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With the economy hopping, it may seem far-fetched to be thinking about a downturn, particularly since the last two expansions of the US economy lasted 8 and 9 years each and we are only three years into the current up cycle. However, since finance organizations must operate with a 'hope for the best, expect the worst' attitude, it is never too early to consider the possibilities.

One of the unusual characteristics of this business cycle in the US has been the ongoing efforts of Global 2000 companies to rein in costs, even though times are good. A clear l lesson of the last downturn is to pay attention to inefficiency before a downturn hits, which so companies can continue their normal business as much as possible even when the slowdown takes hold. A few recent studies have found companies paying particular attention to holding down and even reducing overhead functions and spending.

Along with paying attention to costs, Ventana Research advises companies to take a close look at their budgeting and planning processes to support a lean, more adaptive approach. For example, CFOs typically use capital spending as their primary cash conservation lever when recessions hit. However, studies have shown more experienced CFOs are able to explore a broader range of options for cutting spending than those with less experience. Why? They are able to assess and re-assess their options faster. In our budgeting and planning research, we find some of the most important benefits from process improvement emerge when times are toughest. Organizations that plan and re-plan more frequently and with greater depth are able to respond faster when difficulties arise, and they are more insightful in their decision-making.

The time to implement a new planning process is not during the depths of a recession - it is precisely when times are flush. New processes take time to implement and perfect. Although our research has found that companies are able to make a major shift in their budgeting and planning process within a year, most organizations prefer to stage the changes to their process over a 2-3 year span. Now that Sarbanes-Oxley initial compliance is over, we advise finance organizations to focus on effectiveness measures, especially improving budgeting and planning.

Assessment

Our research has found most companies that adopt a dedicated budgeting and planning tool have been able to make their process more efficient. Spreadsheets have inherent flaws that make them the wrong software for any enterprise-wide, repetitive process like planning. Rather than wasting hours rolling up and consolidating spreadsheets, people are able to spend much more time making the process more valuable. For example, they are able to analyze the budget and align it more closely to objectives and strategy. They can start the process later and thereby gain many more "actual" months on which to base forecasts. We repeatedly see companies that are able to plan and re-plan at a detailed level quickly are also better able to adapt to changing conditions. Making more of the budgeting and planning process pays off during good times, but the advantages it provides in coping with more challenging conditions makes making the change now-while times are still good-- that much more important.