The budgeting process is poorly supported in popular accounting suites, and spreadsheets continue to be overused. Do-it-yourself budget datamarts and best-of-breed modules are alternatives, but a new generation of budgeting applications is on the horizon.

Best-of-Breed Budgeting

Best-of-breed budgeting packages offer a wide range of sophisticated budgeting functionality such as:

  • Top-down or bottom-up approaches to building and managing budget submissions
  • Multidimensional budget codes for better analysis and multicurrency budget numbers
  • Formula-based budget spreading and a financial modeling language for what-if analysis
  • Intelligent budget entry and viewing worksheets with row/column pivoting and cell drilldown
  • Built-in charting, rule-based exception highlighting and cell notation for explaining numbers
  • Role- and hierarchy-based budget submit-and-approve processes for budget planning workflows
  • Better security including selective budget number locking at the worksheet, dimension or cell level
  • Integrated allocation management, financial reporting and performance indicator consoles
  • Links to import or export data in popular spreadsheets such as Lotus or Excel
  • Support for popular database engines such as Oracle, Microsoft SQL Server or Hyperion Essbase
  • Access to budget analysis or the ability to enter budget numbers via a Web browser

Considering how painful the budgeting process can be in organizations with multiple locations and lines of business, it is surprising how poorly budgeting is supported in popular accounting suites. Few vendors have a comprehensive budgeting module in their application suites, and even fewer have serious partnerships with vendors of best-of-breed budgeting modules to plug this important gap.

Of course, every general ledger (G/L) module has some built-in budgeting capability that typically allows users to create a number of budget "version" codes, such as plan, revise and forecast, and post data to them. In addition, these modules let users generate budgets by spreading a year budget by period, copying or uplifting prior year actuals; and compare actual numbers to budget numbers for monetary and percentage variance in financial statements.

But that's about the sum of it. More sophisticated budgeting functionality or the ability to create and manage budgeting in modules other than the general ledger is still uncommon. For example, if you want the purchasing system to check orders against a project or other expense-account budget, you may be out of luck, unless you obtain a specialist fund-accounting system. Similarly, expect to rekey data to integrate human resources and payroll numbers into budget worksheets.

Budgeting Software Basics

Mid-sized to large companies can tackle the budgeting process more effectively by looking for the following software functionality:

  • Budget and actual data stored in a single database
  • Integration with many operational systems, not just the general ledger module of a suite
  • Multidimensional budget codes that link to organization hierarchies or other roll-up structures
  • The ability to manage the budgeting process as a cross-organizational workflow that requires rules, routes and roles
  • Access to variance data and exception data through personalized views

There are three ways to get these capabilities: Build your own custom budgeting system, buy a stand-alone best-of-breed system or purchase a budgeting module as part of an accounting suite.

Build Your Own Budgeting System

Two Different Looks at Budgeting

(For larger screen, click image 43 KB) PowerPlan from PowerPlan Corp. sports a state-of-the-art user interface for managing and understanding budget data. On the left, an Outlook-style slider bar is used to select budget worksheets and reports to view. A selected budget worksheet is shown at the top with linked views to display a trend graph, a source worksheet and a descriptive note explaining the basis for the numbers shown.

(For larger screen, click image 23 KB) This main screen from Walker's new Analytics Planning and Forecasting module has menu buttons for selecting functions to manage the budgeting process workflow efficiently. On the right is a pie chart displaying a graphical analysis of the relative status of each of nine budget workflow steps.

When it comes to managing budgets, there are two basic blueprints from which to build a system: One relies primarily on spreadsheets, the other on datamarts. Spreadsheets are the world's most popular budgeting tool. This could be because technology such as Microsoft's object linking and embedding (OLE) closely integrates spreadsheets with accounting software, and because many accounting-system vendors continue to rely on spreadsheets and OLE to transfer data to and from the general ledger. Although spreadsheets offer many advantages (including easy data-entry, viewing and analysis, and e-mail routing for review and approval), building a budgeting system around, Microsoft Excel for example, is probably not a long-term solution for many businesses.

For larger businesses, a financial datamart offers an effective solution to satisfying the budgeting requirements listed on page 73. A separate database collects data from several operational systems and is linked to one or more systems via desktop query and reporting tools. One popular route for building a budgeting datamart is to use a multidimensional database, such as Hyperion's Essbase (formerly Arbor Essbase), for the server and connect the datamart with desktop analysis tools, such as Cognos PowerPlay or BusinessObjects, and a spreadsheet. However, implementing this solution requires information systems (IS) support to set up and maintain the datamart and is unlikely to cost less than implementing a high-end best-of-breed budgeting module. Consequently, most businesses will want to buy, not build, and the good news is that there are more budgeting solutions around than there were a few years ago.

Best-of-Breed Budgeting Modules

The alternative to patchworks of spreadsheets or a do-it-yourself budget datamart is a best-of-breed budgeting module, of which there are several to choose from in various price ranges. Hyperion's Pillar and Comshare's BudgetPlus are two of the best-known budgeting modules targeted at larger, complex enterprises and cost between $100,000 and $200,000. Products such as Adaytum Planning, Budget 2000 or SRC Software Budget Advisor cost less than $100,000; and PowerPlan and Helmsman run less than $50,000. Helmsman is one of the few lower-cost budgeting products that offers budget entry and viewing via a Web browser. It is difficult to find a budgeting system for less than $5,000 that offers more than just a series of prebuilt, linked templates to use in a spreadsheet, but Planet Corp.'s Budget Maestro may fit the bill.

Remember, though, that most of these products will not directly integrate with the G/L. Transferring actuals and budgets between systems usually requires a file transfer, although some products allow direct data access to the accounting system using an open database connectivity (ODBC) link. One third-party module that has been more closely integrated with a G/L is Timeline's Distributed Budgeting that links to Infinium's G/L. Lawson Software also recently announced that it would integrate Hyperion's Pillar product with its Insight accounting suite — but these are the exceptions. Clearly, budgeting modules that use file import/export to manage information are unlikely to offer useful features such as drilldown to investigate numbers that originated from another system. (For a list of sophisticated functionality, see Best-of-Breed Budgeting.)

The cost of these best-of-breed solutions may seem high compared to other financial management modules, but the price is offset by advantages such as time savings, less reliance on ongoing IS support and the monetary benefits of improved control over the business.

Integrated Budgeting Modules

Many accounting suite vendors typically positioned in the top-tier or enterprise resource planning market have built budgeting modules that are tightly integrated with their financials. These products include: Computron Budget Cycle Management, Geac SmartStream Budget, and Walker Horizon Analytics Planning and Forecasting.

In fact, all of these modules could operate as stand-alone best-of-breed budgeting modules in their own right, but normally they would be purchased as part of a vendor's financial accounting suite. Both Computron and Geac have a strong workflow orientation, reflecting the workflow capabilities that are already present in Computron Financials and Geac SmartStream Financials. In all cases, these modules provide some kind of integration with spreadsheets: to act as the source for budget numbers, the target for budget reports or the means to distribute budget worksheets via e-mail for update by managers as part of the planning and submission workflow.

Integrated budgeting modules in mid-tier accounting solutions are generally weak. Currently, there is no third-party budgeting application that has been widely integrated with mid-tier accounting suites in the same way that FRx or Crystal Reports report writers have. However, Best Software and others are working on new budgeting applications.

Budgeting may not be the strongest module in many vendors' accounting suites, but it does provide a significant opportunity for differentiation among them. Since the Web provides a useful infrastructure for maintaining and viewing budget data and aiding participation in budget workflows, a whole new generation of budgeting applications is likely to emerge soon. These new applications are unlikely to come from accounting vendors but from employee-centric application vendors like Captura Software, Concur Technologies, Extensity and others who have already successfully combined Web clients with workflow-driven server applications such as T&E expense reporting and requisitioning. So, the prognosis for pain reduction in the budgeting process is growing ever more favorable.

Some Budgeting Solutions

Vendor

Product

Web site

Adaytum

Adaytum

www.adaytum.com

Computron Software Inc.

Budget Cycle Management

www.computron.com

Comshare Inc.

BudgetPlus

www.comshare.com

EPS Software

Budget2000

www.epssoftware.com

Geac Corp.

SmartStream Budget

www.geac.com

Helmsman Group Inc.

Helmsman

www.helmsmangroup.com

Hyperion Solutions Corp.

Pillar

www.hyperion.com

PowerPlan

PowerPlan

www.powerplan.com

Planet Corp.

Budget Maestro

www.planet-corp.com

SRC Software

SRC Budget Advisor

www.srcsoftware.com

Solver Inc.

Solver Planning and Budgeting

www.solverusa.com

Timeline

Distributed Budgeting

www.timeline.com

Walker Inc.

Walker Horizon Analytic

www.walker.com