Budget Planning and the Role of Digital Transformation
Whether you work for a government agency, a high-tech company, or a service provider, your organization must plan its annual budget. While many members of your organization might be familiar with planning or budgeting software, the set of activities to create, control, and update the budget is known as the budget process.
Digitalization is tactical – automating activities, for example – while Digital Transformation is strategic, focusing on improving overall business processes and increasing business value.
Self-Check – Maturity Level
Digital transformation is much more than just a buzzword. I look at digital transformation as the maturity level of an organization that allows it to have modern and continuous capabilities for process improvement and optimizations.
If we look at the planning processes of an organization, there are three maturity levels to consider:
- Manual Planning Process An organization in which the planning process relies on manual activities.
- Digitalized Planning Process An organization where some manual activities are automated as a tactical improvement (digitalization).
- Digitally Transformed Planning Process An organization which observes its planning processes and identifies the steps to strategically enhance them through digital transformation.
It’s essential for executives to understand that digitalization may be a step toward digital transformation, but digital transformation requires its own process and a more holistic approach.
Digitalization brings technological improvement but not a huge business value. Planning processes require collaboration, business logic policy, and data integration.
Collaboration
One of the most significant indicators of process improvement is better collaboration and fewer silos within the organization.
Modern enterprise technology should provide a platform to collaborate between different organizational levels (i.e. top-down and bottom-up) and consolidate regional planning. Additionally, digital transformation should aim to bridge strategic, financial, and operational planning.
The lowest maturity level of collaboration is identified when most communication between functions (such as branches and department managers) happens through “offline” methods like emails.
Digitalization may allow collaboration on a specific business function. For example, a system that enables modern sales planning but lacks integration between sales, compensation, and the cost of sales will not enable digital transformation in planning.
Business (Planning) Logic
Some planners feel emotionally connected to their spreadsheets—especially since they spend a lot of time and energy building business logic into them.
But we simply cannot reap the benefits of digital transformation when significant logic resides in vulnerable spreadsheets.
Organizations that only automate or collect the results from these spreadsheets often end up siloed, with loose ends in their planning and process integration.
Managing business logic as part of a planning repository is a critical component of digital transformation.
A proper “business logic repository” should include:
- Business drivers
- Their impact on business results
Drivers help optimize planning and enable better variance analysis between planned and actual performance.
Data Integration
Data integration should be considered across several types of data:
- Baseline data for planning, including: Financial results Customer data Billing information
- Planning data from: Different version scenarios Different periods (e.g., last forecast, last year’s budget)
- Advanced forecast tools using AI and machine learning
Digital transformation is fully achieved when all these different data sets are automatically synchronized and integrated. If a planning process still requires users to “download actual files” or manually sync data between tools and manual inputs, it’s a clear sign that the process isn’t optimized yet.
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