Tag Archives: technology

Are you Comfortable with Your Existing Budget Process?

Why it may be worthwhile to rethink the budget process and look for changes

From time to time I realize that certain tasks I perform, mostly personal and some professional, are harder to do and take longer than they should. It is, however, comforting to know that these familiar tasks will get done, albeit not in the most efficient and cost effective way. My logic is that next time, before I have to start working on one of these tasks again, I will first try to find a better solution. This seldom happens, although I’ve gotten better at it over the years.

Several years ago I was visiting a client, a mid-market direct marketing company on an internal control audit engagement. I noticed that the finance group employed three full time budget analysts and a budget manager. These four people dedicated almost 100% of their time to the budget preparation, consolidation and periodic maintenance. Their data for input was received from many department managers representing business units, divisions and locations.

Several other persons in the finance group also participated in the budget process, mostly during the review and approval phases. The finance VP was the process owner and the entire organization used Excel spreadsheets to compile the budget.  There were hundreds of them, many linked together and miraculously consolidating everything into a set of worksheets that once printed and bound became the official corporate budget.

When I interviewed the Finance VP about his internal controls I asked him how comfortable he was with the budget process, its accuracy and amount of time and effort it took to complete it. His reply was: “I’m not sure how accurate it is; I know there are errors in formulas and links and it is very hard to update, but this is what we have and we know the process well. It was designed years ago and we don’t feel we have the capacity right now to completely troubleshoot these Excel workbooks, or change the process”.

Coming from a finance department person, I was not surprised with his answer. It often seems easier and simpler to work harder and longer instead of taking the initiative and changing the way we do things by replacing the tools we use and the processes we employ.

You often hear that costs of new IT systems, software and other tools are what prevent organizations from optimizing their processes, achieve higher efficiencies, etc., while at the same time, the reality is that not incurring these costs and putting off making the additional effort to design an improved process is often much more expensive (especially long term) than the cost of the proposed process change.

To use this budget process as an example, most finance managers know that using spreadsheets is not the right way, which is why there are specific software solutions designed to remove spreadsheets from the process. Yet they continue to do it the hard way, while their organizations do not get the benefit from using available new technology.

As often is the case, change must be instilled by management with vision and focus on company objectives. Lower level managers are less likely to initiate or suggest change, even though they may realize its ultimate benefits.

In our example here it should be the company CFO who must initiate this change as we see in several of the blog entries on this site. A good example is “Become your Company’s Chief Future Officer”.

As for me, personally, I would like to think that I am more motivated now than before to find better ways to perform some of my tasks, even though I realize I might step into new territory and perhaps encounter temporary difficulties. What I do know is that changes well planned are worth making.

Become Your Company’s Chief Future Officer

Why CFOs must be able to predict their companies’ future and how they can do it

Proformative.com, a premier website for accounting and finance professionals recently announced their annual CFO Dimension conference to be held this year in New York City on the 19th and 20th of October, 2015. This year’s conference theme is “The CFO as Chief Future OfficerTM – Driving strategy, Leadership and Innovation”. This year, 300 senior level finance, accounting and treasury professionals are expected to attend.

As we’ve seen in several of the blog entries on this site, the CFO’s position and responsibilities have evolved in recent years and the perceived association of their role with just the accounting and finance functions is simply not true anymore.

In the blog entry titled “CFO’s Big Picture”, I discuss how the CFO role evolved from a “chief accountant” to a more strategic role, relying on high quality, timely and accurate data to be able to help navigate the company.

The CFO’s Revised Job Description” post suggests that CFOs must now oversee areas such as IT, Legal and Operations, in addition to Finance, Accounting, Reporting and Compliance.

And finally, “Why CFOs need to adopt Financial Analytics” discusses the important practice and discipline of engaging in routine analysis of operations and financial data, both actual and forecast-ed, where CFOs are expected to understand operational and financial results and the underlying reasons for any unexpected results or deviations from budgets or forecasts.

As many of us can clearly see and actually experience in our daily jobs, the CFO position, even in smaller companies, is not the same it was only a few years ago. This is partly due to the realignment of the company’s upper management’s duties and responsibilities, but can also be attributed to a range of technology products aimed at solving the problems and challenges that most organizations face on a daily basis, mostly in long term strategic planning as well as financial and operational planning.

We’ve also seen on this blog that for small and medium size businesses (SMB) I highly recommend a suite of software products published by Centage Corporation: Budget Maestro, Analytics Maestro and Link Maestro.  I have been a long-time user of these products and went through the various version changes and upgrades over the years, and always felt comfortable that this product line had two simple and well-focused purposes:

  1. To empower company management with the ability to see, understand and make informed and timely decisions that will affect future performance of their organizations.
  2. To enable the planning, budgeting and analysis activities by offering a software solution that through built-in business rules and a user formula-free process can automatically generate a complete and accurate budget.

To do that, the software is able to both present future expected results via a set of future period financial statements and other reports, while monitoring past performance, through direct access to actual accounting data, formatted and ready to display in any desired manner.

The ability to access actual data as soon as accounting periods are closed and immediately compare with “future” versions of this data (i.e., budget data) has a profound impact on how the CFO and other members of the management team can move to make decisions with a level of confidence never before possible.

CFOs and CEOs can finally run their organizations based on more facts and less intuition or guesswork. Major mistakes can be avoided or at the least minimized and risks mitigated.

I think that with tools such as Budget Maestro with Analytics you too can become the “Chief Future Officer” in your organization.