While most large companies have already liberated their budgeting process from spreadsheets, many small and medium-sized businesses (SMBs) still manage the difficult and error-prone process of budgeting on these same challenging spreadsheets. Once the SMB is hit with budget-related issues too painful to ignore in budgeting—such as version control, complex macros, formula errors, and inability to easily draw in and consolidate input from needed participants—it would seem likely they would adopt a packaged application for budgeting. But breaking the spreadsheet habit is a difficult step for many, and finance executives often postpone the decision to migrate to a more purpose-built budgeting solution and stick with “the devil they know.”

This article will outline the problems associated with spreadsheet-based budgeting as well as the advantages of new technologies designed to automate the process and ensure greater accuracy. It also offers a step-by-step guide to help start the transition of your budgeting from a spreadsheet platform to an enterprise packaged application. The goal is to help SMBs plan their transition to a budgeting solution that delivers more collaboration but with more control, accountability and budget compliance.

 

Challenges Confronted by the SMB Finance Professional

CFOs and those who work for them face unrelenting pressure to align operations and strategy, deliver accurate and timely financial information, and monitor progress toward goals. Unlike the Fortune 1000, with greater resources and tolerance for risk, or the small office/home office (SOHO) business with its greater agility, mid-market companies are stuck in the middle. The challenges their executives confront are different. They must struggle with increased competition from global suppliers and buyers, shortened business cycles, uncertain access to capital and increased regulation—all with limited support and fewer resources. Time is their greatest constraint.

Consequently, the finance professionals in an SMB need business tools that help them quickly evaluate current and past performance against a predefined set of performance data (goals and forecasts), present clear facts and uncover trends. These managers demand accurate, timely data that can be easily updated as business conditions change.

 

When the Spreadsheet Becomes a Disadvantage in Budgeting

Good budgeting practices are structured to minimize errors and inconsistencies, drawing in all the necessary participants to contribute their business experience and the unique perspective of each department. Best practices in budgeting entail a mixture of top-down guidelines and standards, combined with bottom-up individual knowledge and experience. Excel, the de facto tool for budgeting, is a powerful personal productivity tool. Its current capabilities, however, often are inadequate to support the critical nature of budgeting and forecasting.

There comes a point when a company’s reliance on spreadsheets for budgeting can become an impediment to effective decision-making and analysis. There are several clues to detect this transition point before it leads to severely ineffective decision-making, lost productivity and lost opportunities.