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Birth of a New Budget CultureNew Web-based applications require changing corporate culture in addition to software.
By: Abstract from Business Finance Magazine - 4/15/2002
How To Cultivate a New Culture
* Explain why the budget is being changed -- e.g., to better support goals, objectives, plans or performance metrics.
* Form a cross-functional team of people who will define the key strategies, tactics and metrics that the new budgeting process will support. People who are included in the creation of a new budgeting system are more likely to use it when it is introduced.
* Buy e-budgeting software that includes planning capabilities. Some analytics applications offer no such feature, giving managers little reason to engage in forecasting.
* Explain to employees how the new system will help them do their jobs by giving them data they need to make informed budgeting decisions.
* Train middle managers in the basics of accounting and finance. They will need this knowledge to generate their own forecasts.
* Tie compensation to achievement of performance targets, not budgeted thresholds.
* Pilot the software system within one department or division first, and communicate early successes. Attempting to implement a budgeting system companywide without testing it thoroughly is prohibitively risky.
* Wean managers off of spreadsheets by explaining how the new system can improve their planning accuracy.
* Make sure data entered into the budgeting application is checked for accuracy and consistency. If the software cranks out inaccurate numbers due to data-entry mistakes, its credibility may suffer irreparable damage.
* Instill a new mind-set within the company, shifting away from concerns about "how much does it cost?" to analyses of "how much value will it generate?" Best-practice companies focus on risk-adjusted return on capital and establish cost parameters based on cost benchmarking information.
See the full article from Business Finance Magazine
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