Software That Saves You Money

The recession may be on the decline, but the widespread corporate focus on improving the numbers for the next quarter and avoiding long-term spending isn't likely to fade anytime soon. Getting approval for large projects is more difficult today than ever before. Overhauling the corporate budgeting system, which can cost millions of dollars, is not on most businesses' radar screens. But this myopic mentality can prevent companies from realizing the long-term savings and efficiencies of the latest budgeting products, which can more than justify their sometimes high price tag.

Perhaps the area that has the greatest potential for savings is employee time. Companies that spend less time preparing the budget generally spend less money on it. A 2001 study by Hackett Benchmarking & Research reports that the
average company with annual sales of $1 billion spends 25,000 person-days per year on planning and measuring performance. However, the upper 25 percent in terms of budgeting efficiency spend only about 6,000 person-days per year. Implementing a new software system can move average companies into the top quartile.

"We've estimated [that an e-budgeting solution can produce] savings of 25 percent to 30 percent in terms of the cost of preparing the budget," explains Henry Schweppe, partner who leads the banking practice in the Americas at PricewaterhouseCoopers Consulting in New York City. "Those savings come from improving the infrastructure with faster, more efficient management reporting and cost accounting."

However, the cost savings aren't automatic. To maximize the benefits of a new solution, Schweppe recommends, a company needs to standardize its budgeting procedures as much as possible before making a software purchase. "One key prerequisite is to drive out the amount of detail in the budget," he says. "Basically, it's a three-step process. First, develop a template to consolidate your spreadsheets. Second, build business-unit financial plans into the new tool. Third, build a business forecasting model into the tool."

Time Is Money

In the time-is-money world of forecasting and planning, replacing old spreadsheets with a streamlined, focused application is an obvious means of reducing costs. Joe Hunt, manager of budgeting and analysis at Washington Mutual Finance, a lending company in Tampa, Fla., remembers how tedious and expensive his company's old budgeting process was. "We used 600 Excel files to prepare the budget, and the end users had to dial in to our headquarters and download all 600 of those files to their personal computer," he says. "It took anywhere from four to 10 hours for a district manager to download those files, tying up his time and his computer. And once he did his budget on those files, it took him another day to
upload that data back to headquarters."

Now, according to Hunt, the company's managers don't download or upload anything. "It used to take us three days to do one phase of the budget, and now with the budgeting software we're using from SRC Software, we can do one pass of the budget in four hours," he says. "Overall, it's reduced the entire budget preparation period from nine months down to four months, without changing the number of passes in the budget. That's been our greatest savings. We have 100 users spending half the time they used to spend on the budget."

Hunt envisioned this huge time savings when he approached senior management to make his case for buying the new software. He explains, "Once we sold senior management on the idea, we proved the cost-saving benefits of the software through a pilot program within one of our divisions. We created a pilot committee to test out the software, which included regional supervisors as well as vice presidents -- people who would be using it the most."