Budgeting is, for most respondents, still very much an annual process looking over a one-year time horizon. However, a considerable number of respondents (27%) plan over longer horizons, ranging from three years to four years or more. The length of the budgeting horizon impacts the time that it takes to produce a budget, which can range from less than a month to longer than nine months.
Financial Planning & Analysis (FP&A) teams are typically responsible for the production of the budget. The most popular approach for annual budget preparation is the bottom-up approach (72%), followed by top-down (56%) and driver-based (35%). Most respondents are using more than one approach, with 38% using both top-down and bottom-up, and 31% using three approaches or more.
Compared to the survey we conducted in 2014, we are seeing an increase in the time taken to complete the budgeting process. Although the majority (57%) of respondents are able to complete the budgeting process within three months, only 5% can complete it within one month – compared to 16% in 2014. In addition to this, more organisations are taking around four to nine months to complete their budgeting processes compared to 2014.
There is a perception that more granularity results in increased accuracy. Overall, 53% of respondents are preparing the budget at the lowest level of the chart of accounts (CoA), among which, 84% regard their budgeting process granularity as “about right”. Only 1% of respondents consider their budgeting process as giving “not enough detail”. Finding the optimal balance between level of detail and planning accuracy can help reduce unnecessary and excess effort in the process.