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Excel in Budgeting - Friend or Foe?

  
  
  
  
  
  

Most organizations still use Microsoft Excel as their budget preparation tool.  The reason for this is that the general ledger or ERP providers don’t focus on, or even understand, the budget process or budget workflow and do not think about this from the perspective of the average user or institution.  So, financial people took matters into their own hands and, during the 1990’s, decided to handle this application in Excel. 

This has led to some severe limitations in what can be done for budgeting in organizations still exclusively relying on Excel.  And, due to the economic climate and the general desire to improve overall financial performance, the budget process has become “mission critical".  This has left these organizations with a less-than-optimal process that has become a sore point to management, end users or budget managers and the financial team itself. 

Here are some limitations with Excel and the problems that this causes:

  • Excel is not a database – which results in hours of manual data management by the finance department.
  • Excel is not a programming or development environment – resulting in a very weak application with severe limitations and greatly expanding the possibility of errors.
  • Excel requires lots of manual data entry.  Often data needs to be re-keyed into other spreadsheets for reporting or other purposes.  This redundancy creates version control issues and many hours of manual effort from resources best used elsewhere.
  • Excel is not flexible for budget preparation for users.  Users are often limited to simple data entry as opposed to allowing for different accounts to be budgeted using different methods on a department-by-department basis.
  • Consolidation of the budget is cumbersome. 
  • Version control is difficult.  So finance has to try to manually manage versions – and version comparison is exceptionally cumbersome.
  • Excel offers no audit trails or workflow.  Therefore it is not apparent when things have changed or been approved – and approved by whom.
  • Excel has limited security and is prone to formula errors.  There is no user security and locked cells can be easily overwritten or even erased. 
  • Excel is not loved by non-financial people.  Financial people love Excel, but non-financial people do not.  So, the original concept of using a product that everyone knows and loves is lost on the budget manager.

But, does this mean that there is no role left for this very popular tool?  Absolutely not.  Excel can still play an important role in budgeting if it is seamlessly woven into a dedicated, specialized budget solution AND it is used for the things that it was designed to be used for. 

First and foremost, there needs to be a bi-directional link between Excel and the budget system where Excel is dynamically talking to the application database.  Rekeying of data should never be required.  Secondly, Excel is a very good two-dimensional calculator (rows and columns), is brilliant at analytical functionality, can be outstanding for formatting output and, in the right hands (finance) can be exceptional for pivot tables and multi-dimensional analysis.  If the financial team views themselves as Excel experts, this group should try to take advantage of their love and knowledge of Excel – but without forcing that knowledge and love affair on the budgeting end-users or trying to have Excel handle the heavy lifting of the application.  So to summarize, here are some things where you can and should use Excel but only if dynamically attached to an application that possesses budget intelligence and requires no re-keying of information. 

  • Excel is a good two-dimensional calculator for some calculations.  So, financial people can still use the calculation functionality, especially for more simplistic and customized calculations without learning another product.
  • Excel is a good analytical tool.  Financial people still love Excel and want to be able to perform financial analysis functions in it.
  • Excel is great at formatting output or reports (but not managing data).  There is no better way to lay out customized or ad-hoc report formats than the visual capabilities of Excel.  If the report can be built in Excel, but populated from a secure application and database, you can get the best of both worlds. 
  • Excel is great at pivot tables.  Sometimes, organizations want to slice and dice data but not buy expensive and difficult to maintain multi-dimensional separate applications.  Excel offers similar capabilities for the experienced user without the expense and/or maintenance.  Why not utilize what you already know?

Finding the right balance of how and where to use Excel in any organization is the trick.  You need to analyze your own internal skill set and then determine how much you choose to utilize your knowledge of Excel within the budgeting, forecasting and variance reporting and analysis processes.  Doing this, allows you to leverage your existing knowledge and prevents you from having to learn some vendors unique way of doing something that you already know how (and love) to do anyway.  Plus it can eliminate high cost and low utilization of foreign products. 

Excel…it can be the foe of the budget process if left to it’s own devices and a friend if it is used properly within the confines of a packaged budget application that has budget intelligence woven in. 

XLerant is a SaaS software solutions company that builds and implements innovative, practical and incredibly powerful browser-based budget preparation software for mid-sized and large organizations and higher education institutions, energizing a "Culture of Budget Accountability" among users. The company serves customers in several industries. XLerant's premier budgeting and planning application, BudgetPak, replaces spreadsheet-based budgeting and provides maximum user flexibility and financial controls. Improved communication, greater ownership of the numbers and increased transparency enable companies to better manage financial performance throughout the fiscal year.

Seducing Users to Improve the Budget Process

  
  
  
  
  
  

seduce istock purchased resized 600In today’s world of software, people are used to being seduced by personal applications that make things simplistic…like Google or Facebook. They now expect that business software will follow suit.

Wikipedia defines seduction as the process of deliberately enticing, corrupting, persuading, or inducing a person to engage in behavior. The word seduction stems from Latin and means literally "to lead astray". As a result, the term may have a positive or negative connotation.

Seen positively, and in colloquial terms, seduction is a synonym for the act of charming someone by appealing to the senses, often with the goal of reducing unfounded fears. And as all financial teams well know – budget time can generate fear among constituents!

So what does it take to seduce your users into the budget system – to appeal to their senses and reduce fears? Well, let’s learn from some practical examples. Let’s take Turbo-Tax, maybe the world’s most popular business application.

  • Don’t duplicate the current process. Revolutionize the process. If they simply put the tax forms online, it would not have been very effective at seducing the users.
  • Have the software ask the user questions in order to come up with the solution.
  • Make the software work the way the user thinks about the problem, not the way the domain expert or the programmer thinks about the problem.
  • Put the damn thing in the cloud. Why are you still managing applications internally?
  • Have the software speak the language of the user.
  • Make interfaces to other applications simple and under the control of the users (General ledger, payroll or HR and Fixed Asset).
  • Package the functionality that the user needs so that the job can be done efficiently and effectively. KISS. Don’t over-engineer with worthless functionality that no one can or will use.

Too many organizations focus on the needs of the wrong constituency (finance only) and/or over-engineer the process with too much functionality that will never be used by constituents, or the organization overall – but which looks good on paper or in RFP checklists. (They also pay excessive fees to do this.) Functionality is no longer the key to success in business applications; USABILITY is the key to success in business applications…and the key to successfully seducing end-users.

Organizations should focus on the functionality that improves usability, including:

  • Turbo-Tax like interface to keep the overall interface simple.
  • Situational Budgeting - allowing users to budget accounts flexibly the way they think about these accounts.
  • Provide simple and easy ways to provide documentation, justification and notes on any account so that users can explain what they want and why they want it.
  • Specialized functionality for salary and asset planning.
  • Spreading algorithms to create monthly values for the budget that match real-world needs.
  • Workflow and approval process to have total visibility into where everyone is and to easily track and manage and audit approvals.
  • Simplistic reporting to quickly and easily answer questions and handle variance analysis.
  • Pragmatic “What-if” to capture the most meaningful and most common what-if questions that users want.
  • Watch box to allow users to simply monitor their budget assumptions during budget creation and compare that to historical values.

Simply stated – users will put up with less crap today than they used to with respect to business applications. Therefore, they need to be encouraged…or seduced.

Learn more about the XLerant philosophy engaging users and the key features that improve usability for the budget process.

XLerant is a SaaS software solutions company that builds and implements innovative, practical and incredibly powerful browser-based budget preparation software for mid-sized and large organizations and higher education institutions, energizing a "Culture of Budget Accountability" among users. The company serves customers in several industries. XLerant's premier budgeting and planning application, BudgetPak, replaces spreadsheet-based budgeting and provides maximum user flexibility and financial controls. Improved communication, greater ownership of the numbers and increased transparency enable companies to better manage financial performance throughout the fiscal year.

Reverse Engineering the Budget Process

  
  
  
  
  
  

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Reverse engineering (the process of starting with a product and taking it apart to see how it works) has been used in product development for decades. Many organizations use this as a best practice in copying some key product or concept from a competitor. When applied to a process, it is the practice of starting with the end-game (what you ultimately want to achieve) and then determining what it would take to reach that end-game or result. It can be a valuable exercise in improving a broken or flawed process.

Budgeting has become “mission critical” in most organizations that are serious about financial performance, cost control and making sure that they fund the strategy of the organization as opposed to budgeting to history or politics. Budgeting is currently a very flawed process.

Reverse engineering can be easily applied to this “mission critical” process as well. One only need imagine what a desired budget process would entail and then attempt to come up with a plan for how to achieve it.

For instance, in a desired world:

  • Managers would not have to know very much about either systems or budgeting in order to create a meaningful budget.
  • Managers would be actively engaged in the budget process and have ownership of the numbers and the results.
  • Managers would have the freedom and flexibility to budget their departments the way they think about those departments.
  • Monthly values would be easily calculated for each annual number based on user controlled decisions about that number.
  • There would be specific functionality to handle the complexity of salary/headcount planning and benefits; and managers would be able to easily request specific asset purchases for the following fiscal year. In both cases the process would properly account for both the people and the assets, and provide clear visibility for the plan going forward – without any additional work.
  • Managers could easily prepare and review budgets from anywhere.
  • Approval workflow and audit trails would be automatically and easily applied to the process.
  • Errors would be eliminated or dramatically reduced in the preparation process.
  • All assumptions, documentation and justification of numbers would be easily applied – and this documentation would follow the numbers throughout the approval and reporting process.
  • There would be no redundant data entry.
  • Consolidation would occur naturally.
  • The budget process would be electronically integrated with the general ledger, payroll and fixed asset systems to provide proper data flow.
  • All budget questions could be easily addressed through flexible, and easy to maintain, reporting and analysis.
  • Structured and practical “what-if’s” that address 90% of user needs would be easily incorporated.
  • The process would easily accommodate updates to the budget throughout the evolving fiscal year--to deal with the actual results and reality of budget adjustments based on real-life events.

When you start with what you want to have happen and then seek solutions to address those criteria, building a better budget process becomes remarkably easy. Understanding the needs of all the major constituents in the budget process is another key to success. These constituencies are management, finance, department heads and IT.

However, one critical mistake that many organizations make is they focus on features rather than results. And they start (and end) with a list of features that deals only with the needs of finance, and not the desired outcomes for budget managers or the organization’s management. This leads to an overly complex and theoretical RFP process, or a checklist process that ignores the central issues of budgeting. And this leads to feature fights without regard to the usability or even the practicality of the feature – and also without regard to the usability or practicality of the system in general. Often, a long list of features that will NEVER actually be put into use is what sways financial teams.

The most important constituent in the budget process is not finance, nor even management. To build a better budget process, you need to first consider the needs of the department heads. Most of the current problems with budgeting are that the department head’s needs are not properly accounted for - but when they are, ease of use, flexibility, ability to document their assumptions and justify their requests, and helping them understand what they are trying to accomplish with the budget become the primary drivers. If budgeting is a financial function, why are 80% to 90% of the users non-financial people? And, budgeting is as much a communications process as it is a financial one.

So beginning with complaints or needs of constituents can be enormously valuable. Here are the results of what a recent survey said about the primary complaints of these constituents about their current budget process. It is important to note that the vast majority of respondents worked in organizations that used Microsoft Excel for budgeting:

Management

  • The budget does not tie to the organizational strategy.
  • I can’t get my questions answered in a timely fashion.
  • The process takes too long.
  • I worry about quality of information.
Finance
  • Department heads don’t put sufficient time and energy into their budgets.
  • I worry about errors (formulas) and redundant data entry.
  • I don’t want to be an Excel programmer or manually manage data.
  • Department heads keep changing budget templates.
Department Heads
  • The budget templates don’t let me budget my department the way I think about my department.
  • The process is too cumbersome and rigid.
  • I don’t feel like the numbers are mine.
IT
  • I don’t like Excel-based processes.
  • There’s no structured data management, audit trails, checks.
  • I don't want to manage another system... would prefer if this moved to the cloud.

In support of the need to focus on the usability needs of department heads, consider some quotes from a recent WSJ article on business applications:

At a time when people are accustomed to using well-designed applications from companies such as Google Inc. and Apple Inc. in their personal lives, they have little patience for workplace applications that leave them confused. Functionality is no longer the definition of success. Usability is key.

"Basically, users will accept less crap today, when it comes to software," says Michael Krigsman, an independent industry analyst. "That is because the world of consumer software has become easy and simple to use and has trained users to expect that business software will follow a similar model. And if it doesn't, people are much less patient than they were in the past."

Reverse engineering the budget process is an excellent way of ensuring that you radically improve the process going forward. But taking the primary needs of ALL BUDGET USERS into consideration and including the most important constituents into the reverse engineering process is essential to success.

Building a better budget process for better financial results can be an easy and inexpensive process in most organizations if the organization has the motivation, confidence and discipline to do so.

To learn more about best practices that will improve your budgeting process download our ebook: The 10 Commandments of Budgeting.

XLerant is a SaaS software solutions company that builds and implements innovative, practical and incredibly powerful browser-based budget preparation software for mid-sized and large organizations and higher education institutions, energizing a "Culture of Budget Accountability" among users. The company serves customers in several industries. XLerant's premier budgeting and planning application, BudgetPak, replaces spreadsheet-based budgeting and provides maximum user flexibility and financial controls. Improved communication, greater ownership of the numbers and increased transparency enable companies to better manage financial performance throughout the fiscal year.

“Actual Results May Vary” – The Art of Forecasting

  
  
  
  
  
  

Most organizations budget. They may not budget well, but at least they try. The budget process is the funding of the next 12 months of the strategic plan. It sets financial targets for revenue and expenses and it (hopefully) lays out how each area of the company will support the company strategy.

But is it sufficient to prepare a fixed budget and then not do it again for a whole year? In most cases, probably not. “Actual results may vary." Budgeting is a process that often requires adjustment as the fiscal year unfolds and reality takes shape.

This is where The Art of Forecasting comes in. Forecasting is the process of marrying actual results, for the months available, with the budget and then making adjustments to revenue and expenses for the remaining months to fine-tune the funding plan of the strategy. This can mean a more aggressive plan, a less aggressive plan, reacting to changing variables, or staying the course based on the reality and the type of business that an organization is in.

But getting managers to prepare a good budget can be difficult. Getting them to re-forecast and repeat the process on a regular basis takes special care. Department managers generally do not enjoy the forecasting process and therefore view it as a chore that does not add value. The reasons for this are:

  • Most organizations still try to do budgeting and forecasting using Microsoft Excel templates. These templates are rigid and are designed for the way financial people think – not the way operations people think. So the templates do not let these people budget their departments the way they think about their departments.

  • The process of marrying together the actual results with the remaining months of budgets is not an easy task.

  • It is cumbersome to make adjustments to the budget numbers.

  • Version control is difficult.

  • Reporting is inflexible and cumbersome so comparative versions are not easily accessible.

In order to facilitate a better forecasting process, organizations require features and usability that Excel simply does not provide.  These are:

  • An easy way to marry actual account balance results from the general ledger with the original budget so that there is an established baseline for the forecast.

  • A Turbo-Tax-like interface that walks the manager through the process without them having to learn how to prepare a forecast.

  • The ability of the manager to choose whether to freeze the original budget totals (so that the actual results cause the budget numbers to automatically adjust, by month, and holding the original total amounts the same – spreading the remaining available balances over the remaining months of the forecast) or simply allowing the totals to recalculate and replace the monthly balances in the budget with the actual results.
    Powerful spreading algorithms.

  • Version control and workflow to allow the forecasting process, and the approval of the forecasted numbers, to happen quickly and easily.

  • Reporting that allows comparative reporting for forecast to budget, by account and totals, so that managers can easily see and adjust numbers appropriately.
    Documentation and justification notes on all numbers.

The budgeting process in organizations is “directional”.  As pointed out above, “actual results may vary”.  So course correction is critical as reality unfolds. 

Done properly, the forecasting process can be an immensely powerful and useful process in organizations in all industries to keep it on course.  It allows organizations to have a fresher view of their funding plans for the strategic plan across the remainder of the fiscal year.  It keeps managers focused on how they plan to utilize their remaining resources based on what has already happened in the organization YTD.  And, it keeps the planning process fresh and alive. But it cannot be done well in any organization unless the process is supported  for the managers responsible for the forecasting process. 

To learn more about how to effectively do this in an organization, click here to view the recording of our webinar, “The Art of Forecasting… A Pragmatic Case Study."

You will hear Dan Brent of the Massachusetts School of Professional Psychology discuss his institution’s use of forecasting to improve financial performance. 

XLerant is a SaaS software solutions company that builds and implements innovative, practical and incredibly powerful browser-based budget preparation software for mid-sized and large organizations and higher education institutions, energizing a "Culture of Budget Accountability" among users. The company serves customers in several industries. XLerant's premier budgeting and planning application, BudgetPak, replaces spreadsheet-based budgeting and provides maximum user flexibility and financial controls. Improved communication, greater ownership of the numbers and increased transparency enable companies to better manage financial performance throughout the fiscal year.

What Motivates Organizations to Abandon Excel Budgeting?

  
  
  
  
  
  

motivation to switch from excel to budgetpak resized 600

Budgeting, planning and forecasting are “mission critical” applications in most organizations today. A poor budgeting process is the number one reason why organizations miss their numbers. Implementing a process that appeals both to the financial organization, officially responsible for the budget, and the department heads, who own the results is hugely difficult. Poor capabilities from ERP systems have caused most organizations to rely heavily on Microsoft Excel for budgeting, planning and forecasting. But Excel is a simplistic two-dimensional spreadsheet versus a product with built in “budget intelligence”, is not a product development environment, is not a database and therefore requires much manual data management and is not flexible enough to deal with the budget preparation needs of the actual users.

So, organizations, and the financial professionals in them, are now seeking solutions to this Excel dilemma. They want a sophisticated application that appeals to the department heads and allows them to spend their time analyzing the numbers, not programming or managing data or checking for errors or manually keying data into shadow spreadsheets.

A survey was recently conducted on these organizations and seven fundamental reasons surfaced as to why organizations made this critical switch to a best-of-breed solution. These issues were:

  • Time spent maintaining spreadsheets
  • Lack of budget audit trails, budget workflow and budget approval process. 
  • Lack of proper user interface and flexibility in budget preparation process for department heads
  • Redundant data entry into multiple spreadsheets
  • Lack of flexible reporting for the budget process and the management reporting process
  • Concerns about errors in the budget process due to clobbering formulas or data entry or other issues
  • Lack of participation in and ownership of the numbers by department managers. 
The solution to this issue is an application specifically focused on the budgeting, forecasting and reporting process. Key criteria in selection of a system are:
  • Cloud-based computing to minimize cost and IT involvement and to increase flexibility
  • Focus on a user interface that appeals to the department heads. This is more of a Turbo-Tax like approach to organizational budgeting and away from Excel look-alike products
  • Specific functionality to build a budget that lets department heads budget their departments the way they think about their departments
  • A system that is simple to install and maintain that does not require programming or syntax or special knowledge
  • Simple integration with key transaction systems like the GL, payroll or HR system, and fixed asset system
  • Software acquisition costs (keep at a minimum)

Of these capabilities the key recommendation of people in organizations who licensed a new budget process was to focus on the needs of 95% of the users of budgeting…the department heads. A recent WSJ article on business software supported this idea. In it, the author writes:

“At a time when people are accustomed to using well-designed applications from companies such as Google Inc. and Apple Inc. in their personal lives, they have little patience for workplace applications that leave them confused. Functionality is no longer the definition of success. Usability is key.”

And here's what one client recently said about the usability of XLerant's BudgetPak solution:

“Creating spreadsheet budgets is not the best use of our finance team’s time, but until we found BudgetPak, it was necessary. Our team was able to master the budget set-up tools in BudgetPak with very little training and with the XLerant product in place, we can now spend time focusing on higher value tasks. What we love about XLerant is it gives our managers the tools to transform their department-specific knowledge into a budget they can understand and own.”

Read more of what clients have to say about BudgetPak

When it comes to technology…Keep It Simple Stupid. This is especially true if you need to get the buy-in from non-financial people in the process.

 

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XLerant is a SaaS software solutions company that builds and implements innovative, practical and incredibly powerful browser-based budget preparation software for mid-sized and large organizations and higher education institutions, energizing a "Culture of Budget Accountability" among users. The company serves customers in several industries. XLerant's premier budgeting and planning application, BudgetPak, replaces spreadsheet-based budgeting and provides maximum user flexibility and financial controls. Improved communication, greater ownership of the numbers and increased transparency enable companies to better manage financial performance throughout the fiscal year.

15 Things You Can’t Do in Excel Budgeting (But Should)

  
  
  
  
  
  

 

Budgeting is “mission critical” in organizations today.  Yet many organizations still use Excel for budget preparation.  Many organizations have turned to Excel because their ERP systems had weak budgeting capabilities.  ERP systems were designed especially for financial people, with strict controls and transaction processing.  But successful budgeting involves non-financial department heads, requires flexibility, and account balance information (numbers). 

Excel is not a good match for necessary budgeting capabilities either.  It isn’t a programing language or a database.   Therefore financial people are building a mission critical application in a two-dimensional spreadsheet and then managing the data themselves.  This is enough to give the IT department the creeps and cause senior management to lose confidence in the numbers. 

Plus, due to the limitations of Excel, there are 15 (or more) things that are critical to the budget process that simply can not be done, or can not be done sufficiently.  Here are 15 things that Excel can’t handle for budgeting but need to be done:

 

  1. Excel is not cloud-based, which is the current direction of application software.  As mentioned above, Excel is neither a development environment nor a database.  It does not protect the integrity of the data.
  2. Excel does not offer a Turbo-Tax like interface for non-financial people. Face it: department heads do not like the budget process and certainly do not like Excel the way financial people do.  So providing an application that walks the department head through the process makes for a better budget with more ownership from the department managers.
  3. Excel does not provide for situational budgeting. This involves allowing people to budget different accounts in different ways – depending upon their needs.  Some want to put in an annual number, some may want to have an increase or decrease from last year, some may want to budget by head, others may want to enter detail behind a number, others may want to use drivers, and some may want to use a free-form modeling environment.  Allowing users flexibility is key to a better process. 
  4. Excel does not allow for justification and documentation for every number in the system, and does not allow for this documentation to follow the number throughout the approval and reporting process – which significantly limits the value of the final budget for strategic decision-making.
  5. Excel does not allow for proper asset planning; proper budget accounting allows for depreciation, amortization or expensing of the asset, and a system that will keep track of what was requested, what was approved, and when the asset is scheduled to be deployed in the forthcoming fiscal year.  These things are all hugely important to finance, purchasing and the people who need to deploy certain assets to certain departments (think IT or other service functions).
  6. Excel is terrible at personnel planning down to the individual and department level.  This often represents 70% of the actual budget.  Successful personnel planning allows for raises, incentive compensation, permanent or temporary leaves, raises by person or category, taxes, benefits calculations, and new hire policies. 
  7. The days of simply keying in and approving numbers are in the past.  Executives want to approve plans, not numbers.  So, Excel does not allow for special initiatives that cross different accounts.  This functionality is required for proper budget preparation and review.
  8. Excel does not allow for the intelligent monthly spreading of annual numbers.  Either numbers need to be individually input into months or simplistically divided by 12.  Proper budgeting requires a variety of ways to spread annual numbers including examining the historical seasonality of each account and using that method. 
  9. Excel does not allow for account “pegging”. This is the concept of having a department head make special requests for funds in particular months without impacting the total amount requested for a specific account. 
  10. Excel has no concept of workflow, approval or version control. This is critical to both ensuring proper data, as well as making sure that proper approvals have been done for each department budget.
  11. Excel provides finance no visibility as to where each department is in the budget process.  It is critical for finance to understand who has not started their budget, who has started but not completed it, who has completed  but not submitted, who has submitted but has not had the budget approved, and so forth. 
  12. Excel does not allow for intelligent reporting.  Budget assumptions, special initiatives, asset and personnel planning, consolidation and other reporting should dynamically occur as part of the process without effort or re-keying of data.
  13. Excel does not allow for practical “what-ifs”.  This is the concept of having department heads see the impact of certain common questions such as, “What if we delay headcount adds?”, “What if we reduce salary increases by certain percentages?”, or “What if we reduce expenses by a certain amount?”  This is extremely valuable near the end of the budget process when people are trying to achieve certain management goals.
  14. Excel does not easily allow for building revised budgets or forecasts as the actuals become available.  This is the concept of mixing actuals and budgets together and doing budget revisions or adjustments to provide more visibility and accuracy into the plans as the year unfolds.
  15. Excel does not permit a parameter driven set-up which would free-up finance from programming.  This concept allows finance to easily and
    powerfully maintain the application without complex macros and other difficult-to-build, and follow, programming concepts.

 

So, Excel is not the best choice for corporate budgeting.  It has been used as a makeshift fix for the lack of functionality in the ERP system.  But a specialized application designed for budgeting can dramatically improve the overall process as well as the financial performance of today’s organization. 

XLerant is a SaaS software solutions company that builds and implements innovative, practical and incredibly powerful browser-based budget preparation software for mid-sized and large organizations and higher education institutions, energizing a "Culture of Budget Accountability" among users. The company serves customers in several industries. XLerant's premier budgeting and planning application, BudgetPak, replaces spreadsheet-based budgeting and provides maximum user flexibility and financial controls. Improved communication, greater ownership of the numbers and increased transparency enable companies to better manage financial performance throughout the fiscal year.

Why Cloud-based (SaaS) Budgeting is Ideal for Higher Education

  
  
  
  
  
  

If there are two things that all higher education institutions have in common, it is that they all have limited financial and IT resources – and they are all trying to do more with less, while simultaneously keeping tuition costs down. 

Higher education institutions have a financial staff that is sparse, and IT resources are constantly at a premium.  There isn’t a lot of excess cash for large software or hardware purchases.   And you can’t pick up a newspaper today without reading about how presidents of higher education institutions are under pressure to better manage the strategy of the organization.

Yet despite this lack of resources (or perhaps, because of it…) and because of the need to control costs, higher education institutions are in desperate need of a better budget process.  Most of these institutions try to budget using Microsoft Excel budget templates.  This Excel process has tremendous hidden costs associated with it and also limits the effectiveness of a mission-critical application in today’s world. 

What does Excel really cost you? First, there are hidden costs in Excel budgeting due to the amount of work finance has to expend in building macros.  Then the financial staff needs to manually manage all of these spreadsheets throughout the budget process – and the (many) various iterations thereof.  Someone has to manually check to make sure that faculty and staff have not intentionally, or unintentionally, modified the templates – which can result in errors.  The templates need to be manually consolidated and then, in most institutions data is re-keyed or transferred to other spreadsheets for reporting and analysis purposes.  This results in massive hidden costs, in terms of labor and time.

But since 90% of spreadsheets in the world today have hidden errors in them, the greatest cost of using Excel for budgeting is the possibility of preparing a budget with errors…errors that result in embarrassment to the financial team, the senior business officer, and the president of the college. 

Speaking of the president…they want to see a budget that supports the strategy of the institution (versus one that is based simply on history or politics).  And faculty and staff want to be able to budget for their areas and departments the way they think about them.

Of course the IT department would prefer to see a database application that protects the integrity of the information, allows for easy backup, controls security and has all of the functionality and flexibility to prepare a budget uniquely by department.  However, IT does not have the time or the money to support a new application with hardware or personnel resources.

So across the board, there is a need for a better budgeting process – and the solution resides in the cloud. 

Cloud-based budgeting (also known as SaaS, or Software-as-a-Service) is perfect for higher education. This approach solves the problems of all the major constituents in the process – allowing stretched finance and IT teams to achieve (much) more with (much) less. Here are some reasons:

  1. With cloud-based budgeting products, such as XLerant’s BudgetPak, budgeting intelligence is built right into the application.  It is a database application.  It naturally understands the budget process and workflow, has the flexibility to allow faculty and staff to budget their areas the way they think about their areas – and allows them to demonstrate how they are budgeting to the president’s strategy. Plus it allows these faculty and staff to budget and report from anywhere (anytime) using all the popular hardware and browsers including PC’s, Mac’s, iPads and other devices.  And XLerant is the leading provider of higher education budgeting software, so the organization has the required experience to understand the needs of this specialized group.
  2. Finance gets a prepackaged and completely configurable solution so that there is no need to program anything.  Plus the approval workflow is built in, so that the process supports organizational approval up the line.  And cloud-based budgeting uses a structured database so that there is no data to check and no data to manage.
  3. IT gets a huge advantage as well.  There is no
    hardware to buy and maintain, and no people resources to apply since the vendor manages the entire application.  Security, monitoring, backup and all functions are included in the service.
  4. The other advantage is that there is no upfront investment to make in hardware or software.  Cloud-based budgeting is offered on a subscription basis where the costs are spread evenly over a 7-8 year time frame.  This provides a lower-cost and predictable cost structure for institutions trying to hold down costs.
  5. Also implementation times are dramatically shorter
    Cloud-based budgeting allows for complete implementations in around six total weeks – reducing the impact on both finance and IT teams, at substantially lower costs than on-premise computing. 
  6. Finally, the institution gets a better budget process, with greater participation in, and ownership of, the numbers by faculty and staff.  The process produces better results that are tied to strategy and all of this can be accomplished in a shorter elapsed time with no errors.
Cloud-based budgeting is the best alternative for higher education institutions.  Cloud-based budgeting offers safety, cost, and functional advantages to a market segment desperately in need of these – and provides advantages to every constituency associated with the budget process:  Administration, IT, faculty, staff and finance.

 

XLerant is a SaaS software solutions company that builds and implements innovative, practical and incredibly powerful browser-based budget preparation software for mid-sized and large organizations and higher education institutions, energizing a "Culture of Budget Accountability" among users. The company serves customers in several industries. XLerant's premier budgeting and planning application, BudgetPak, replaces spreadsheet-based budgeting and provides maximum user flexibility and financial controls. Improved communication, greater ownership of the numbers and increased transparency enable companies to better manage financial performance throughout the fiscal year.

XLerant Heads to CFO Dimensions Event in New York City

  
  
  
  
  
  

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The XLerant team is hitting the road next week (though not straying too far from our CT offices!) for the CFO Dimensions event in the heart of NYC. We’ll have the usual booth presence so all the attendees can come meet and greet with us. But even more exciting is that our CEO, Ted Dacko, will take the stage to enlighten the audience with some new insights into the world of budget management.

Ted will be joined on stage by Jason Webster, the CEO and Founder of Archetype Consulting.  Their presentation “The FP&A Paradigm - A Shift From Budgeting to Strategic Planning”, kicks off at 11:30AM on August 22nd,and will cover to the evolving role of financial leadership– and their growing need to engage members across the entire organization in the FP&A process. Jason is a widely published industry expert on the changing trends in financial services.

So, why are so excited for this event? Well, the days of traditional ‘behind-the-desk’ financial roles are gone. Today’s finance execs know they have to lead from the front – and together we can identify and disseminate what’s working best in real-world practice. That’s why we’re thrilled to help re-shape the industry with innovative software solutions.

Be sure to follow the event’s chatter at the twitter hashtag #CFOD13 !

XLerant is a SaaS software solutions company that builds and implements innovative, practical and incredibly powerful browser-based budget preparation software for mid-sized and large organizations and higher education institutions, energizing a "Culture of Budget Accountability" among users. The company serves customers in several industries. XLerant's premier budgeting and planning application, BudgetPak, replaces spreadsheet-based budgeting and provides maximum user flexibility and financial controls. Improved communication, greater ownership of the numbers and increased transparency enable companies to better manage financial performance throughout the fiscal year.

Why Budgeting is “Mission Critical” in Higher Education

  
  
  
  
  
  

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You can’t pick up a newspaper without reading about how higher education is under pressure to keep tuition costs in line.  In the past, higher education institutions were able to pass along cost increases to students.  No more.  Now these institutions must learn to do more with the same resources or, in some cases, with less resources.   This puts pressure on the institution to make sure that it creates a financial plan that allows it to maximize its services at the most efficient cost. 

In addition, college presidents are crafting strategies for their institutions.  These strategies are essential to meeting their short-term and long-term goals as administrators.  In the past, faculty and staff have been more prone to doing what they have always done rather than thinking about strategy.  They tended to budget to politics and history. 

The budget process is at the vortex of this issue.   The budget must tie to the strategic plan.  It is the next 12 months operational plan of that strategic vision and plan.  If the budget does not tie to the strategy, it is essentially not doing its job.    Plus, the budget, being the blueprint for the next 12 months operational plan, is the place where institutions need to focus their attention in learning to do more with the same or less resources. 

Most higher education institutions are limited in their budgeting process.  They still use Microsoft Excel spreadsheets as the basis of the budget process.  Excel was fine for the old days, but can not meet the needs of todays higher education institutions.  There are several reasons for this:

  • Excel does not have “budget intelligence”.  It is a simple two-dimensional spreadsheet that does not inherently understand the budget process or workflow.  It does not understand accounts, departments, time periods, versions, spreading, salary planning, asset planning, users, consolidation, approval or many of the other functions required of more sophisticated budgeting. 
  • It is not a database.  So financial people become the database and must manually manage, consolidate and report data. 
  • It does not check for errors in the budget process and complex formulas, which can be difficult to understand even by their authors, can wreak havoc on the process.  Several institutions have reported submitting budgets to the board that had to be recalled based on the discovery of such errors
  • Excel does not have the flexibility to let various faculty and staff members budget their unique departments the way they think about those departments.  The math department budgets differently than the music department, which are both different from how the library budgets, which is different than the admissions department, which is different from the athletics department, which is different from student housing and on and on.
  • Excel does not easily account for documentation, justification or validation to strategic tenants. 
  • Upwards of 79% of a higher education budget is salary and benefits related.  Yet Excel does not inherently understand headcount and salary planning, how to give raises, calculate state and local taxes, benefits, special arrangements like recruiting fees, relocation and the like.

So the process needs to be upgraded to help colleges and universities better manage revenue and expenses and make sure that faculty and staff budget to strategy and not history or politics. 

But higher education also is slow to change.  People are reluctant to improve their approaches and cling to past practices in spite of the need to do so.  So they limp along claiming that change is too difficult or that that their current approach is not “that bad”.  These institutions will fall behind in their ability to adapt to a changing world and the people who are reluctant to make the changes will be left behind. 

All applications in all industries change over time.  The institutions that lead the change are the winners while the ones who resist these changes tend to be the ones who face crisis after crisis. 

Budgeting is a “mission critical” and strategic application in higher education.  It must be treated as such.  And, institutions need to shed their reliance on spreadsheets if they want to keep pace with peer institutions. 

XLerant is a SaaS software solutions company that builds and implements innovative, practical and incredibly powerful browser-based budget preparation software for mid-sized and large organizations and higher education institutions, energizing a "Culture of Budget Accountability" among users. The company serves customers in several industries. XLerant's premier budgeting and planning application, BudgetPak, replaces spreadsheet-based budgeting and provides maximum user flexibility and financial controls. Improved communication, greater ownership of the numbers and increased transparency enable companies to better manage financial performance throughout the fiscal year.

If Budgeting is a Financial Process, Why are 90% of Users Non-financial people?

  
  
  
  
  
  

 

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Most people think of budgeting as a financial process and the budgeting system as a financial one.  Yet, if you stop and think about it, 90% to 95% of users in the budget process are non-financial people.  Budgeting is as much a communications process as it is a financial one.   And budgeting is the next year investment plan for the company’s strategic plan.   It is therefore critical to make sure that the budget process supports the department heads who really need it and it allows these people full flexibility and communication abilities to justify their plans, provide transparency into thinking, and to document all assumptions.

So the real critical issue with respect to budgeting is its usability with respect to the non-financial people in the process.  Yet most companies select budget software with their financial staff in mind versus the end-users.  Esoteric features and functions, which will be rarely used or only used by a very small percentage of people become more important than the overall usability for the vast majority of users.  This defeats the overall purpose of the system, which is to support department head usage and communications. 

All companies have a bell curve of users with a variety of needs in terms of sophistication and flexibility.  Financial professionals normally sit way to the right on this bell curve and many department heads sit to the left of the medium on the bell curve.  Sacrificing the needs of the many for the needs of the few often causes the death of the overall value of the system and process. 

Department heads crave usability.  They want the system to let them budget their departments the way they think about their departments. Often, they want the system to walk them through the entire process and the ability to easily document their needs, assumptions, and justification of how they plan to support their portion of the organization’s strategic plan.  What good is a feature if it can’t be used by 90% of the people that it was intended for? 

So, when selecting budgeting software, focus on the needs of the many, not on the needs of the few – and remember, if budgeting is a financial system, why are 95% of the users non-financial people?

Use the KISS method and focus on the needs of the many, not the needs of the few. 

XLerant is a SaaS software solutions company that builds and implements innovative, practical and incredibly powerful browser-based budget preparation software for mid-sized and large organizations and higher education institutions, energizing a "Culture of Budget Accountability" among users. The company serves customers in several industries. XLerant's premier budgeting and planning application, BudgetPak, replaces spreadsheet-based budgeting and provides maximum user flexibility and financial controls. Improved communication, greater ownership of the numbers and increased transparency enable companies to better manage financial performance throughout the fiscal year.

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