What is in this article?:
- Liberate the Budget Process: A Step-by-Step Guide
- 12 Warning Signs That Your Budget Process Has Outgrown the Spreadsheet
- Benefits of Budgeting with a Packaged Application
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.
Benefits of Budgeting with a Packaged Application
An attractive solution for replacing the spreadsheet is the use of innovative technology solutions designed to automate the budgeting process, allowing your financial leaders the freedom to focus on more strategic initiatives and feel confident in the financial future of their organization. By automating the process, financial leaders can anticipate the following key benefits:
Greater accuracy—Formulas for your models are based upon your assumptions and workflow, utilizing built-in financial intelligence and business rules to ensure complete accuracy.
Centralized database—Any changes to estimates or assumptions are automatically updated in real-time so everyone is working with a single version of the truth.
An easier-to-use common interface—Applications are built from the business perspective to maintain consistency with business entity names rather than database conventions.
Accounting application integration—Automated processes will import data from commonly used accounting applications, with the ability to support a rolled-up budget and forecast from multiple systems. This expedites data transfer and minimizes errors.
Reduced programming—By eliminating the need for spreadsheet-type formulas, and therefore errors, your budget and forecasting model can become an accurate reflection of your business.
Contingency planning and sensitivity analysis with “what if” scenario generation—Users can change variables to see their immediate effect on outcomes. A series of models can be replicated, enabling additional analysis and comparisons.
Integrated reporting—Generate profit/loss, balance sheet and cash flow statements automatically, which can be customized to your needs.
Collaboration—Involvement and collaboration by more end users and contributors to the budget process.
First Steps Toward Enterprise Budgeting
A best-practice approach to moving beyond spreadsheet-based budgeting would start with these steps:
• Fully understand your current budgeting model. It’s likely to contain embedded assumptions, formulas, reporting requirements and experience that are important to transfer over to a packaged application.
• Determine what works and what does not work in your current process. For example, if your particular business model requires the bottom-up forecasting of many participants, you need a packaged application with strong collaborative features.
• Create the vision. Project the ideal vision of your budgeting process, including who would participate, what integration would be helpful, which general ledger or other transactional systems your budget should link to, and the reporting needed.
• Conduct user analysis. What kinds of users today take part in your budgeting process, who is missing, and who are the people you want to draw in? By documenting their needs, you can set the stage for a good level of user acceptance of the budgeting application.
• Secure high-level executive sponsorship and ensure that you will have sufficient project justification and funding.
Conduct Due Diligence
The primary benefit of graduating from pure spreadsheet budgeting to an automated process based on innovative technology solutions, is a more accurate, inclusive and timely budget with significantly reduced cycle time. Companies often report that they can move from annual budgeting to quarterly budgeting as a result. Faster, more informed budget-related decisions can also be enabled.
For the SMB, the ability to assess profitability by product line, customer, region and channel in real-time helps determine where to put resources, cash and personnel. The enterprise budget gives a complete view of your financial organization, blending top-down and bottom-up perspectives, incorporating historical and forward- looking information.
The implementation and maintenance requirements of the solution should be carefully considered. The project’s strategic aims, budget and executive sponsorship need to be clearly defined. Recognize that your organization will likely depend upon this system as part of standard operations for a five-to-ten-year period. Conducting the necessary due diligence to explore all options is a worthwhile investment.
John Orlando is executive vice president and CFO of Centage Corp., a provider of automated, budgeting and planning software solutions for small to medium-sized organizations. He has more than 25 years experience in finance, accounting and administration, working with both high growth Fortune 500 companies and startup business. Prior to Centage, he served as group director of planning & analysis at WearGuard (subsidiary of ARAMARK), where he was instrumental in driving profitability via restructuring, cost containment and margin improvement initiatives. He holds a bachelors degree in accounting from Northeastern University and an MBA from New Hampshire College.