Top Five Reasons to Retire Excel and Move to Budgeting Software

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Top Five Reasons to Retire Excel and Move to Budgeting Software

As a CPA firm, we have the opportunity to observe how 100’s of companies create and utilize their budgets.  What we’ve found, not surprisingly, is that over 90% of our clients use Excel for budgeting.   For most, Excel is a great option.  It’s inexpensive, flexible and easy to use.   That being said, it doesn’t work for everyone and, as your budgeting process becomes more complex, Excel may no longer be the answer.    As a matter of fact, we’ve seen a growing trend of companies moving away from Excel to true budgeting software solutions.

So, how do you know when it’s time to make that move?    Here are five key reasons:

Reason # 1 is Data Integrity.   The more complex your budgeting process becomes, the more likely that there are material errors in your budgets.    According to MarketWatch, 88% of spreadsheets have errors.    Another way to look at it, according to Ray Panko, a professor of IT Management at the University of Hawaii, “spreadsheets contain errors in 1% or more of all formula cells, even after careful development”.

As you increase the number of people involved in the budgeting process and/or the number of Excel worksheets and workbooks that you are managing, errors are inevitable and it’s probably time to consider making a change.

Reason # 2 is Version Control.   Just as the risk of errors increases, the difficulty of managing budget versions with Excel increases exponentially as the complexity of your budgeting process increases.  Whether it’s the number of people involved in the budgeting process, the number of worksheets, the number of entities or the number of G/L account numbers and other financial dimensions, the more you have, the harder it is to manage versions.

If you have ever discovered that the budget version used in your board reports or the budget version that your managers are managing against differs from the final approved budget, it’s clearly time to consider a change.

Reason #3 is Collaboration.   Excel works great if you have only one or two people putting together the budget.  As the number of budgeters increases, though, it quickly becomes more challenging to use Excel because of the difficulty of sharing and managing multiple spreadsheets.   And, if the budgeters are adding notes to their spreadsheets which are then getting rolled up to a higher level, the notes do not get rolled up.

With a good cloud-based, budgeting software solution, everyone is working on the same model so collaboration is much easier.  Notes can be shared and you can even implement electronic approval workflow to streamline the budgeting process even further.  If you need a better tool for collaborating, then it may be time to look at budgeting software.

Reason #4 is the need for Business Rules and greater ease-of-use.   With Excel, you can lock certain cells and try to enforce budgeting rules, but invariably, formulas get broken and users find a way to circumvent or distort the models.    This can’t happen with budgeting software because the administrator can define the rules and institute security to ensure that the rules cannot be overridden.   In addition, the budgeting software generally has features designed to automate some of the processes like assigning payroll benefits.   This, in turn, makes the budgeting process easier for the users and may be a good reason to move from Excel.

Reason # 5 is the inability to easily revise budgets and forecasts.    Revising budgets and forecasts with Excel can be very time consuming.  If you see people hunched over their computers spending multiple hours and days trying to do “What if” analysis, for example, it’s time to consider making a change.  Besides the fact that people are probably working too many hours, they are spending those hours manipulating spreadsheets versus analyzing performance and making business decisions.

With a good, cloud-based budgeting solution, you can move from STATIC planning where you have one budget that only gets updated once a year to ACTIVE planning where you can easily revise forecasts and do “What-if” analysis as business opportunities arise or market factors change your original budgeting assumptions.   That’s huge value that may easily justify the cost of a new budgeting solution.

To Summarize, Excel is an invaluable budgeting tool, but it’s not the answer for everyone, especially if you have a complex budgeting process.   If you are experiencing any of the reasons listed above, it may be time to check out a true budgeting software solution.   At Maner Costerisan, we represent several of the leading budgeting software applications and we would be happy to help you evaluate which one, if any, is the right solution for you.

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