The ever-greater importance of budgeting and financial planning
Creating a fiscal
year budget and financial planning has been a standard operating
procedure for generations, but today’s business environment puts even greater
emphasis on accurate and responsible financial planning, analysis and reporting.
Executives need to know where they stand, not just to run the business
effectively, but to satisfy the considerable (and justifiable) interest of
lenders, creditors, existing and potential investors, and in some cases,
regulators. At the financial planning
level, division heads need to know how each area of their business is
contributing to overall results, and line managers need to continually adjust
what they do and how they do it based on clear and accurate data.
To
meet these many management planning and control needs, financial managers must
build or buy a budgeting and planning software. The default solution has
been to use spreadsheets, the bread and butter tool of financial analysis.
Spreadsheets are a logical starting point as financial managers use them so
frequently for other tasks. But spreadsheets pose as many problems as they
solve, especially in mid- to large-scale businesses where budgeting data comes
from several, dozens or hundreds of distinct work groups or business units. For
instance, the spreadsheet that’s perfect for the manufacturing unit will not
work for the sales organization and vice versa. Consolidating a budget in an
even mildly complex organization can become a frustrating game of creating,
tracing and fixing links and macros. Determining how changes in one corner of
the business affects the bottom line ranges from difficult to impossible in the
spreadsheet-based budget. Because of these constraints, spreadsheet budgets can
become obsolete or inaccurate almost as soon as they are created.
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