Standing at the Crossroads: Has Your Budgeting/Planning Process Outgrown Excel?

It’s a safe bet that most businesses start out using Microsoft Excel to prepare budgets and forecasts.  Most likely they continue to do so as their business grows.   And why wouldn’t they?  Excel is one of the best known and widely used financial tools available today.    You’d be hard pressed to find a finance/accounting professional who isn’t a serious user of Excel.

There are many reasons Excel usage is pervasive in the business world, including:

  • Ease of use
  • Flexibility
  • Powerful functions
  • Intuitive formula language (mostly)
  • Ability to create simple or complex models and reports without IT support
  • Familiarity and widespread adoption
  • Reasonable cost

These benefits make Excel a great personal productivity tool, but the emphasis is on personal.  What about the enterprise perspective? Excel is probably the best budgeting and planning tool to use when companies are simple, with a small number of users.  But what happens when the business becomes complex with increasing volumes of data and evolving corporate structures requiring the involvement of more users both within and without the finance/accounting team?

Growing companies eventually realize, trying to use a personal productivity tool like Excel to run the budgeting and planning processes has some serious disadvantages, including:

  • Data integrity issues
  • Limited collaboration functionality
  • No built-in workflow and version controls
  • Lack of auditability
  • No single data source
  • Not scalable

In many cases, the same features that make Excel a powerful personal productivity tool are the ones that create the biggest headaches.   What to do when the pain from those headaches is no longer tolerable?

Many companies assume that the solution is to move budgeting and planning away from Excel to financial management or accounting applications that promise better control and auditability. Unfortunately, those applications frequently present challenges that only become visible after implementation.

The users driving the budget process are familiar with Excel, and all the powerful things it can do to make their lives easier. When they discover that the new application lacks the flexibility of Excel, will they shrug their shoulders and think “oh well”? Not likely! What they often do is create shadow systems in Excel.  Companies then find themselves with a budgeting and planning process that is less efficient and subject to the same data integrity issues that they were trying to avoid.

The fact is it is unrealistic to expect users to abandon Excel in favor of a much more structured budgeting and planning application. If they can’t easily do what they want in the new application, they will do it the old way in Excel.  It’s just human nature.

For companies that are still a long way from joining the Fortune 500, the best approach to improving their Excel-based budgeting process may be to start with the goal of finding software that retains the look, feel, and functionality of Excel while addressing the critical areas where it falls short.

What does that mean in practice? There are a variety of cloud-based budgeting and planning applications that utilize Excel as a front-end to a system that eliminates the many disadvantages of relying solely on Excel.

Keep in mind that using Excel as a front-end may mean something different depending on the vendor. In some cases, it may be a case of “Excel-like” rather than real Excel. While it may look very similar to Excel, it doesn’t include full Excel functionality, something that may send some users back to their shadow systems.

To fully leverage Excel expertise across your organization, reduce the learning curve, and minimize user resistance to new planning software, it makes sense to evaluate applications with a front-end that features full Excel functionality.

While Excel continues to thrive as a personal productivity tool, it was not designed to meet the collaborative and complex planning environment that many of today’s companies struggle to manage. There are a variety of cloud-based applications that build upon what Excel does best while providing the control and collaboration capabilities needed today.  If you find yourself at the Excel crossroads, CFOs2GO is here to help guide you and your team through the process of deciding where to go next.

 


 

Joe co-leads the firm’s Financial Modeling and Analysis practice area and leads the Branded Consumer Products practice area, which specializes in financial services to companies developing branded products for consumers. A versatile financial professional, Joe has broad experience in FP&A, investor relations and financial operations management and process improvements that drive increased efficiency and cost savings. He is well-regarded for his communication skills within organizations and with investors and banking partners.

If you would like to speak with Joe, please use the Comments section to make a request.

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