When it comes to forecasting and budgeting, there’s always an element of ‘factoring in the unknown’. You need to be able to flex the original plan to include deviations that will evolve over the course of time. This requires continuous reforecasting.
Finance teams create budgets and forecasts, sometimes years in advance, on thousands of data points. You cannot get lost in the details, attempting to be perfect. This is where it is important to be directionally correct, but not necessarily 100% accurate – a difficult balancing act in the easiest of circumstances. Over the past few years, with the global pandemic and the Ukraine conflict, to name but two black swans (and once-in-a-lifetime impacts), this gets even more difficult.
An element of the solution is being reactive to events, being able to best understand what is in front of you, and calibrating a response. This is most effective when implemented rapidly and with a clear message outlining the reasons why, to all those involved, to ensure organisational buy-in. These actions need to be continually recalibrated as events unfold. Communication is key to both the internal team, managers and stakeholders, but also to customers and suppliers (where appropriate).
Reacting to the unprecedented
- The COVID response
When we did the budgeting for the year COVID began, we had a clear vision and strong financial plans. But events overtook everything. Adapting these plans as rapidly as possible to the new environment was key.
As a business, we worked with our customers to understand their pain points and help to mitigate some of the issues they were facing, requiring innovation and initiatives that we couldn’t have possibly conceived at the start of the year. We worked with our colleagues in ensuring they had the right environment and equipment to work safely.
- The Ukraine crisis
At Amdaris, we began 2021 with high growth plans for our Ukrainian centre. We had signed off our budget at the end of 2020, yet suddenly, in 2022, the Ukrainian crisis unfolded. We needed to pivot to firstly, ensure that all our staff were safe and could relocate from Ukraine, where possible, and, secondly, to ensure we had contingency plans for our other European offices and staff in case the situation escalated further.
We also had costs we hadn’t expected when we set out our budget, which included sending generators and power banks to our staff who had stayed in Ukraine.
Although we had forecasted to grow our Ukrainian centre, we had to change our tactics and strategy of the business to better fit what was happening in the geopolitical landscape. Instead of seeing this as a loss, we threw some of our passion and momentum behind the Bulgarian centre opening and supporting our Ukrainian colleagues. We took the learnings we had had and made space in our budget to excel in new areas, while making sure our people were safe.
Ongoing support and adaptation
Reacting to events, we pledged to stand by Ukraine. And as a symbol of this support, we also planted ‘trees of hope’ dedicated to Ukraine across our global locations. But once initially reactive, we had to continue to be responsive to our Ukrainian colleagues’ needs: a public show of solidarity has to be backed up with action, and budgeting needs to constantly align with current and changing circumstances.
For example, we are still actively recruiting Ukrainian developers and running our internship programme in Odesa. The key approach to this support is adaptability – for example, accounting for how and where individuals choose to work, whether they stay in Ukraine or relocate, and adjusting company policies, such as bank holidays and emergency leave pay, depending on employees’ needs.
Flexible calibration
Setting aside budget to create more headroom can be beneficial in these cases. However, in a ‘normal’ year, this would take away from other functions and could inhibit growth and not maximise investment in the right areas.
The most important element of budgeting and reforecasting is being flexible in the approach and being highly adaptable in a short period of time. Calibrating to the new environment – without being beholden to the exact numbers – but ensuring the strategic direction is correct.
About the author:
Jamie Gibson, Chief Financial Officer at Amdaris
Jamie leads Amdaris’ global finance teams, overseeing the strategic financial planning and corporate fundraising needed to drive profitable long-term growth.
His career includes time at companies such as Capita, SunGard, IPWireless and Cramer.