Monthly Archives: May 2015

What Criteria do You Use to Select Your Planning, Budgeting and Analysis Software

Why the obvious solution may be your worst choice

About a year ago I was looking at various software solutions that assist companies with the planning, budgeting, forecasting and analysis processes. I was surprised to see how many choices were available, even in the SMB (Small & Medium Business) market. There was a mix of server based (on premises) and web based solutions and certain applications claimed to be suitable for larger enterprises. Cost of licensing, subscription and software renewal fees varied among the different products and labor and consulting fees to implement these systems also ranged from modest to very expensive.

What I also realized during this analysis was that the most common tool in corporate planning and budgeting is still the spreadsheet (more accurately a set of spreadsheets or workbooks). Microsoft Excel dominates this, and the level of sophistication ranges from simple revenue and expense worksheets with basic consolidations, to extremely intricate systems containing hundreds of workbooks and worksheets, linked together and having certain reporting capability.

I attribute use of spreadsheets for planning and budgeting to the early days of personal computers when dedicated budgeting software did not exist. Spreadsheets are also very common in the workplace and all finance and accounting personnel are familiar with them.

As dedicated software solutions became more available more and more finance managers and professionals began to realize that spreadsheets are not the right tool to use in these processes and for good reasons as explained in these blog posts: Replace Excel with a Dedicated Planning, Budgeting and Analysis Solution and Forecasting a Balance Sheet in a Spreadsheet World.

The strong arguments against use of spreadsheets are the main reason for the existence of dedicated, database-centered applications intended for implementation and maintenance of a corporate budget and analysis process. This approach has become quite popular even in smaller companies and there are a variety of applications available to choose from.

Unfortunately, in designing many of these budgeting software solutions, their designers, while doing away with use of traditional spreadsheets, and adding important security and workflow functions and controls, failed to realize that their users were still required to enter formulas, functions and links into their plan or budget models. In fact, many of the traditional drawbacks found in spreadsheets are also present in these budgeting software applications.

Those who implement these types of applications quickly discover that building and maintaining a budget is not much different than using a set of spreadsheets. The risk for errors creeping into the model is the same as in traditional spreadsheets; maintenance is just as hard, change management controls are mandatory and rather complex; adding drivers and allocations, and configuring the system to output even a rudimentary Balance Sheet and a Statement of Cash Flows requires much knowledge and experience, often resulting in significant consulting work, services gladly provided by the software vendors.

Fortunately, there is another approach, providing the best of both worlds: A complete departure from the spreadsheet environment, while allowing budget and finance managers to build a budget without using a single formula, function, macro or link. This approach employs built-in business logic and rules and the ability to employ an unlimited number of drivers, setup to suit the specific needs of every organization.

Of particular importance is the automatic system generation of all future period financial statements, including a Balance Sheet and a Statement of Cash Flows, besides an obvious P&L.

Examples and explanations of this approach can be found here: 10 Must Have Features of a Budgeting & BI Solution, Those Debits and Credits, or A Modular and Automated System for your Annual Budget Process.

It is good to know that there are several choices when it comes to selecting a planning and budgeting software application. It is, however, wise to realize that applications that seem natural for this function may not be the best choice and in the case of the most obvious solution, the spreadsheet, the worst possible one.

A New Way to Look at Accounting Data

How a software solution changed the way I look at financial data.

I usually don’t rush out to purchase the latest and greatest technology products; I hardly ever jump on every software or hardware upgrade that becomes available. I just seem to be happy with the software tools I use in my everyday work, as long as I’m not too far behind.

As a long time user of the Budget Maestro software application for small and medium size enterprise budgeting and forecasting (, I was quite content with the reporting capabilities of the software and the fact that I was able to quickly, as soon as the actual accounting data was available after period end close, analyze budget data against the actual results.

This analysis can be done within minutes of importing trial balance data into Budget Maestro.  If the General Ledger used is one that is directly supported by Link Maestro, another Centage Corporation software product, data is immediately available in the Budget Maestro software to analyze.  This arrangement seemed to do the job.

Then, years later, I heard about a new Budget Maestro companion product, Analytics Maestro, which seamlessly connects to any Budget Maestro plan (or any of its versions and actual data).  For reasons that I just can’t explain, I did not jump on the opportunity to investigate this product until recently, when I acquired a license to this product.  This followed a webinar I attended on this product, and half way into the demonstration I knew I had to have it.

In my blog entry titled “Two Key Principles in the Budgeting Process” I mention two fundamental principles that each budget process should encompass. One of them is timely and periodically analyzing actual data against budget data. This activity cannot be stressed strongly enough. No intelligent and informed decisions can be made without reliable data that can be easily seen and understood. My only regret here is that I did not acquire Analytics Maestro sooner.

Assuming you have the ability to perform this analysis on a regular basis and without too much effort and that the budget data can be relied on, can you really see and understand the results of the analysis if you just compare numbers?  What if you had a complex organization with many business units and multiple product lines, customer classes, sales regions, expense categories and other business “dimensions”? That can make the analysis much more complicated because you have to be able to slice through the data’s “dimensions” and look at the data from multiple viewpoints.

This is exactly what Analytics Maestro is able to successfully address. It lets you see and understand your data like never before. This is what got me so excited about this product and it is why I now regularly use it and share my experience with it with people I know who daily face these challenges.

Analytics Maestro is an MS-Excel add-in product. It connects to user created Budget Maestro data cubes, the storage units that hold all the Budget Maestro plan data, including all versions, as well as actual accounting data captured by Budget Maestro from the company’s accounting General Ledger.

Excel is used because of its great formatting capabilities and the presentation graphics it affords.  Just like in Budget Maestro, there are no formulas or programming needed, only formatting, assigning color and graphics to make your presentation stand out, and your data easily understood.

However, there is one more great capability here: The budget and actual data are used by Analytics Maestro exactly the way you set up your organization structure (e.g., business units, reporting entities), data groups (holding data dimensions unique to your organization, like customer classes, product lines, geographic locations, etc.), chart of accounts structure and other dimensions.

The chart of accounts you use in your actual accounting system is mirrored in Budget Maestro, which makes it an extension of the actual accounting into future periods.  As budget items are assigned to their appropriate G/L accounts in the software, Budget Maestro automatically generates all the standard financial statements and other reports.  All that data is transferred to the data cube Analytics Maestro is accessing to create its presentation reports.

What this means is that any format of any report you choose is available in Analytics Maestro, including consolidated financial statements (e.g., Income Statement, Balance Sheet and Statement of Cash Flows).

When in Analytics Maestro, all you have to do is select the component you want to look at and as soon as you double click on its title, only the relevant data appears, while all graphs and charts, tables and other presentation data instantly change to reflect your selection.  Each selection displays only the relevant data, allowing you to slice and dice through it like never before.

A quick demonstration of this product was all it took for me to be hooked.  I knew right there and then that I had to have this product.  My experience so far fully confirms that.

For many years I’ve been preaching that unless a company can see and understand its data, any decisions made by management can be risky and ultimately costly.  It really comes down to the difference between failure and success.

Analytics Maestro (combined with Budget Maestro) is a product that can make that difference.

Think you can rely on spreadsheets for financial applications?

Think again. They probably are not as complete, reliable and accurate as they appear to be.

Earlier this summer I was on an internal control engagement at a local publically held company that must annually comply with the Sarbanes Oxley act concerning internal control over financial reporting, management disclosure and attestation by an external auditor. This process recurs every year and following the audit the external auditor gives an opinion before the company can file its annual report (FORM 10-K).

Since this was not my first year on this engagement I knew the company had certain deficiencies with IT change management and with end user computing controls. These are usually internal controls over the design, implementation and use of end-user programmed databases and spreadsheets used in financial and accounting processes that affect external financial reporting, and the control environment over changes made to these databases and spreadsheets.

As is the case with many companies, this organization had an infinite number (so it seemed) of Excel spreadsheets that were designed and maintained by many employees, practically in every department of the company.

For the purpose of my engagement I was only interested in spreadsheets used to compile and consolidate financial information that was used in the preparation of external financial statements.  I identified several of these spreadsheets; some were very complex where data from many sources were consolidated into a set of reports.  These spreadsheets also included inter-company eliminations and other formulas, functions plus macros and VBA code.

As is required in this type of engagement, all deficiencies were reported to the company management and it was up to them whether or not to further disclose them in the filing.  The external auditor’s job was to audit the control framework both for design and effectiveness of controls and form their own opinion, requiring management to disclose certain material weaknesses, defined as severe deficiencies, or a combination of deficiencies aggregated to a material weakness.

It is common with spreadsheets used in accounting, finance and reporting to have little or no internal control over critical spreadsheets which implies that:

1)   There may be undetected errors and omissions in one or more of the worksheets included in one or more workbooks.

2)   There may be undetected erroneous or broken links among the many worksheets (tabs within one workbook), or workbooks (separate Excel files).

3)   Formula and function cells and other critical areas of spreadsheets may be at risk of being unprotected from accidental erasure of data, tampering with formulas and links, etc.

4)   Changes to cells, formulas, functions, links, macros and other VBA code usually performed by the original authors of these spreadsheets may introduce new or additional errors to these spreadsheets.

What this implies is that financial statements compiled with the use of Excel spreadsheets may be flawed due to undetected errors.  I recently wrote about this topic in an article published in Accounting Today.

These are the financial statements that are filed with the SEC (by publically held companies), and / or given to shareholders, bankers and other persons on a periodic basis.  Unless the errors are detected either by internal audit or by the external auditors, misstatements will occur and may not be detected for a long time. Restatements of financial statements are often the result of detection of erroneous financial statements.

Use of spreadsheets to compile financial statements without a solid internal control framework and change management is a bad idea. So is use of spreadsheets in other important financial processes, such as corporate planning and budgeting.

Fortunately, similar to certain ERP solutions where consolidated financial statements can be produced without use of spreadsheets (requiring specific setup which many companies simply prefer to ignore), there are planning and budgeting applications that do not rely on spreadsheets. These are always preferred to the use of spreadsheets.

Unfortunately, among these “purpose built” financial applications and primarily planning and budgeting applications, many still rely on user supplied formulas, links and other programming, which in addition to significant amounts of time and effort to design, implement and maintain, always pose risks of errors and omissions and ideally require an mature internal control environment over these processes, rarely seen in most industries.

This leaves us with only one sensible option:  Implementing financial applications that are not only removed from the spreadsheet environment but also do not require user-designed formulas, functions, links or other programming code.  I see this as an emerging product category in the years to come, with anticipated positive acceptance by finance managements of many organizations.