’s fast-moving and unpredictable environment.

Weisberg noted that with Mosaic, “It’s really easy to set up and model different scenarios and pull multiple data points in, yet it still gets out of its own way and helps focus your conversations with stakeholders.”

Download our modern financial planning ebook to jumpstart modernizing your budgeting process. Get out of compiling spreadsheets and embrace strategic finance that focuses on efficiency and real-time accuracy to make the best business decisions in the moment and for months to come.

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