By Dyana Boutwell
I know, clinical financial forecasting is everyone’s favorite topic. Don’t hold back your excitement in wanting to think all about your budget management responsibilities. Now is it because you are struggling to keep on top of your study budget? Is your forecast up, down, up again, and you are seeing fire come from the eyes of your Finance rep? I’ve been there. I’ve seen the fire. And I’d like to take this opportunity to give you some key pointers to throwing the bucket of water so all is peas and carrots at the monthly Finance meeting.
There are usually three major offenses you can make when it comes to your study forecast. First and foremost, you can be over budget (again). Here Finance will drill you with questions as you seek approval for yet another budget increase. Second, you can significantly over forecast and hold onto dollars. You think you are doing the right thing because you are under budget! But why are you still seeing fire? Because not forecasting with accuracy impacted the big picture; other activities were a no-go because you were unsure if you would need the dollars and were afraid to release them. Or lastly, you are the ultimate offender and your budget swings up and down like a yoyo. One month you are increasing the total study costs by $1.5MM, the next you are decreasing it by $750K. Sound familiar? Finance has to justify those swings to Senior Management, and if a public company, the auditors. Such swings are a sign that tracking of forecasts or accruals is not being done with accuracy or confidence. You are not just seeing fire – Finance’s head may have blown off by now.
I’m here to tell you that there are ways to reduce the pain points without engaging in a complete overhaul of your financial system. Start by asking yourself these questions…
- Are you and Finance speaking the same language? This is the starting point toward effective communication and making the process more collaborative. For example, as a project manager, you should know how Finance defines accrual and what your responsibility is in supporting this tracking. It should be clear that accruals are how Finance tracks expense on your studies, and that this is driven by estimated work completion and not invoicing. There also should be no mystery behind Finance’s information requests or how they use the information you provide. On the other hand, not all Finance professionals have been exposed to clinical trials. You want to ensure Finance understands how a trial is run and what factors drive the budget up or down. Cross-education should be a priority.
- Are you clear on who “owns” particular information and reporting? Mapping out roles and responsibilities will eliminate redundant data housing and provide clarity around required communications. An effective rule of thumb – Clinical stays on top of budget and actuals; Finance manages the accruals. Avoid keeping multiple trackers of the same information. You do not want to spend all of your “spare” time rectifying disconnects cross-functionally. Misalignment in tracking will eventually lead to errors in reporting, especially when there are too many involved in the monthly forecasting process.
- Are you communicating up AND down? This is another situation we’ve all been in. Leadership and Program Managers know the forecasts and accruals, yet the folks managing the studies may not. Or, study managers are keeping a tight budget, but this information is not being shared effectively by the leaders that sit in the Finance meetings. Broken communication chains can cause confusion and ultimately to a budget that is not being managed, forecasted, or reported accurately.
- Lastly, do not forget to ask yourself – are your tools archaic? I cannot emphasize this enough – BUILD SOLID TOOLS. Do you utilize a standard tracker across programs? Can you easily track and manage your budget to actual? Can you efficiently track actuals and work completion against POs? Do you have a tool that houses benchmarking data to effectively forecast study costs? Do you leverage an accrual model or are you spending hours upon hours trying to track them manually? If your current tracking and reporting seems cumbersome, useless, or excessively manual, it’s time to reevaluate your tools. Always remember your vendors have reporting capabilities as well – leveraging this can help minimize your manual tracking or assist with validating your internal data. There also are experts like us here at Halloran who can help you forecast study costs with accuracy, hand off an accrual model for usage, and build tools that are effective and automated. Don’t go down the rabbit hole of trying to tweak excel spreadsheets creating the next band aid solution – consider asking for and accepting help. If you draw a line in the sand and clean up shop from that point forward, you will have time to do other things because tracking and reporting your budget will be streamlined.
Naturally every organization is different and the answers to these questions can vary greatly. At the end of the day, you want a process in place that is efficient, scalable, and does not keep you up all night with your head in a spreadsheet. Go ahead and throw the bucket of water on Finance’s head (not literally for those of you that are tempted). You truly can transition to having a solid budget and forecast; it’s just a matter of answering some important questions and collaborating toward positive change.