An intelligent way to budget your information technology needs
I recently noticed an article in CPA Trendlines (cpatrendlines.com) by Randolph Johnston, Leslie Garrett PhD, and Brian F. Tankersley, CPA.CITP, CGMA titled: “Tech Survey: 90% of Accounting Firms Fail to Budget Properly”. This specifically makes reference to technology spending and how these firms do not budget their technology spending by employee. The body of this article is made available to subscribers of this publication and it is based on The Accounting Firm Operations and Technology Survey, also available from CPA Trendlines.
I couldn’t help but ask a few questions: What else do these accounting firms fail to budget? Why are they not budgeting these expenses (capital expenditure) properly? Is it an oversight? Is it too difficult and time consuming to do? Do they not have the proper budgeting tools? Are there any other reasons?
We all know that information technology spending has become a significant, hard to ignore expenditure, attributing to large depreciation expenses recognized by virtually all types of organizations. This spending category is also a major contributor to increased cash and borrowing needs. It would make perfect sense to properly budget for this expense and forecast its impact to the company’s balance sheet, yet surveys like the one mentioned above indicate that this is simply not done as it should be. Why?
Experience in various industries shows that many organizations fail to properly budget because they either don’t have the proper budgeting tools and software applications or their existing systems are too complex to maintain in response to changes in the organization. I guess accounting firms are no different, although I would expect them to set a good example for all the client companies they so diligently audit.
It is well known that many companies still use homegrown spreadsheets to administer and maintain the budgeting, forecasting and analysis processes, where every little change involves significant modifications to formulas, links and other programing and debugging tasks. Many organizations simply do not care or are not able to make these changes.
Companies that decide to move away from spreadsheets into purpose designed budgeting software solutions quickly discover that they have not entirely gotten away from these formulas and links, another reason why changes to budget models are often not implemented.
In contrast, an application like Budget Maestro from Centage Corporation (www.centage.com), does not rely on user-supplied formulas, functions, links or any other programming. Since a budget prepared with this application (or parts of this budget) can easily be based on user-defined drivers (e.g., headcount), the example of budgeting technology spending by employee becomes relatively trivial. The software also has a dedicated Assets module (optional to use but included in the base system), where technology spending (capital expenditures) can be set up and properly budgeted and tracked.
An added bonus in the Assets module allows one to automatically post to the depreciation expense account, with data derived from the budgeted technology capital spending.
As with every piece of budget data in Budget Maestro, everything flows to the various financial statements, including a Balance Sheet and Statement of Cash Flows, all this without ever having to enter a single formula or link, or perform any programming.
Things just don’t get much better than this.