Connection

The Official Blog of Forecast5 Analytics

Steve Miller
WRITTEN BY
Steve Miller

Data Visualization, Forecasting, Budget, Benchmarking

Budgeting – You Can’t Look Forward Without Looking Back

Posted on Apr 24, 2017 9:43:40 AM

A budget is a forward-looking fiscal plan for a given period of time.  Good budgeting, however, is not as simple as “what do I think will happen next month/quarter/year?”  What differentiates good budgets from mediocre ones isn’t just how close the actual results are to the budget, but also how easily the budget is monitored and communicated throughout the year. Building a budget you can live with on a daily basis requires the use of historical analytics. Simply taking last year’s budget and cutting a few percent or, if you’re fortunate adding a few percent, is not going to make for a strong fiscal plan.

Step 1:  Compare Past Year’s Budgets to Actuals

The first step in building an analytics-based budget is comparing past years’ budgets to actuals.  Are there areas where actuals have typically missed budget; either positive or negative?  It may be that you can “sharpen the pencil” in some line-items and take out contingencies that you rarely need to access.  Conversely, there may be hard-to-control line-items where you need to build in more cushion.  By going through this exercise during the budget building, you should have fewer items of concern during your budget monitoring throughout the year.

Learn how schools are using a set of new visual analytics to analyze their "academic return on investment". 

Step 2:  Look for Upward and Downward Trends

The next step in the process is looking for upward and downward trends in significant line-items and analyzing the magnitude of those trends.  What have been the largest growth areas of your budget over the last 3-5 years?  Are there areas that are shrinking?  Going forward do you expect these trends to continue or change?  With this information, you can adjust your expectations for the coming year.

Step 3:  Look at Your Current Year’s Budget

Lastly, and most importantly, how is the current year going?  Budgeting budget-to-budget or last year’s actual-to-budget misses the most timely and relevant data.  You may want to begin your budget for the coming year midway through the current year.  Perform an analytical review of your year-to-date numbers at that time.  Are most line-items at 50% of budget?  If not, why not?  Are they not spread evenly throughout the year, or are unexpected factors impacting your current performance?  With this knowledge, what do you forecast your year-end results will look like?

Once you have performed all of this analysis, you can combine it with the requests from your budget managers, your new initiatives and your revenue estimates to have a much more well-rounded budget.  You will be prepared to monitor it much more effectively, knowing which areas may need a little extra attention as well as what areas you may want to highlight at your budget hearing/adoption meeting.  Lastly, you’ll be much better informed and more able to easily respond to questions about why things happen differently than the budget throughout the year.

Free Template Download - Create Your "State of the District" Report


Steve Miller is a Senior Product Manager for Forecast5. Before his current role at Forecast5, Steve spent the 20 years working with school districts and other local government clients as an external auditor, school business official and consultant focusing on long-range financial planning.  Steve is a CPA and CSBO with a Bachelors in Accounting from the University of Illinois and a Masters in Education Administration from Northern Illinois University.

Post a Comment

From the learning center

Producing Monthly Financial Reports in Minutes Helps North Mason School District Identify $800,000 in Savings

Producing Monthly Financial Reports in Minutes Helps North Mason School District Identify $800,000 in Savings

Washington district creates monthly board report to project savings, enhance transparency and allow funds to be allocated elsewhere.

Download Now
Clarkston School District Accesses Entire Forecast5 Product Suite for Enhanced Decision Making

Clarkston School District Accesses Entire Forecast5 Product Suite for Enhanced Decision Making

Washington district gains a historical perspective on key areas and leverages budgeting & forecasting tools to meet WA reporting mandates.

Download Now
5Cast™ Plus Projects Wylie ISD's FY18 Payroll Costs with 99.98% Prediction Accuracy

5Cast™ Plus Projects Wylie ISD's FY18 Payroll Costs with 99.98% Prediction Accuracy

This Texas district CFO used monthly reporting tool, 5Cast™ Plus to accurately project and predict closing year end payroll costs. 

Download Now
Sycamore School District and Board Reverse Deficit Spending and Obtain a Balanced Budget Using Forecasting Model

Sycamore School District and Board Reverse Deficit Spending and Obtain a Balanced Budget Using Forecasting Model

Jim Dombek, District 427 Board President and Nicole Stuckert, CFO/CSBO use forecasting tool, 5Cast™ to formulate a three-year deficit reduction plan designed to bring about a balanced budget.

Download Now