Energy Company’s Budget Process Transformation Drives Agility and Strategic Impact

The challenge

The client’s chief financial officer (CFO) sought a partner to develop a formal annual budget process, as well as assist in the execution of the subsequent year’s budget for the company’s largest division. As part of this process development, rebuilding the legacy financial models was necessary to facilitate a more streamlined and accelerated process, as well as to ease the transition into OneStream, a finance management platform which was to be implemented as a planning and reporting tool.

To determine the gaps and challenges of the client’s budget process, Protiviti initially performed an assessment of the client’s current planning process, including a review of existing budget models and the budget rollup process. Based on the assessment performed, the following challenges were identified:

• The client historically employed a top-down budgeting process, with minimal input from commercial and operational groups.
• Existing financial models used for annual budgeting were granular and complex, requiring highly manual efforts to update and maintain throughout the budget process.
• Management reviewed the budget on an individual segment basis and not at the consolidated total company level, which would have accounted for elimination of intercompany activities.
• The annual budget process extended over a six-month period due to inflexibility of the existing model, coupled with management’s desire for different scenario views to support key business decisions.
• The company did not re-forecast the business on a routine basis throughout the year following finalization of the annual budget.

Based on the assessment results, Protiviti established a future state roadmap to achieve a more efficient annual budget process, including the development of an enhanced driver-based financial model.

Transforming the annual budget process

To achieve the client’s goals as established in the roadmap, Protiviti worked in collaboration with a cross-functional client team to drive the necessary transformation to execute the subsequent year annual budget process:

• Formalized the budget process, reducing the budget cycle by approximately 10 weeks. This formal task-based budget tracker (inclusive of key deliverables, cross-functional responsibilities, management reviews, and deliverable dates) established the appropriate level of governance required to facilitate a focused and streamlined budget process.
• Built a more flexible driver-based financial model, unlocking agility and enabling greater business partnerships. Data-driven P&L financial models included standardized input templates for commercial and operational teams to input business drivers and key assumptions, enabling the ability to run various scenarios throughout the budget process. These models were also built to enable a seamless transition into the finance management platform to drive more robust adoption and use of the tool.
• Developed an integrated three-statement financial model to provide management with an accurate view of the consolidated total company budget. This integrated model provided a mechanism to consolidate all three business segments, eliminating intercompany activities. This model also provided management with a more comprehensive and accurate view of the consolidated budget provided, enabling more informed strategic decision-making across the company.
• Established formal planning and review meetings to drive greater accountability and improve overall budget accuracy. Planning meetings were conducted with commercial, operational, and departmental leaders to incorporate and validate key budget inputs, KPIs, and assumptions, thereby enhancing business partnership with the FP&A organization. Formalized management reviews of budget versions and final budget were established to ensure transparency, timeliness of requested actions, and alignment of the final budget submission in accordance with the established budget timelines.
• Executed the annual budget process to augment the client’s understaffed FP&A organization. Protiviti served as the client’s FP&A organization throughout the annual budget process, which included:
  • Preparation of initial financial models based on existing data and analysis of business drivers.
  • Reviews of initial business drivers with commercial, operational, and departmental leaders, adjusting assumptions and inputs based on planned strategic initiatives and anticipated business actions to drive growth and optimize spend.
  • Finalization and presentation of consolidated budget results to management, leveraging the creation of an enhanced management reporting package, providing a comprehensive overview of the annual budget, key drivers and analytics to enable informed decision-making.

Unlocking future value

The transformation of the annual budget process unlocked significant future value for the company, including:

• A more efficient and focused annual budgeting process, which served as a basis for the establishment of a quarterly re-forecast process.
• Improved budget and forecast accuracy.
• Enhanced cross-functional collaboration, incorporating the business perspective into budgets and forecasts.
• More informed strategic decision-making and resource allocation across the organization’s multiple divisions.
• Streamlined the implementation by removing financial model complexities and documenting the existing budget model’s operations and defined KPIs.
• Clear communication of the company’s strategic advantages and value propositions, articulating the business case to potential lenders.

As a result, the company’s leadership team is now better equipped to confidently assess its financial outlook and cash position, allowing for greater focus on high-impact strategic initiatives that support continued profitable growth.