Project Description

Time to abolish spreadsheet based budgeting?

Many midsized companies still use spreadsheet based budgeting systems. However, many also agree on the obvious limitations of these solutions.

Er det på tide at erstatte den regnearksbaserede budgetlægning?

“The greatest benefit lies in the much faster budgeting processes. We use less manual hours and resources on budgeting. We have also experienced substantial advantages through simulations where we compare our actual purchase to the budget”

Mark Jensen, Business Developer, PWT Group
Read the whole case

Problems associated with spreadsheet based budgeting

These budget spreadsheets were probably created because it seemed to be the easiest and fastest solution at the time. Over time, however, they have most likely grown and the business has changed. Furthermore, the developer of the spreadsheet system may have left the company. On top of this, these spreadsheets may also contain errors that have occurred throughout the development and expansion of the budget. Actually, several studies have shown that over half of corporate spreadsheets contain errors that have evolved over time.

If you can recognise some of the below statements, it may be time for your organisation to move away from spreadsheet based budgeting:

1. Only one or few persons understand the links, formulas, macros, or logic behind the spreadsheet model

2. Knowledge about the logic of links, macro’s and calculations has been lost due to employee turnover

3. It is not possible, or very difficult, to break down the budgets and forecasts into the desired level of detail

4. Monitoring actuals vs. budget is a separate, not integrated and not automated task

5. It is difficult and time consuming to align the spreadsheets with customers and articles in your ERP

6. You are only able to budget on a high level, why you need to define sub budget forms for lower levels

7. Lack of detail prevents you from forecasting on customer and article level

8. Documenting budget assumptions is not straight forward and therefore not done

9. Consolidating budget entry forms from several budget holders is time consuming

10. It is impractical to implement rolling forecast because of time and complexity.

Transforming your budget and forecasting into an integrated performance management system will free you from the above-mentioned limitations and establish a more robust environment, a shorter budget process time and more reliable and more committed forecasts and budgets.

Benefits of an integrated solution for forecasting, budgeting and analyses

If your budget/forecast solution is tightly integrated with your business intelligence solution, you will be able to reap a number of benefits.

  • You will work with ‘one single version of truth’. Measures and dimensions are uniform
  • Integration and automation secures alignment with ERP (new/obsolete articles and customers)
  • Historical data are available for comparison at any detail level
  • Budget entry is limited to changing figures on desired levels from top to bottom or from bottom and up
  • Budgeting on lower levels for selected customers/article/article groups etc. will result in more robust forecast
  • This will enable better follow up on goals for campaigns and individual activities
  • Tight integration with ERP and use of historical data makes rolling forecast achievable
  • This enhances the predictability tremendously, leading to better planning and lowering of costs

This will not only save time but also give you a lot more options to enhance your forecasting by enabling you to work on different levels of detail at the same time. With an 80/20 approach you will be able to focus on the most important budget drivers and let the rest be calculated automatically, but still be broken down to the lowest desirable level for follow up on actual vs. budget on all levels.

Being able to do detailed budgeting on customer/article level for the most important customer groups/customers, new customers and new article groups/articles, you can enable close follow up on both strategic and tactical goals.

If you are able to document assumptions and add action plans to your most important business drivers, you can establish a performance management system that most certainly will make significant impact on your bottom line.

If you want to know more about InfoSuite Budget, which is integrated with InfoSuite BI, you can learn more here.

More articles