The pandemic's effects on forecasting and budget allocation

At a time of heightened uncertainty, it can be helpful to see what day-to-day strategies your peers are using to keep afloat. A series of webcasts this summer focused on how CFOs and finance leaders can help their organisations increase resiliency and jump-start growth in the current environment and offered a view into tactics being employed. The series included expert insights and practical guidance from leaders at McKinsey & Company as well as series hosts Oracle and the Association of International Certified Professional Accountants (AICPA and CIMA).

The first webcast in the series was in late May and outlined the steps CFOs and finance organisations can take to build financial resilience and prepare to return the business to scale quickly. It covered areas including bolstering productivity, reallocating resources, strengthening the balance sheet, and communicating with external stakeholders.

During the broadcast, attendees were asked to submit responses to six questions. Questions generated between 862 and 2,427 responses. Here's a look at some of the responses, which highlight how finance leaders are dealing with pandemic-related disruptions.

Forecasting time horizon

The Association polled webcast participants to understand the periods used to model different scenarios and found that the ranges have shortened considerably from previous three-to-five-year forecasts. Respondents were allowed to select all time frames for which they forecast. The majority of the respondents now forecast for the next 12 months, with forecasting for the next six months and for the next three months being the next most common. Only 6% of all responses indicated forecasts using five-year horizons.

The pace of modelling

Participants were also asked about the pace at which they are trying to predict outcomes and flag early warning signs, and that too has sped up significantly. About 17% are running continuous or daily scenarios, with 26% running weekly, 33% running monthly, and the remaining 24% running ad hoc scenarios. See the graphic "The Pace of Modelling" for full results.

The pace of modelling

How frequently are you re-running your models with new information as part of rolling forecasts?

Tech investment

Webcast participants were asked where they were investing in digital-enablement technologies needed to power financial planning and analysis (FP&A) and boost finance resiliency for the road ahead. Improving and implementing decision support and analytics received 513 votes (871 people participated in the survey). This was followed by investing in automating transaction processing with 353 votes, including procure-to-pay and order-to-cash cycles, freeing finance to focus on more strategic activities. See the graphic "Tech Investment" for full results.

Tech investment

What technologies are you considering implementing in finance and accounting to increase your finance resiliency? 

Budget allocation

The Association polled webcast participants to understand the top three areas they were focused on when reviewing resource allocation initiatives. Operating costs got an overwhelming 663 votes (871 people participated in the survey), making it by far the top area of focus. Cash on hand, receivables, and payables were getting scrutiny from 448 respondents, and head count from 446 respondents. See the graphic "Budget Allocation" for full results.

Budget allocation

When analysing reallocation of resources, what were the top three areas of focus for review? 

More on Agile Finance

The Agile Finance Reimagined series is free to anyone and offers CPE/CPD. The webcasts broadcast between May and August are archived and available to view on AICPA TV or to listen to via the Go Beyond Disruption podcast. To read the white paper from the May session, Agile Finance Reimagined: Building Finance Resiliency and Returning the Business to Scale, and to listen to the discussion, go to cgma.org.

Resources

"Agile Finance: Reimagining the Customer Experience", the fifth webcast in the Agile Finance Reimagined series, will take place on 12 and 13 August. AICPA members can visit the AICPA Store at aicpastore.com, and CIMA members can visit the CGMA Store at cpd.cimaglobal.com to register for free.

To comment on this article or to suggest an idea for another article, contact Kim Nilsen, publisher of FM magazine, at Kim.Nilsen@aicpa-cima.com.