Categories
Finance Plan & Forecast

Simplicity is the ultimate sophistication

Have you ever been to a giant buffet? Try to remember what it was like. We usually get excited when we see the various options and we ‘cruise the aisles’ to identify what we want. If you are like me, you have a hard time deciding and you end up wandering around taking a little bit of everything but nothing of anything. By the time you leave, you feel bloated and promise yourself to go easy next time. Chances are you won’t even remember what you ate.

ELEGANCE

Contrast that giant buffet to a Japanese Bento box. Here you get a beautifully arranged meal in a box with 2-5 different small portions. The meal is pleasing and you really get to appreciate it. While you savor the various tastes, you have the opportunity to have a meaningful dinner discussion. There is no hustle & bustle. And by the time you are done, you feel satisfied but not full.

OUR BUDGET?

Think about your planning, budgeting & forecasting processes. Are they a bento box or a giant buffet? I clearly remember doing my first annual budget and quarterly forecast: we had well over 300 various line items spread across hundreds of spreadsheet templates. It was a very difficult, time-consuming and frustrating experience. And we got very little value out of it. There was just too much information to be absorbed. Also, those monthly variances drove me crazy. It clearly felt like a giant buffet – too much to consider.

LESS IS MORE

Best practice companies are clearly moving towards slimmer templates. They follow the idea: less is more. The general trend is to create budgeting & forecasting templates with less than 50 line items. The buffet is basically turned into a bento box.

Budget Detail
Da Vinci said: "Simplicity is the ultimate sophistication"

THE BENEFITS

Why should you consider a detail reduction? Here are a few reasons:

  • Less detail creates focus: Think about the Bento box. You focus on a few items instead of loading your plates with mixtures. People get overwhelmed with detail and especially non-financial managers. The less items you have to consider, the more time you have to focus on the important stuff.
  • Increased speed: Producing a detailed budget takes a lot of time. Aggregating the numbers and working through the variance reports isn’t any easier. Focusing on just a few things allows people to complete their plans or forecasts in less time. Also, the task is not as daunting.
  • Less administration: Administering & summarizing 100s of accounts is a tedious and complex exercise. The less detail you have the less administrative burden. And of course: low complexity – less room for errors.
  • Higher accuracy: Detail provides us with a false sense of accuracy. The future is uncertain. Especially the further out we look. How are we supposed to know how much we will spend on taxi rides next December? Estimating overall travel expenses is a lot easier and will be less error prone.

Next time you work with your templates, ask yourself whether there is too much detail. The Japanese have a saying: “Only eat until 80% full.” Try that for your annual budgeting process!