Become a detective without quitting your day job
I must admit, I never thought I’d write a post about budgeting. Sometimes I shock even myself.
I currently work in a PE backed fintech that is undergoing a strategic pivot from a largely offline D2C foreign exchange platform into a vertical SaaS business. I can’t quite articulate the level of transformation we need to undergo in order to deliver on this shift, not least of which is a full automation of manual processes & reporting and the implementation of digital tools required to run a company in the 21st century.
We just finished the budgeting process for our upcoming fiscal year and it was a truly chaotic experience (and not the good kind of chaos). It was also the first time the company had run this process with a formal head of FP&A so you can imagine that the shock factor for all parties involved was next level…
Having just come up for air from this process, the lessons learned have been very top of mind.
Many things didn’t work well. We wasted hours validating disparate data sources, chasing historical information and trying to run a structured process in an environment that had never challenged itself to invest in growth vectors, new channels or collaborative ways of working.
Putting aside the issues we had with the process itself*, there was one strategy that truly saved us: triangulation.
*Full disclosure: There are many great resources and experts who can speak to how to run an efficient budgeting process - I am not one of them.
What is triangulation?
In addition to being a very fun word to say, triangulation is a cross-referencing method that involves using multiple data sources and perspectives to verify and validate financial information.
In the context of budgeting, this means combining various inputs from different departments, historical data and external market dynamics to create a more accurate and realistic financial plan.
Imagine you’re trying to solve a mystery with just one clue—tough, right? Now imagine you’ve got three clues pointing you in the right direction. Much easier…hopefully.
That is effectively what data triangulation is all about. Instead of relying on one data source to land your budget, you mix in a bunch of different inputs— think: sales forecasts, historical data, industry benchmarks, and insights from senior leaders across your organization. By comparing these different pieces, you can spot discrepancies, validate assumptions and ultimately end up with a much more reliable picture of your financial future.
One of the most powerful parts of triangulation is the ability to squash bias : as teams are planning for their year ahead, Sales might be overly optimistic, while Operations might be more conservative; some teams might be sandbagging their forecasts while others might be unrealistically aggressive.
By triangulating this information across teams, you almost always uncover gremlins you wouldn’t have otherwise spotted and neutralize personal opinions.
In the end, this gives you a more objective and fair budget.
What does this actually look like in practice?
Oh, I’m so glad you asked.
Channel your inner Sherlock Holmes - set out on a fact finding mission
Start by collecting data from a variety of sources. Pull in information from different departments, look at industry comps for ARR, growth rate & profit margin and leverage historical financial data as a baseline.
Engage your most senior leadership to help you pull this together and stress test different assumptions with them. They are ones operating in the business day-to-day - leverage their knowledge.
Open the flood gates - make sure you are casting a wide net to catch as much data as possible (in a structured way though, please)
Make sure there’s a free flow of information between departments. Regular meetings and collaborative tools can help ensure everyone’s sharing their data and insights.
I beg of you, do not build these models in static spreadsheets that can’t be shared collaboratively. This may very well be the hill I die on.
Compare & contrast - stress test all your numbers and try to disprove your own assumptions
Use analytical tools to scrutinise the data from all your sources. Run sensitivity analyses, explore different pricing models and growth scenarios. Look for patterns, correlations, and any discrepancies that might need further investigation.
Try to break your own plan.
Document. Every. Single. Thing
Unless you are a robot, when you look back on this in a year’s time, you will not remember the layers of assumptions in your model unless you wrote them down. If you don’t, I promise it will lead to chaos.
Do yourself a favor today and document religiously for tomorrow.
Triangulation truly requires teams to work cross-functionally. It necessitates buy-in from the top and participation from many people across the organization. This is not IC-level work that can be done in a vacuum.
Everyone needs to be actively engaged in the process and willing to challenge each other until you arrive at a financial plan that has been - shall we say - triangulated across as many sources of reliable information as possible.
