In simple situations, Excel is a great tool for producing forecasts and budgets:
- Linking P&L to cash flow and balance sheet (if well compiled)
- "What-if" modelling by changing key variables embedded in formulae
- Flexibility as the budget process develops
- Wide-spread availability and familiarity for budget-holders to compile their section of the budget
But as the situation becomes more complex, Excel’s weaknesses become apparent:
- Excel itself is not designed for multi-user collaboration
- Version control is difficult
- Multi-dimensional analysis of products, locations, projects, etc is difficult
- Co-ordination and consolidation is tricky
- Mistakes are therefore easy to make (as are SUM ranges missing important costs!)
- Models are time-consuming to use, for each and every change
- Drill-down from reporting systems to the composition of the budget is not easily available
In many businesses, the budgeting and forecasting process has become “Excel hell” – difficult to administer and taking far too long for each forecasting cycle. Nonetheless some 50-60% of larger businesses still use Excel as their principle forecasting tool.
As a result, requests are common for tools to help automate and manage the budgeting processes. Why are so many businesses still using Excel?
There are a number of good choices for budgeting and forecasting:
- Modules available alongside financial software suites
- Specialist systems using their own interface
- Specialist systems using Excel as a front-end
- Specialist systems using a web browser, available “on-demand” in the cloud or on-premise.
How can these tools be used successfully? There’s a 5-step approach:
- Analyse the key aspects of the current Excel models
- Establish other user requirements, such as links to reporting and accounting systems
- Identify and assess the options available
- Shortlist realistic options and choose a solution
- Implement the software swiftly and professionally
If you’d like to talk further how to do this, please contact me.
Do feel free to comment about your own experiences.
I believe that spreadsheets are only suitable for budgeting in the most simple businesses. Most businesses will want to view the budget data across a number of dimension; nominal account, time period, product, division, region etc. As spreadsheets are realy only 2 dimensional, this requires a database solution.
ReplyDeleteAdditionally, as Crhis states above, spreadsheets are not good in a multi user environment and this precludes them as soon as there is more than one person in the budgeting process.
There are several budgeting tools available which provide advance budgeting functionality including budgeting across multiple dimensions and automated workflow for budget collection and collation.
However, when it comes to reporting, epecially actual against budget, it is often difficult to get what you want as the report writers provided are hard to learn and lack flexibility.
We have developed an Microsoft Excel based report writer in order to address reporting weaknesses across any database based system. DBReport is designed to be easy to use, extremely flexible and robust. As it works within Excel, all the presentational functionality of Excel (e.g. formatting, charts etc.) can be harnessed.
We also provide management dashboard tools for the production of high quality, easy to understand management information. These provide 'graphlettes' based on Excel data and allow the presentation of values against a performace scale (e.g. red, amber, green).
Further details are available at http://www.pendragonsystems.com/products. You can also arrange an on-line demonstration by calling 07776 307 037