Best Practices

Master monthly performance: How to conduct effective budget vs. actuals meetings

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Budget vs. actuals meetings are a common touch point between finance leaders and their business partners, and well-structured and insightful meetings provide an opportunity to identify areas for improvement, strategize solutions, and share best practices.

Unfortunately, these meetings can sometimes be a point of contention if teams aren’t properly equipped. Inaccuracies in the data, arduous processes, and misalignment on broader business goals and key KPIs can create friction between the finance team and departmental leaders. Finance teams can be viewed as nay-sayers or left out of important strategic conversations altogether. 

It doesn’t have to be that way. Fostering open, collaborative communication where the finance team provides a path forward for department leaders facing headwinds can change the perception of finance leaders from reactive cost-cutters to strategic business partners.

Effective meetings depend on accessible data

A well-planned and organized meeting is the foundation for productive discussions and decision-making. Consistency is key. By setting regular expectations, you establish a routine that allows for timely review and analysis of financial data, enabling more productive discussions.

Automate processes 

Streamline the reporting process by integrating with systems like your ERP and automatically rolling forward time periods at month's end. If you can close the books more quickly and deliver reports more efficiently, business partners are better equipped to make data-driven decisions.

Ensure relevant financial reports are available beforehand

To facilitate meaningful discussions, ensure these reports are accurate, up-to-date, and available to all attendees before the meeting. Modern FP&A platforms like Vareto have helpful collaboration features that allow departmental leaders to access their financial data throughout the month, including the ability to drill down into transaction-level data

These self-serve capabilities allow business users to collaborate with the finance team throughout the month, enabling them to come prepared with insights, questions, and suggestions, making the meeting more efficient and productive. Additionally, it allows finance leaders to address any concerns or clarify information before the meeting, streamlining the discussion and ensuring everyone is on the same page.

Effective communication produces alignment

When department leaders are equipped to monitor their numbers throughout the month, minimal time has to be spent reviewing financial data line by line. Instead, you can focus on areas where there are significant discrepancies, either positive or negative, as these represent potential opportunities for improvement or areas of concern. 

Once you've identified the variances, delve deeper into understanding the reasons behind them. You are responsible for promoting open dialogue and actively seeking input from department leaders. To be effective, try asking open-ended questions, acknowledging different perspectives, and demonstrating genuine interest in their viewpoints. Encourage department leaders to share their insights and explanations for discrepancies, whether they are due to changes in market conditions, operational challenges, or unforeseen circumstances. By understanding the root causes of these deviations, you can work together to develop targeted solutions and action plans.

To fully comprehend the significance of budget variances and determine next steps, assess together their impact on departmental and overall company performance. Consider how these deviations affect KPIs, company goals, and financial health. This evaluation helps set priorities and allows the team to better understand the potential consequences of not addressing these discrepancies.

Turn insight into tangible results

Once you’ve identified and understood the reasons behind budget variances, it's time to develop targeted strategies to address them. Work with department leaders to brainstorm potential solutions. Ensure the proposed strategies are actionable, realistic, and aligned with the organization's financial objectives.

Avoid being prescriptive

In his blog Changing the perception of the CF-No, VP of Finance at Demostack David Wieseneck, described how finance leaders can create trust by allowing the business stakeholder to take ownership of the decision. Avoid shutting down ideas or saying no outright; instead, highlight the possible risks, benefits, and overall framework for decision-making. Point out the trade-offs from a budgeting perspective, and ultimately let your business partner decide what’s right for them.

Collaborate cross-functionally

As a finance leader, you're in a unique position. You have insight into operations across the organization and work with a variety of people and departments. With this vantage point, you can harness your organization's collective knowledge and experience through better cross-functional collaboration. Work with leaders to implement best practices from other departments and modify successful strategies for their specific contexts. This kind of cross-functional collaboration also allows leaders to gain a deeper understanding of the challenges and opportunities faced by other departments, enabling everyone to provide more informed recommendations that better support the organization's objectives.

Make next steps clear and measurable

For each strategy developed, assign responsibility to specific individuals or teams within the department. This ensures accountability and provides a clear point of contact for monitoring progress and addressing any challenges that may arise during implementation. It’s essential to set clear timelines and milestones for improvement. Establish deadlines for each step of the implementation process and communicate these expectations to the responsible individuals or teams.

During subsequent budget vs. actuals meetings, take the time to review the progress of each action plan and assess its impact on financial performance. This process involves comparing the initial goals and objectives with the current outcomes and determining whether the strategies effectively address the identified issues. If an action plan is not yielding the expected results, consider revising or adjusting the approach. Engage in open dialogue with department leaders to gather feedback, identify potential roadblocks, and brainstorm alternative solutions.

Effective finance leaders drive efficiency

While tools and technology certainly have their place, don't overlook the significant impact that “soft” skills can have. By fostering strong relationships with business partners and stakeholders, finance teams can be more proactive in supporting operational efficiency and driving positive outcomes.

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