For many, November and December bring happy thoughts of upcoming holidays. But for finance executives and staff whose companies operate on the calendar year, these are two of the most dreaded months of the year.
Research shows that budgeting and planning are still very painful processes for many organizations. A survey done late last year by the American Productivity and Quality Center (APQC) and Grant Thornton* highlights the pervasiveness of the problem.
62% said staffs are too buried in basic finance duties to improve budgeting processes.
70% use a last year plus percentage as a budgeting technique.
A Process of Futility
These organizations treat budgeting and planning as an annual exercise that just needs to get done, not as a process that delivers business value – turning the Office of Finance into an Ebenezer Scrooge who forces a useless process on everyone during the holiday season. No wonder business people have a “bah humbug” attitude when it comes to the budget process.
To avoid the Scrooge perception during the budget process, Finance must take into consideration the tribal knowledge and business acumen of those participating. It must provide value to those who participate, not just to the senior executive team.
And, a goal of changing or improving the budgeting and planning process will never be achieved if Finance remains “too buried” to improve it or predefines budgets as “last year plus a percent” or “x% of projected revenue.” If you want the budgeting and planning process to be relevant and valuable, you have to get it out of spreadsheets.
39% use spreadsheets and email as a budgeting solution.
51% admit there are no governance or controls on spreadsheet budgets.
Research shows that 88% of spreadsheets contain errors.
Excel Limitations and Risk
Spreadsheet-based budgeting also creates significant risk for an organization. Numbers are often incorrect, inconsistent, or not properly documented. There are many high-profile examples of the negative impact spreadsheet errors have had on businesses, but there are many, many more that go unpublicized.
Yet, the majority of businesses surveyed (even larger enterprises) still use spreadsheets for budgeting. In the aforementioned survey, two thirds of respondents reported more than $1B in annual revenue and 56% said they still used spreadsheets in combination with technology for budgeting and planning. Thirty-nine percent still use spreadsheets alone. In addition a majority stated that these spreadsheets had no documented governance or control processes, increasing the risk of errors.
Make Next Year Different
I certainly don’t advocate that you ditch Excel entirely. In fact, Tagetik uses Excel as a front endbecause of its wide familiarity, flexibility and ease of use. But, an Excel interface should only be the window, not the engine. There needs to be collaboration, workflow, line item details, notes/justification, and history of all changes made throughout the process in addition to the native capabilities of Excel to turn the budgeting from a pointless exercise to valuable process.
So, once you get through this current budget cycle, set a New Year’s resolution to not let the budget process make you the Ebenezer Scrooge of the holiday party again next year. As Scrooge did in “A Christmas Story”, learn from the mistakes of the past and focus onmaking the future better for yourself and those around you.
By Dave Kasabian, EPM Channel Contributor, from: http://www.tagetik.com/blog/authors/dave-kasabian/2015-12-budget-season#.VnRarrYrJD8
Dave Kasabian is chief marketing officer for Tagetik, one of the fastest growing global software companies in the corporate performance management market. Kasabian, who joined Tagetik in 2011, is responsible for Tagetik’s product strategy, competitive positioning, market development, and go-to-market strategy. He brings to Tagetik deep insight into the ways businesses can overcome performance improvement barriers and realize the full potential of CPM technology. See Dave’s articles on EPM Channel here.