Category Archives: planning software

Why Enter Notes in a Budgeting and Planning Software Application?

Business lady feels pressure working under control of her boss

The little time you spend entering notes and comments will pay generous dividends when you need to refer to these notes

I spent many years in the software industry.  I was not a programmer or software architect but was very close to many of the technical aspects of the business and got to observe some of the good and bad practices used.

One of the worst practices I recall was not entering comments next to program code lines, or not writing clear and sufficient notes to allow both the original developers and other people to fully understand the original code.

This became evident when we lost one of our best programmers, who left for another opportunity.  Although we owned the copyright to the code, every programmer who looked at it could not make sense out of it and although the code was near completion with initial testing of functionality underway, we had to scrap it and start from scratch.  We learned a very expensive lesson:  Enforce the practice of documenting all programming work and minimize the risk of losing your own intellectual property due to negligence and bad work habits.

Computer programming, design and engineering are good examples why notes must be kept, however, many other activities, both business and personal, can use this discipline.

As I gained experience in corporate accounting and finance I started to adopt this concept in my work and introduced a policy that all accounting transactions (e.g., journal entries into the GL) must be accompanied by notes or comments explaining the rationale behind them and anything that would help a reader understand the underlying events that required the entry.  Automated entries from sub-systems are pre-defined and repetitive with built-in comment codes and other data that explain the transactions, but manually entered transactions such as journal entries are not.

I often see journal entries made by clients without any explanations; not even the journal header notes or the one-line text per GL line, let alone the memo field where one can enter a free form text memo, add simple tables explaining the entry, etc.  This feature is available in all ERP and accounting software nowadays and the excuse that they only give you eight characters to record a comment (or file name) does not work anymore.

When you make such journal entries or other financial related data entry such as in putting together a corporate budget you have to ask yourself:  Will I be able to remember what I just did six months from now?  Will I be able to explain my work to managers, co-workers, or auditors?  Will I look at the transaction in a totally different way and maybe even suspect there are flaws in it?  Simple documentation, right next to the transaction will solve all that.  The common excuse that documenting your work will add extra work with no real benefits is not valid.

The real benefits are significant:  For a little extra work you gain confidence that the logic used during the transaction entry will still hold at any time in the future; that other employees and managers will be able to understand your work; that any internal or external auditor will have complete information on the audited transaction; and that your financial statements and internal control over financial reporting will be more robust due to this practice.

In Budget Maestro by Centage Corporation, every area of the software has a notes section, accessible through the Notes Tab on the upper right side of the screen.  Users can enter an unlimited number of individual notes for every budget line in every module (Revenue, OpExp, Personnel, Debt, etc.).  These notes can be filtered by user, date entered or description.

The notes can even contain copied and pasted simple Excel or Word tables.  Files that back up the logic or data used in establishing budget lines can be attached to each note within each budget line.  These files (e.g., Excel, Word) can be directly opened from the notes’ associated files area.  With very little effort you can reveal the data and logic used to create the budget line.

Since Budget Maestro allows users to create complex models using built in business logic, Business logic and accounting rules built into the budget, it is imperative, in my opinion, that these budget lines, many dependent on other data sources, with increases or decreases during the budget year plus other logic applied (e.g., Drivers, Based Upon) be clearly documented.  It will make your work easier and more productive.  You will be able to clearly explain the rationale behind choosing the various logic elements that Budget Maestro offers.  It will make the budget review a lot easier and you won’t get caught trying to figure out what you were thinking at the time these particular budget lines were created.

While it may seem an extra amount of time and effort to enter notes (in Budget Maestro or in any other software application), the benefits are going to be evident the first time you need to refer to one or more of these notes.  Budget Maestro makes it easy to enter notes and associated files everywhere in the application, so use this feature liberally.

Planning, Budgeting, & Forecasting: Why Tradition May be Dangerous – Part 1

Be open minded and explore opportunities for change

Being part of a consulting firm in the area of accounting and finance I frequently get solicitations by phone and e-mail from vendors of accounting and finance software applications. These are vendors of accounting software, ERP applications, fixed assets management software, manufacturing MRP and other solutions, and of course vendors of corporate budgeting, planning and data analysis software, a category I like to associate with CPM (Corporate Performance Management) or EPM (Enterprise Performance Management) software, both of which generally used by the finance function working with company existing (actual) data and with forecasted or budgeted information in an attempt to arrive at an understanding of enterprise performance as measured against exiting goals and plans.

Planning, Budgeting, & Forecasting With CRM Software

Recently I had numerous contacts, both by phone and e-mail, with sales and sales support representatives from several well-known vendors of CRM software, specifically as pertaining to the functions of planning, budgeting, forecasting and analyzing data. I was intent on understanding why their solutions were beneficial to their customers and the real strengths of their product offerings in providing those benefits. I was also interested in learning how their approach allowed organizations to gain insight into their financial position, past, present and future and especially on how they were able to deliver future period forecasted financial statements and whether all statements were fully synchronized with each other and with the underlying budget.

As I expected, all of these applications were quite capable of setting up a corporate budget by importing static data from numerous reporting entities and by constructing a financial model that relied on historic data plus assumptions and application of a variety of formulas and functions, linking different worksheets, performing allocations and using drivers to arrive at a consolidated corporate budget.

A few of these applications were featured a large number of dimensions in modeling the business and its data, allowing a seemingly endless number of analysis options.

All of these software solutions either had a direct interface to the actual accounting GL (requiring custom programming) or indirectly via a two-step export-import process of actual accounting results, such as GL account balances and even detail transaction data.

CRM Systems Come Up Short on Planning, Budgeting, & Forecasting Tasks

All the presentations I watched and the marketing and technical material I received were very impressive and highly polished, but on further inquiry it was disclosed to me that each implementation required a varying amount of setup work, usually performed by vendor trained personnel or outside, independent consultants.

This implies additional, perhaps significant, costs and also longer implementation timelines. Changes to the model or any part of the implementation often requires contracting the original vendor or an authorized third party. Since very little can be done in-house, I imagine only a few changes and improvements to the implementation are actually done beyond the original setup. This does not encourage users to keep up with the ever-changing market and economic conditions. High costs may be another deterrent.

What struck me most was the fact that none of these software vendors provided complete and accurate financial statements beyond the traditional Income Statement. They all claimed they could program a forecasted Balance Sheet and a Statement of Cash Flows, but these statements were always going to be modeled, using high level formulas and assumptions and always requiring maintenance with every small change in the budget.

None of these statements are synchronized to the income statement and to the underlying budget for the simple reason that none of these software solutions have an integrated GL where budgeted transaction data can be processed in a manner similar to how an actual accounting GL operates.

In the second installment of this article we will explore this fundamental flaw and see a better approach to this challenge.

Take Advantage of your Planning & Budgeting Software’s General Ledger

How to leverage the existence of a General Ledger in your planning & budgeting software

In a recent post I brought up the need for a GL (General Ledger), integrated into the planning and budgeting software and resembling an actual accounting software GL Why Have a General Ledger in a Budgeting Software?. We saw that the benefits are great and the entire budget process with the insight gained from its reports can transform the way companies value the budgeting process output in a profound way that enables managements to clearly see and understand the data, resulting in making sound decisions supported by this reliable and timely data.

Every accounting system, whether completely manual (anyone seen one of those lately?), or integrated into a complete ERP solution employs a General Ledger (GL) at its core. The GL is the last stop where data from the entire organization finds its way into pre-defined accounts, sorted into the various business units (reporting entities) where individual reports as well as consolidated, rolled-up reports can be produced. It is the GL that allows financial statements to be produced and distributed to users. These financial statements (Income Statement, Balance Sheet and Statement of Cash flows, plus other reports), deliver the performance of the organization during the reporting period as well as its financial position at the time the reports were published.

If actual accounting period financial statements are relied on to convey a story to their users, shouldn’t forecasted financial statements be available to company management to aid in making decisions that will help the organization achieve its strategic and operational goals? Here’s where a GL integrated into the planning and budgeting process can be invaluable.

In my work with planning and budgeting systems I have only seen one system that employs a GL at its core: Budget Maestro from Centage Corporation. I am certain that other software vendors are working on such an approach, since it is the only sensible way to be able to arrive at a complete set of future period financial statements, all synchronized with one another, where the Income Statements, the Balance Sheet and Statement of Cash Flows update in real time in response to changes in any component of the budget itself.

The secret to properly using the planning and budgeting software is to mirror your actual GL Chart of Accounts in your budgeting software, assuming it has a built in GL (similar to Budget Maestro’s GL mentioned above). Then, when you assign the appropriate GL accounts to the various budget records (e.g., Revenue, Cost, OpEx, Personnel, Assets, Debt, etc.) all activities projected through the budget process will cause transaction amounts to be included in system generated journal entries, using these GL account assignments. This is similar to the actual accounting system making journal entries in the GL in response to actual accounting transactions.

From experience I can say that all GL accounts must be present in the budgeting software. It is very frustrating to create a budget record, say, a sales forecast for a product and realize when you are asked to select a revenue account or any other needed account, that the account you are looking for is not on the dropdown list because it was not loaded into the GL when you set it up. So make sure all GL accounts are present and properly classified for reporting purposes.

In Budget Maestro, the setup of the Chart of Accounts and the grouping of all GL accounts into their proper groups and under the right reporting entities is very simple and intuitive. Most of the work can be done though uploads from company supplied templates. A good number of popular accounting system GL’s can be linked directly into Budget Maestro via Link Maestro, another Centage product.

Whether you are looking to upgrade from an existing planning & budgeting solution or starting from scratch, I strongly urge you to look at a solution that is GL based, one that mimics the operation of your actual accounting GL and with the ability to link it to the budgeting solution’s GL. The results will transform your budgeting process and allow management to receive complete and accurate forecasted financial statements, automatically derived from the budget. Analysis of actual results vs. budget can happen in almost real time.

I truly believe this is the future of the planning, budgeting and forecasting process and all indications are that progressive CFOs and finance managers are leaning in that direction.