February 9, 2021
This post was originally published on the Sage Intacct Blog
What does it take to successfully manage your business or nonprofit? How do you measure success? To answer these questions in the simplest form, you must have a plan, identify objectives to meet it, and identify metrics to measure progress toward your identified objectives. For example, 3 years ago, I was overweight and needed to reach a normal weight for my long-term health. To reach that weight, I set a 6-month goal to lose 25 pounds. I weighed myself monthly each of the following 6 months with the objective to lose four pounds each month to meet my goal. The monthly weigh-ins measured my progress towards my long-term goal.
Like my weight loss, to be successful in today’s environment, your organization should take a similar approach. Budgeting and planning is the method to do this. Similar to how a refrigerator full of healthy food provides an ideal environment to lose weight, organizations that implement an environment that makes performance management easy have the best chance of strategic success. That’s what this blog is about—how integrated budgeting and planning provides the best chance for your company to successfully execute your strategy.
Spreadsheet-based budgeting and planning and the dreaded tri-weekly outlook
When I worked in FP&A, every three weeks I provided an update on the company’s operating expense to the executive team. At a high level, the executive team wanted to know the current status of our budget and what we were projecting for the quarter and fiscal end. While these questions seemed simple, I dreaded the tri-weekly expense outlook.
I had three days to prepare it amidst other FP&A activities such as the monthly close and rolling forecast updates. The process to create the outlook was extremely time-consuming and error-prone. Here’s the process I followed:
- Gather the data—Our company’s actuals and budget information were stored in three different places. I had to consolidate the data from those three sources into a spreadsheet. Then I copied and pasted the consolidated data into my spreadsheet-based model. The data didn’t always match up due to budgeting account changes, so I had to add new rows to the model and update the formulas accordingly. This was a three-to-five hour exercise at my company.
- Validate the data—Because I added rows and updated formulas, I needed to perform data checks to make sure I didn’t break anything, including calculations that would impact prior periods. This process also took several hours. I crossed my fingers hoping the data checks wouldn’t fail since that would require additional troubleshooting and increase the potential for version control issues if not caught right away.
- Analyze the data – Then I could finally start the process of analyzing the data to identify where we were over or under target and understanding the drivers behind it. I remember the feeling of not having enough time to provide actionable analysis given the lengthy exercise of gathering and validating data.
Preparing the operating expense outlook required the majority of my time to be spent on data collection and confirming accuracy instead of performing value-added analysis. It also meant lots of drudgery and many late nights.
Inefficiency and stale data = outdated decisions
Since my spreadsheet-based model was the hub for the company’s actual and budget data, the data that I gathered was a “snapshot in time.” This meant the data that we relied on to make decisions was outdated by the time the data was compiled.
A better way—integrated budgeting and planning
Similar to how a refrigerator of healthy food provides an environment for weight loss success, integrated budgeting and planning provides an environment for finance to be successful by providing the following:
1. Saves time and eliminates the drudgery of compiling and validating data
Compiling and validating data is done by the system—no consolidating data from multiple sources, no copying and pasting, and no fixing broken formulas. The elimination of manual spreadsheet work can save days of effort.
2. Provides more time for scenario planning
The time saved from manually manipulating data enables you to shift from operational work to strategic analysis. You have more time to do more important work such as understanding what caused variances or performing scenario and “what-if” analysis to guide decision-making.
3. Enables dynamic planning with real-time data
When budgeting and planning are integrated with your financials, you no longer need to wait for the data. With a couple of clicks, data can be refreshed. The organization’s leaders get immediate visibility. Forecasts and scenarios can be updated and analyzed on-the-fly in meetings. So, your important decisions are made as needed based on current information.
Sage Intacct Budgeting and Planning is integrated with Sage Intacct core financials, allowing users to create budgets using Sage Intacct account and dimension structures as well as actuals data. Budget data can be exported back to Sage Intacct core financials for additional forecasting and variance analysis. This bi-directional data flow eliminates the need to manually compile and validate data. This means your data is both current and accurate, creating the environment you need for success. With Sage Intacct, you spend more time on analysis, modeling, and scenario planning to give you more confidence in decision-making.
For help with integrated budgeting & planning, please contact Jim Norton, CPA, Senior Manager, Accounting Technology Services at firstname.lastname@example.org.