You have to question the relevance of the annual budget in today's business community. Few insurance firms can any longer predict what funds will be required from one quarter to the next, let alone accurately forecast spending plans 12 months ahead.
Budgets remain only to provide the appearance of financial control to otherwise jittery corporate stakeholders, such as investors, shareholders and key customers. They encourage the assumption and complacent thinking that if a company has set budgets then it has devised some kind of rock steady Grand Financial Plan based on deep thinking and in-depth analysis of past, present and planned expenditure.
Life isn't like that today. Politics change. Business competitors can emerge from anywhere in the world and from any sector, at any time. Corporate goalposts have to flex to keep the company in play and in most cases that is a constant demand.
To meet world market demands today, corporate spending has to become much more responsive. Companies must trust departmental managers to do what they have been hired to do - manage their own resources to best effect to meet business objectives. Why handcuff them to a budget that we all know becomes a challenge, or a moveable feast the moment it's set?
Quite simply, the time has now come for the annual budget to go the way of the fax machine - something you use from time to time, but not a business-critical tool.
Companies that understand this, and act on it, stand to greatly enhance their credibility and performance. Those that don't should expect to be consigned to history.
Richard Pierce
Managing director
PS Financials plc
