Improving Budgeting: Modernising the Cycle

The budget cycle is crucial in all organisations. CIPFA has taken a long and hard look at the budgeting, forecasting, monitoring and reporting cycle arrangements in place in most public bodies to assess whether they are working well. The evidence is that improvements are needed. All financial processes need to be fundamentally reviewed from time to time and the budget cycle is no exception.

The financial environment is now moving towards medium-term three-year settlements for public services, with pressure for faster accounts closure, and a greater emphasis on efficiency, performance outcomes and value for money. The budget and reporting cycle needs to adapt as a tool to support these developments.

Improving Budgeting: Modernising the Cycle gives you practical ways to improve this key financial process. Existing good practice and fresh approaches to budgeting are explained along with the sensible steps that your organisation can take.

Rolling forecasts that are formally reviewed and updated each quarter are potentially a powerful tool. Looking ahead 18 months and integrating known financial outcomes with performance metrics, taken together with frequent re-forecasts and the analysis of underlying performance and financial trends, this approach allows organisations to see into the future as a rounded whole. Resources can be redirected at frequent intervals. Because known financial results are prepared each quarter the closure of the accounts for the current financial year is streamlined.

Amongst the potential benefits of this approach are better skilled managers who remain engaged with planning what the future will look like. They can gain a deeper understanding of the prime cost drivers and variables for their business area. For the organisation’s leaders the forecasts act as a tool for relating funds with the outcomes they purchase and the organisation is much better able to assess value for money.