As the year slowly draws to a close, CFOs also start their annual haggling over costly budget items. Various challenges force companies to dismantle old, cost-inefficient structures. In looking for new budgeting options, a well-known but controversial method is moving back into the limelight: zero-based budgeting (ZBB).
It’s difficult to think of a business process that is more unpopular than budgeting. In nearly two decades of writing and talking on the subject, I have yet to come across anyone who is prepared to stand up and say it is a good thing.
Why, when everyone hates it, do we still have traditional budgeting? My tentative answer to this would be that most people were not aware of the alternatives.
In the period from 2001 to 2006, the Retail division of Swiss Post transformed itself from a public service company into a business driven sales organization. Crucial drivers of change were, on the one hand, the adaptation of the steering systems up to the final implementation of a "Beyond Budgeting" philosophy and, on the other hand, a humanistic attitude of management and finance department against all employees. The success was amazing: The division succeeded in increasing the sales of new retail products from 0 to over 400 million CHF, optimizing the bottom line by more than 100 million CHF or more than 5 percentage points and becoming the first state-owned company in Switzerland to win the EFQM- Award for Business Excellence.
Many sophisticated business environments use budgets as a bridge between actual and forecast. Within the corporate finance domain, budgets are used to allocate resources and provide a starting point for current and future period estimates.
As a former public accounting auditor, I have been through my fair share of busy seasons which usually ran from September to April. For me, this was a character building and learning opportunity that I am privileged and thankful that I got to experience in my career. However, like most, I realized this was not what I wanted to do long term.