What is in this article?:
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.
12 Warning Signs That Your Budget Process Has Outgrown the Spreadsheet
1.No single version of the truth guides or emerges from the budgeting process. Managers need to roll multiple budgets into a single enterprise perspective, but it’s too hard to do because there are too many variations in roll-up structure.
2.Ownership and accountability by business users have disappeared, and control over consolidating the budget has been concentrated to a single person.
3.Executives can’t answer the following questions: Who are my most profitable customers? What managers are the most productive? What product line is most profitable? Why are certain metrics “out of sync”?
4.Financial statements are not fully integrated because they are too time-consuming to set up or the model was modified too many times to ensure no errors.
5.Detail becomes impractical and almost unattainable. Spreadsheets grow so large that budgeting for some line-item expenses or revenue items is done only at a consolidated summary level.
6.Budget calculations become too complex for most budget preparers to follow, and the model gets too large for users to assimilate.
7.It takes more time to manage and maintain the spreadsheet than to perform the actual analysis and planning.
8.The budgeting models break frequently with changes to data structure or roll-ups.
9.There are data integrity issues—mistyped data, broken formulas, missing links, logic errors—that make budget models unreliable.
10.Comparing current year actual results to plan and/or last year’s actual results is a manual, cut-and-paste exercise that takes too much time, invites errors and slows down month-end analysis and reporting. Summary or high-level variance analysis lacks underlying detail.
11.It’s difficult to accurately track payroll, taxes and benefits expenditures for all employees, including contract, part-time and seasonal workers, resulting in over-budgeting for payroll taxes such as FICA or underestimating total employee costs impacting year-end cash flow.
12.Deferred revenue projections (for projects, maintenance contracts, royalties, renewals, subscriptions, etc.) are too complex to model, requiring the layering of multiple revenue schedules within multiple periods to create the waterfall effect.