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The Agony or Corporate Budgeting

Roger Knocker • November 22, 2023

The Agony or Corporate Budgeting


Anyone who has been responsible for preparing a budget knows that it is hard work and requires political savvy, a clear head and attention to detail. Somehow, line management forgets to plan capacity to complete their budgets and each year the process takes them by surprise – even though it comes around every year, like clockwork. However, the more proactive and perceptive managers make sure that their departments have defined their business strategy well ahead of the budgeting season. And so, they are properly prepared for the budgeting cycle and fully equipped with the required level of staffing and new capital expenditures required to run, improve and enhance their business processes.


More often than not, however, the scene plays out like this…The politically motivated manager uses the process to ensure that he has more than sufficient resources budgeted to enable him to spend on what he wants rather than what is required for the business. Because the budget assumptions are vague and inaccessible, it’s very difficult to challenge the budget and the historical inefficiencies on which his budget is based. As long as he can protect his bonus, he will supply a budget that is ambiguous enough to allow him to manoeuvre when things get tight.


Back in the engine room, the financial manager pulls out the previous year’s spreadsheets. It takes a good few days to understand exactly how they work and what needs to be changed to make the current year’s budget perform optimally. The changes needed are normally implemented to accommodate changes in organisational structures, or gain visibility into runaway costs or, to cater for changes in reporting requirements. The spreadsheets are quickly changed, formulas are updated and like all previous years, not much time is left for testing and none for documenting the system. Templates are eventually created for each department and sent out with the relevant instructions. Then, it all goes quiet until the week before the deadline.


Suddenly, the dreaded call comes in from the manager who inevitably finds multiple mistakes in the slapdash spreadsheets. Once again she does her homework and methodically uncovers all the errors that have crept into the system. Spreadsheets need to be recalled, reworked and re-commissioned, much to the annoyance of those who have already started capturing on the erroneous spreadsheets and now need to double up their work by recapturing in the new version.


Finally D-Day dawns and all the spreadsheets are resubmitted. It’s an enormous job to link the spreadsheets for aggregation, especially when some of the “smart alecks” have managed to make their own changes to the spreadsheets where protection was overlooked. Maintaining the links and version changes makes the situation worse. No-one is 100% sure if all the spreadsheets have been linked correctly and no-one wants to be reminded of the large Capex that got unlinked in the previous year and caused a great deal of embarrassment… The HOD was less than impressed when he was told that his Capex didn’t make the final version due to an avoidable spreadsheet error.


After countless reconciliations to cater for the late submissions and new versions, the numbers are only ready just in time for the board meeting. It doesn’t take long for one of the bigwigs to find something that doesn’t make any business sense and, of course, the numbers need to be rehashed… again. The board also wants to see numbers that support different scenarios. This becomes a huge corporate headache as departments try to create scenarios that are totally incompatible with how the spreadsheets have been aggregated. In fact, it’s impossible to build the scenarios into the underlying departmental sheets, so a completely new system of interlinked spreadsheets is created. By the end of this arduous process, the new spreadsheet network looks nothing like the original and a new reconciliation processes is born to reconcile what was requested versus what was finally submitted.


What is described here, in this typical scenario, is just the tip of the iceberg and leads to many gruelling hours of wasted work. The worst part is that everyone knows that all the work that has been put in to arrive at these golden numbers will probably be invalid by month 4 of the new financial year!

By Clerissa Holm March 18, 2025
In the world of finance, numbers tell a story. However, that story is often buried beneath layers of spreadsheets and complex datasets. For financial professionals, the challenge is not just about understanding these numbers but also presenting them in a way that drives decision-making and inspires action. Enter data visualisation – the art of transforming data into clear, compelling visuals. Among the tools that have proven especially powerful are the line graph and the waterfall chart. These visuals help finance teams translate dry statistics into impactful narratives. In this article, we explore how these graphs can transform financial storytelling. The Importance of Data Visualisation in Finance Finance professionals are accustomed to handling vast amounts of data, from profit margins and revenue growth to expense tracking and risk assessments. Yet, presenting these figures effectively to stakeholders is a different ballgame. Visualisation simplifies this process, turning complex data sets into accessible insights. When done correctly, data visualisation: Enhances comprehension: Humans process visuals 60,000 times faster than text, making it easier for stakeholders to grasp key information quickly. Drives decision-making: Clear and compelling visuals help executives make informed decisions without wading through dense reports. Highlights trends and outliers: Visual tools can bring hidden trends and anomalies to light, prompting timely actions. Improves understanding and communication with business - Business doesn't always get what Finance is trying to communicate and good visualisations go a long way to bridging the gap. Better communication improves alignment to strategic financial goals. The line Graph: Unravelling Trends Over Time The line graph, also known as a stream graph or a stacked area graph, is a powerful tool for visualising changes in data over time. It is especially effective in showing how multiple categories contribute to an overall trend. In finance, line graphs can illustrate revenue streams, expense categories, or investment performance in a visually engaging manner. Use Case: Revenue Streams Analysis Imagine a financial report for a company with diverse revenue streams, such as product sales, services, and subscriptions. A line graph can display how each stream has evolved, highlighting peaks and troughs. The thickness of each ‘line’ represents the contribution of that revenue stream to the total, making it easy to spot which areas drive growth. Benefits of line Graphs: Trends Made Simple: Displays how multiple components evolve over time. Visual Impact: The fluid, organic design makes it easier to follow changes. Comparative Insight: Helps compare different categories intuitively. The Waterfall Chart: Bridging the Gap Between Figures Waterfall charts excel at breaking down the cumulative effect of sequential data points, making them ideal for financial analysis. They help bridge the gap between figures by showing how individual elements contribute to a total. Commonly used in profit and loss statements, budget analysis, and variance reports, these charts provide clarity in understanding how specific actions impact the bottom line. Use Case: Profit and Loss Analysis A financial analyst preparing a quarterly report might use a waterfall chart to demonstrate how various factors—like increased sales, higher marketing spend, and cost savings—impacted net profit. The chart’s structure, with its clear progression from starting figures to the final result, makes it easy for stakeholders to follow the financial narrative. Benefits of Waterfall Charts: Clarity: Simplifies complex financial data by showing individual contributions to total figures. Transparency: Clearly distinguishes between positive and negative impacts. Decision Support: Helps executives understand the key drivers of financial performance. Choosing the Right Visual for the Right Data Selecting the appropriate visual tool depends on the story you want to tell: Use line graphs for illustrating trends across multiple categories over time. Opt for waterfall charts when you need to detail the step-by-step impact of specific factors on an overall financial figure. By mastering these tools, finance professionals can enhance their storytelling, transforming raw data into insights that drive strategic decisions. Conclusion: From Data to Decisions The ability to visualise data effectively is a powerful advantage. The line graph and waterfall chart are more than just visual aids—they are essential tools for financial professionals looking to make data-driven decisions that resonate with stakeholders. By adopting these techniques, finance teams can turn numbers into narratives that not only inform but also inspire action. In the end, the power of finance lies not just in analysing data but in presenting it with impact.
Financial KPIs Every CFO Should Track in 2025
By Clerissa Holm February 17, 2025
In the ever-evolving financial landscape of 2025, CFOs are tasked with navigating complexities ranging from global economic shifts to technological advancements. The ability to track and analyse the right financial Key Performance Indicators (KPIs) is no longer a luxury but a necessity. These metrics not only provide insight into an organisation’s financial health but also support strategic decision-making. Here are the top financial KPIs every CFO should prioritise in 2025: 1. Revenue Growth Rate Revenue growth is a clear indicator of a company’s ability to generate sales over time. This KPI allows CFOs to evaluate the success of business strategies and identify trends in market demand. Formula: Revenue Growth Rate = [(Current Period Revenue - Previous Period Revenue) / Previous Period Revenue] x 100 Why It Matters: Monitoring revenue growth helps CFOs assess performance against strategic goals and anticipate future cash flow needs. 2. Gross Profit Margin Gross profit margin measures the profitability of core business operations, excluding indirect costs like administrative expenses. Formula: Gross Profit Margin = [(Revenue - Cost of Goods Sold) / Revenue] x 100 Why It Matters: It reveals the efficiency of production processes and pricing strategies, enabling CFOs to identify areas for improvement. 3. Net Profit Margin While gross profit focuses on operational profitability, net profit margin considers all expenses, including taxes and interest. Formula: Net Profit Margin = (Net Income / Revenue) x 100 Why It Matters: A high net profit margin indicates strong financial health and the ability to manage expenses effectively. 4. Cash Conversion Cycle (CCC) The CCC measures how quickly a company can convert its investments in inventory and receivables into cash flow. Formula: CCC = Days Inventory Outstanding + Days Sales Outstanding - Days Payables Outstanding Why It Matters: In 2025, with supply chain disruptions and rising interest rates, efficient cash flow management is critical. The CCC helps CFOs identify bottlenecks and optimise working capital. 5. Operating Expense Ratio (OER) This KPI compares operating expenses to revenue, offering insights into cost management. Formula: OER = (Operating Expenses / Revenue) x 100 Why It Matters: Keeping operating expenses in check is vital for maintaining profitability, especially in uncertain economic climates. 6. Debt-to-Equity Ratio This KPI highlights the financial leverage of the company by comparing total liabilities to shareholder equity. Formula: Debt-to-Equity Ratio = Total Liabilities / Shareholder Equity Why It Matters: With interest rates fluctuating in 2025, maintaining a healthy balance between debt and equity is crucial to avoid over-leveraging. 7. Return on Equity (ROE) ROE measures the efficiency of a company in generating profits from shareholders' investments. Formula: ROE = (Net Income / Shareholder Equity) x 100 Why It Matters: A strong ROE signals to investors that the company is effectively using their capital, which is vital for securing future funding. 8. Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) EBITDA provides a clear picture of operational profitability without the influence of financing and accounting decisions. F ormula: EBITDA = Net Income + Interest + Taxes + Depreciation + Amortisation Why It Matters: CFOs use EBITDA to benchmark performance against competitors and industry standards, making it a key metric for strategic planning. 9. Customer Acquisition Cost (CAC) As businesses invest in growth strategies, understanding the cost of acquiring new customers becomes crucial. Formula: CAC = Total Sales and Marketing Expenses / Number of New Customers Acquired Why It Matters: Tracking CAC helps CFOs ensure marketing spend aligns with long-term profitability goals. 10. Economic Value Added (EVA) EVA measures the value a company generates beyond the required return of its shareholders. Formula: EVA = Net Operating Profit After Taxes (NOPAT) - (Capital Employed x Cost of Capital) Why It Matters: EVA provides a holistic view of financial performance, emphasising value creation over short-term profits. Final Thoughts In 2025, CFOs must adopt a forward-thinking approach, leveraging advanced analytics and real-time reporting tools to stay ahead. By focusing on these essential financial KPIs, CFOs can drive strategic growth, ensure resilience, and foster long-term success in an increasingly competitive landscape. Tracking these metrics isn’t just about numbers; it’s about enabling informed decisions that align with the company’s vision and goals.
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