Basic business accounting practices date as far back as the 1400s, when Venetian investors kept track of their Asian trade expeditions using double-entry bookkeeping, income statements and balance sheets. The word “budget” is from the old French word “bougette,” meaning “small purse.” The British government began to use the phrase “open the budget” in the mid-1700s, when the chancellor presented the annual financial statements. Businesses began to regularly use the term “budget” for their finances by the late 1800s.
Modern business forecasting began in response to the economic devastation of the Great Depression of the 1930s. New types of statistics and statistical analyses were developed that could help business better predict the future. Consulting firms emerged to help companies use these new prediction tools.
Accounting and forecasting were difficult in the early 20th century because they depended on laborious hand-written equations, ledgers and spreadsheets. The emergence of mainframe computers in the 1960s and personal computers in the 1980s sped up the process. Software applications such as Microsoft Excel became widely popular for financial reporting. However, Excel programs and spreadsheets were prone to input errors and cumbersome when various departments or individuals needed to collaborate on a report.
By the start of the 2000s, companies gained access to ever-growing operational data sources, as well as information outside corporate transaction systems — such as weather, social sentiment and econometric data. The vast amounts of available data for forecasting created a need for more sophisticated software tools to process it.
Numerous planning software packages emerged to handle this data complexity, making planning, budgeting and forecasting faster and easier — both for processing and collaboration. With predictive insights drawn automatically from data, companies could identify evolving trends and guide decision making with foresight, not just hindsight.
Today, cloud-based systems are becoming the standard, providing more flexibility, security and cost savings — helping organizations generate accurate predictions and budgets with fewer errors.
But despite these advancements, businesses are still quite dependent on traditional spreadsheets. (1) Seventy percent of businesses say they rely heavily on spreadsheet reporting, with only 16 percent using on-premise specialist software — and only ten percent using cloud software for planning.
Many businesses still base their strategy on annual plans and budgets, which is a management technique developed over a century ago. But in today’s more competitive environment, organizations are realizing that plans, budgets and forecasts need to reflect current reality — not the reality of two, three or more quarters ago. Continuous planning and rolling forecasts are becoming widely used methodologies to update plans, budgets and forecasts frequently throughout the year, on a quarterly or even monthly basis. These approaches help managers spot trends before their competitors — helping them make better informed, more agile decisions about pricing, product mix, capital allocations and even staffing levels.