How to escape the vicious circle of reduced funding and increasing admin burden in public sector finance

According to research from the Chartered Institute of Public Finance and Accountancy (CIPFA), around 21% of local authorities were already experiencing a deficit when the pandemic hit, and many have been forced to rely on their reserves in order to shore up their finances. This figure is only likely to increase as time goes on – even with further extensions to reliefs and holiday periods, and the upcoming review of business rates.

Public sector organizations face an interesting catch-22 situation in the fallout of COVID-19. On the one hand, disruption to business rates has left many local authorities with sharply reduced income. And although central government support has helped balance the books this year, many still face looming uncertainty. Uncertainty that’s reflected in a lack of confidence over setting budgets in the longer term.

At the same time, even though authorities want to engage in the kind of mature scenario planning needed to set robust budgets, rising demand for services and the increasing burden from administration make doing so difficult, and extremely costly in and of itself. Requiring a level of accuracy and speed of reporting – and of data communication across different parts of the organization – that simply isn’t feasible with their current tools.

The need to reduce costs while also confronting the need to direct more resources to figuring out how to reduce costs combines to create an ever-worsening vicious cycle.

Escaping this cycle requires organizations to make a clean break with one of their most persistent habits – manually processing data via spreadsheets in order to deliver FP&A.

The over-reliance on manual data handling not only slows down the process of reporting, budgeting, and planning – it all but guarantees that information will be out of date as soon as it’s useable. And makes scenario modelling for different contingencies – a necessity in times of extreme uncertainty – all but impossible.

It appears that local authorities are already feeling the strain – with the majority of new financial plans focusing on a one-year time horizon thanks to COVID uncertainty and an institutional inability to create robust long-term scenario plans.

What can your organization do to escape the vicious cycle

1. Acknowledge the need to plan beyond the short and medium term

A lack of certainty around your finances should be no excuse for looking after your organization’s fiscal health. A mature approach to scenario planning that allows you to navigate through uncertainty will be essential to your ability to provide services and balance your budgets going forward.

2. Accept the need for tools that are fit for purpose

Despite our love affair with Excel and its ubiquity in local authority finance, we must acknowledge that contemporary FP&A solutions are a much more appropriate tool for the job. The cost savings and productivity gains made possible through the use of smart workflows, automation, and – increasingly – AI and machine learning only provide greater reason to embrace a better experience for yourself and your people.

3. Carefully weigh up the option of moving to the cloud

Not only is it in line with wider government strategy, taking your financial planning, budgeting, forecasting, and reporting ecosystem to the cloud can empower your organization and your people with a wealth of flexibility in terms of working styles, and the data visibility you need to create truly accurate reports and models of the future.

How can Unit4 help you to achieve this

Unit4 FP&A was created to help finance teams in people centric organizations use their data, their money, and their time to its fullest potential by creating a single source of truth for the organization’s finances, reducing the burden of administration on your people’s time, and ensuring flexible and proactive planning approaches that help you secure both your organization’s budgets and its ability to serve citizens.

To learn more about what Unit4 FP&A can do for yourself, check out its dedicated product page here or click here to book a demo.