“Budgets aren’t what they used to be,” one CFO told us for this month’s cover story. At a growing number of companies, in fact, budgets have ceased to be at all.
Consider it the recession’s silver lining: the same volatility that has made running a business so challenging over the past three years has finally forced companies to admit that the annual grind of negotiating the targets and allocations that will determine corporate strategy is largely a waste of time. Some companies have abandoned the effort altogether. Others still produce a budget, but no longer treat it like the North Star. Instead, it’s regarded as one of many inputs that guide decision-making, and its limitations are readily acknowledged.
The rolling forecasts and other alternatives that companies are now embracing have been advocated by some for years, but it has taken the frustration of one blown forecast after another to finally convince a critical mass of companies that there must be a better way. For our cover story, “Let It Roll,” longtime contributing editor Russ Banham spoke to CFOs at companies of all sizes and in many industries to see what drove them to change, and what exactly they changed to.
Another change for the better is brewing in Washington, D.C., where, despite the focus on budget deficits (not to mention GE’s skewering on late-night comedy shows for its prowess in driving its tax bill to zero), the push for corporate tax reform has serious momentum. At press time, Congress seemed ready to pass legislation that would bring the official corporate tax rate down by nearly one-third, to 25%. To what degree this alters companies’ effective tax rates remains an open question, but certainly among smaller companies, which lack the deep bench of tax expertise that GE enjoys, a reduced rate would, if enacted, be welcome news.
More welcome still would be the claimed trickle-down effect of job creation, but as some states are finding, even tax breaks pegged directly to that goal often fail to produce the desired results. Therefore, the states are asking, politely, for their money back. CFOs still have plenty of room to negotiate, however, as staff writer Marielle Segarra explains in “States Show Their Claws.”