Budget Season: Excel Turns the Office of Finance into Scrooge

For many, November and December bring happy thoughts of upcoming holidays. But for finance executives and staff whose companies operate on the calendar year, these are two of the most dreaded months of the year.  

Research shows that budgeting and planning are still very painful processes for many organizations. A survey done late last year by the American Productivity and Quality Center (APQC) and Grant Thornton* highlights the pervasiveness of the problem.

62% said staffs are too buried in basic finance duties to improve budgeting processes.

use a last year plus percentage as a budgeting technique.

A Process of Futility

Tagetik CPM software for Budgeting and PlanningThese organizations treat budgeting and planning as an annual exercise that just needs to get done, not as a process that delivers business value – turning the Office of Finance into an Ebenezer Scrooge who forces a useless process on everyone during the holiday season. No wonder business people have a “bah humbug” attitude when it comes to the budget process.

To avoid the Scrooge perception during the budget process, Finance must take into consideration the tribal knowledge and business acumen of those participating. It must provide value to those who participate, not just to the senior executive team. And, a goal of changing or improving the budgeting and planning process will never be achieved if Finance remains “too buried” to improve it or predefines budgets as “last year plus a percent” or “x% of projected revenue.” If you want the budgeting and planning process to be relevant and valuable, you have to get it out of spreadsheets.  

39% use spreadsheets and email as a budgeting solution.

51% admit there are no governance or controls on spreadsheet budgets.

Research shows that 88% of spreadsheets contain errors.


Excel Limitations and Risk

Spreadsheet-based budgeting also creates significant risk for an organization.  Numbers are often incorrect, inconsistent, or not properly documented. There are many high-profile examples of the negative impact spreadsheet errors have had on businesses, but there are many, many more that go unpublicized. 

Yet, the majority of businesses surveyed (even larger enterprises) still use spreadsheets for budgeting. In the aforementioned survey, two thirds of respondents reported more than $1B in annual revenue and 56% said they still used spreadsheets in combination with technology for budgeting and planning. Thirty-nine percent still use spreadsheets alone. In addition a majority stated that these spreadsheets had no documented governance or control processes, increasing the risk of errors.

Make Next Year Different

Tagetik CPM software for Budgeting and PlanningI certainly don’t advocate that you ditch Excel entirely. In fact, Tagetik uses Excel as a front end because of its wide familiarity, flexibility and ease of use. But, an Excel interface should only be the window, not the engine. There needs to be collaboration, workflow, line item details, notes/justification, and history of all changes made throughout the process in addition to the native capabilities of Excel to turn the budgeting from a pointless exercise to valuable process. 

So, once you get through this current budget cycle, set a New Year’s resolution to not let the budget process make you the Ebenezer Scrooge of the holiday party again next year.  As Scrooge did in “A Christmas Story”, learn from the mistakes of the past and focus on making the future better for yourself and those around you.

* Financial Planning and Analysis: Influencing Processes, People, and Technology, APQC, March 23, 2015

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