The Performative webinar “Best Practices in Budgeting & Planning” was held on October 25, 2012. The presenters were Jeff Gelderman, Director of Host Analytics, and Monica Ross, Director of Strategic Projects at Parsons. The goal of this event was to help companies learn about current emerging technology and techniques they can use in planning, budgeting, and forecasting.
The Role of Finance Has Evolved
Finance has evolved with the use of technology. Instead merely hiring bean counters, firms need financial executives to provide proactive, real-time insights as well as information that the company can use to make better decisions. Without technology, your accounting professional can only serve up reactive, rigid data as they review your company’s past performance.
Manual Approach to Data Is Outdated
The study of the Department of Defense recorded an error rate of 1 in 3 million records when using bar coding. Compared to an error rate of 1 in 300 for manual recording, that is a huge difference. It’s clear that using a manual approach is not as effective as automating your processes and systems.
Why It Makes Sense to Update and Automate
Some companies may not understand why it’s important to update the tools you use. After all, if you can create a budget in Excel in a few weeks, then you may not think it’s worth getting it done faster by using a different tool. But there are two things you need to think about here.
The first one is retention. While your employees may know how to use the current tools to create the budget you want, they don’t need to spend an inordinate amount of time on the task. This is especially true when the deadlines interfere with their personal lives.
You can also think about it this way: cutting boards with a handsaw isn’t necessarily a good idea when it takes 3 hours to do so while you could have gotten the job done in 10 minutes with a circular saw. Using the right tools frees your time to do something else.
Second, using the right tools is helpful because it makes your employees more efficient. After all, if they don’t work on the budget for many months one end, then they can be productive with other projects. Not upgrading your tools isn’t necessarily cheaper for you, because now you’re paying for your employees’ time to get the work done slowly.
Get Rid of Your Company’s Pain Points
When you upgrade your tools, you want to get rid of your company’s pain points. Here are some pain points you might be experiencing by using Excel spreadsheets.
Process
Building the company from bottom-up instead of top-down is important to the company. It’s also important to set realistic expectations on detail and accuracy and manage multiple inputs. This cannot be done when you’re using Excel because there is no possibility for added user input.
Tools
It’s not efficient to use Excel spreadsheets when it involves having 37 tabs per spreadsheet. While Excel allows you to build complex formulas, they can easily be broken. Using Excel requires a manual entry of your assumptions and spreads, which brings us back to that 1 in 300 error rate. Last but not least, it’s difficult to use Excel for analysis and complicated to link to your general ledger system.
Not Usable for Business
It’s difficult to change scenarios, compare past years with each other, or create a trend analysis using Excel. It’s also difficult to distribute the report because formulas in Excels are too fragile. Additionally, the assumptions and allocations made in Excel can easily be misunderstood by people who didn’t create the spreadsheet.
Timeline
Using Excel to come up with a budget takes too much time. Some firms take several months to come up with a budget, which often doesn’t get done until the company is well into the fiscal year. This creates the problem of explaining why the budget wasn’t met and how to reconcile the real information with the budgeted numbers.
What Your Company Should Be Looking For
Whether you’re looking for budgeting, forecasting, or reporting tools, here are a few things that your company might expect from each of those tools.
Budgeting
Budgeting tools should allow your company to take advantage of integrated information and allow for quicker development. Your budgeting software should be performed using workflows so that none of the steps in the process are left out.
Forecasting
Your forecasting software should allow managers to see and use their own information. It should be possible to see changes when comparing different scenarios. Most importantly, there shouldn’t be any manual data entry to reduce the likelihood of errors.
Reporting
Improved reporting should break down into monthly results. It should be easy to build new reports, and you should be able to use graphs, tracking, and other visual indicators to see what’s going on. Your company should be able to use reporting software to create ad-hoc reporting and analysis easily. And to make it easy to evaluate a certain area quickly, your software should generate flash reports as well.
The Process of Choosing the Right Software
If your company is switching reporting software, it’s important to understand that it takes time to do so. Your steps include vendor selection, basic configurations, additional configurations, and a test user launch.