How your asset/liability management model makes budgeting and forecasting easier
The overarching goal of planning is to provide long-term direction plus a short-term plan for how get there.
As we head into the new year, credit unions and their boards are typically finalizing their budgets for the upcoming year. This year that means dealing with the operational impacts of the coronavirus pandemic and ongoing implementation or planning for the current expected credit loss accounting standard as well as routine financial matters. Even so, no one wants to spend a lot of time developing the budget.
The good news is a good asset/liability management model has a wealth of information and tools that can be used in the budgeting process. It is just a matter of capitalizing on the model’s abilities and leveraging it in a way to make the process simpler.
A solid understanding of the differences between a budget and the financial forecast are vital to budget preparations. Don’t forget that board members can often benefit from a review of these concepts, given that some are recruited for the position less for their financial expertise (or lack thereof) than for their community involvement. With that insight and an awareness of how the ALM model is used to generate budgets and forecasts in everyone’s mind, your credit union’s planning and execution next year will be on track.
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