I heard recently of a company that starts the budgeting process in September for the following financial year budget (they spends 10 months of the year working on their budget!)
As two-thirds of budgets are out of date within 4 months, this seems to me to be a huge waste of time!
Budgets are inflexible by design. Once people realise they are out of date it is difficult to change them. This is partly because of the level of detail at which they are produced and mainly because they have become the anchor point for so many management processes – from incentives to performance measures, to decision making rights.
There ARE alternatives to traditional budgeting. Beyond Budgeting, Forecasting, Trends & KPI’s are hot words at the moment. Each method can save you time, money and the headache of months of budgeting.
If you would like to discuss this further, please contact me.