Tag Archives: Excel Spreadsheets

Replace Excel with a Dedicated Planning, Budgeting and Analysis Solution

But make sure that moving away from spreadsheets doesn’t land you back in the same spot.

I read a recent article on TechTarget.com titled “How to know when it’s time to dump Excel for BP&F software”, authored by Linda Rosencrance. It lists and explains seven distinct signs showing that it is a good idea to move away from spreadsheets to a more robust and dedicated planning, budgeting and analysis solution.

The seven compelling points mentioned in this article should be enough to convince any person who is responsible for developing and maintaining a corporate budget that other, much better tools exist for use in this important process. Finance management should also recognize the drawbacks inherent in a spreadsheet-based process and push for an immediate change.

In recent years I’ve seen many organizations of various sizes make the transition. I’m also seeing an interesting phenomenon developing:  While the change away from spreadsheets is fundamentally good and meant to result in positive benefits to many individuals and several finance functions in the company, there are solutions on the market today that, in my opinion, entirely missed the point of developing a non-spreadsheet, dedicated planning, budgeting and BI software application.

On the surface it seems that moving the application into a database environment is the right thing to do; however, beneath the surface there seems to be something very obvious:  Users are still required to design and place formulas, functions and links in various places in the application in order to build a model and get meaningful results. In a sense, this is quite similar to working in a spreadsheet-based environment with its many pitfalls and shortcomings, some of which are:

  1. Substantial programming of formulas and links, with or without the help of outside consulting. Inevitable introduction of programming and formula errors into the model.
  2. Complex and cumbersome maintenance of the model, especially if there are changes to the business (e.g., new product lines, locations, mergers and acquisitions).
  3. Systemic and comprehensive internal control environment (change management) must be maintained in order to mitigate risks inherent in use of formulas, functions and links in spreadsheets used for financial applications. This is unlikely to exist even in larger organizations.
  4. Costly implementation, considering substantial outside consulting and company employees’ time.

For the reasons mentioned above I always encourage users to fully evaluate the different options they have once the decision to move away from a spreadsheet method has been made. Just moving away from spreadsheets may be very compelling for the seven reasons given in the referenced article, but unless the alternative is carefully researched, companies may find themselves in the same situation they were trying to get away from in the first place.

Readers of this blog know that I’ve been writing about a specific solution I like: Budget Maestro from Centage Corporation (www.centage.com), and for a good reason (actually many good reasons).  One of the main reasons I like this application is that it is a true departure from use of spreadsheets.

It is evident to me that the designers of Budget Maestro made a conscious decision to not only rid this process from use of traditional spreadsheets (for the obvious benefits listed in the above TechTarget.com article), but also to never force users to apply a single formula, function or link in the entire product. To me this is a very significant departure from the traditional process, including many of the database-based solutions. The four solution shortcomings listed above simply do not exist with the use of Budget Maestro.

Knowing that Budget Maestro is a comprehensive product with several pre-programmed dedicated business modules, and not having to input a single formula, it makes it so much more appealing to anyone thinking of moving away from spreadsheets.

And this makes it very hard to come up with a reason why this product, and perhaps other solutions (I personally have not seen any yet) that are a true departure from spreadsheets should not be selected.

Why CFOs Need to Adopt Financial Analytics

And why they can’t continue to do their daily work without it

RK Paleru, Executive Director of the Systems, Analytics and & Insights Group at George Washington University recently authored the article “How can CFOs adopt Financial Analytics?”.  He touched on the reality facing the finance departments of so many organizations that are not adopting new technologies and therefore still relying on spreadsheets to deliver the results that support decision making.  While these departments know that these tools are flawed, they still continue to rely upon them.

In response to Paleru’s article, a great discussion ensued on Proformative’s website.  One member commented that accounting and finance departments are so wrapped up in the close process, financial statement consolidations, financial reporting generation and compliance activities, that there is hardly enough time to devote to analytics, especially with the inadequate tools many of these organizations possess.  I tried to reinforce the notion that upper management (the CEO, CFO and certain other management team members) must have timely, accurate and complete data in order to be able to make reasonably informed business decisions.  In addition, major changes have to be made in order for management teams to be able to see and understand their company data immediately, as actual data becomes available and in conjunction with existing and updated planning, budgeting and forecasting data.

My general observation is that many existing planning and analytics software solutions do not provide CFOs the data they need.  This is due to the fact that the majority of the software solutions today cannot produce accurate and complete future period financial statements, and especially the Balance Sheet and Statement of Cash Flows.

This is why I am excited by a new generation of Planning, Budgeting and Analytics software which I call:  “SmartBudget Driven Future Period Financial Statements and Analytics”.  I’m sure this definition will be refined as this software category matures but for right now the essence of it is:

Generating future period financial statements and other reports, driven by a smart budget, prepared using built-in drivers and system pre-defined business rules, automatically consolidated across the enterprise that provides the CFO (and the CEO) with the insight into the future financial health of their organization.

Using this type of software, all the traditional potential errors and omissions are completely eliminated or greatly reduced due to the fact that no spreadsheets are employed in this process and users are never asked to provide formulas, functions, links, macros or any other programming.

The software should also perform analytics in particular areas of interest such as sales and expenditures and respond to any other custom requirements the organization might have.

Another desirable feature is the ability to “drill back” into the source GL containing the actual accounting period results.  By pulling in any required detail data from the GL (as detailed as actual transactions, if the ERP software GL is set up to post into in detail), the analyst can examine specific variances and anomalies, not visible on the summary level.  The root cause of these variances or anomalies can be investigated and any found issues can be quickly remediated.  The CFO, equipped with this information will have the opportunity to make process changes, or make timely and informed decisions.

Analytics Maestro, used in conjunction with Budget Maestro can provide:

  • Sales analytics, using both actual and budgeted data
  • Expenditure analytics
  • Future period Balance Sheet for each budget period
  • Future period Income Statement for each budget period
  • Future period Statement of Cash Flows for each budget period
  • Many other specific reports, tailored to the company’s needs

The future period financial statements can be consolidated or filtered by any entity or level in the enterprise entity hierarchy.

With this data, CFOs can have a pretty good idea of what the financial health of the company is going to look like.  They can see the predicted cash balance, receivables, inventory, payables and other liabilities.  They can easily obtain forecasted future financial ratios determine whether the company will comply with loan covenants whether or not it will be able to utilize its credit lines, whether or not it will be able to retire debt and other obligations in future periods and more.

By using a software like Budget Maestro, CFOs can have a pretty good idea of what the financial health of the company is going to look like.  A CFO can perform his or her job with peak performance when relying on intelligent data in real time.  Not relying on analytics can be a costly mistake. Luckily, there is a new technology available that can change all that.