Budgeting and Forecasting Software
Why is it Necessary?
Budgeting and forecasting is an essential part of any business and is typically one of the hardest components to get right, usually requiring hundreds of man hours to prepare. The most disturbing fact is that after investing so much time and effort, the detailed budget is quickly out-dated and re-forecasting must be undertaken soon there-after. The need to budget and forecast efficiently and effectively drives a lot of business to consider the merits of implementing corporate budgeting and forecasting software. However, every person’s notion of, and experience with such software is wide ranging and difficult to define.
Embracing budgeting and forecasting application is a balancing act
Some still nominate the humble Excel spreadsheet, quite often the tool of choice because of its prevalence and ease of use, despite its inherent limitations as a collaboration tool. Others refer to their experiences of massively expensive and clunky software that requires many months (or years) to configure and deliver business value, with heavy reliance on IT or specialist consultants to “keep the thing going”. There are even some ERP (enterprise resource planning) vendors that provide capability for corporate budgeting and forecasting within their platforms, but rarely do they provide the full capability required to do the job properly. The scope of what these systems need to achieve must also be well defined. There are some handy tools out there that are marketed as ‘forecasting software’, but they are better defined as demand planning tools to cater for specifics around product selling in particular industry sectors.
Scope and Definition
Our definition of Budgeting and Forecasting Software is one which ultimately encapsulates and satisfies the requirements of finance specifically in relation to budgeting and forecasting for Profit Loss, Balance Sheet and Cashflow, as well as the broader and longer term financial objectives and goals of the business. This is not to say the software would only be used in finance by finance people – in fact, the use of the appropriate software should be a catalyst to push the responsibility of budgeting and forecasting out to the wider business as one of its many benefits. Equally, when rolling out corporate budgeting software, key metrics and KPIs will form the back bone of how budget models are created within each department and how they consolidate into the total corporate view.
Software offerings described above fall under the umbrella of Corporate Performance Management (CPM). The Gartner Group, the Information technology research and advisory firm, describes CPM as suites “that facilitate efficient, compliant and transparent processes within the office of finance. They also enable CFOs and other business leaders to manage organizational performance and guide strategic direction”. (Magic Quadrant for Corporate Performance Management Suites – 2 April 2015)
Clearly, any software that is being evaluated to undertake corporate budgeting and forecasting, must have a clearly defined “value add” to the business that is easily quantifiable. There are a number of factors that influence ROI in this context – the number of budget contributors, the number of profit centres/cost centres, the number of budget iterations demanded by the board and the need to do monthly rolling forecasts, to name just a few. As a business that relies on excel to do its corporate budgeting and forecasting, you could also add to this list the need to do top-down budgeting or the need to model budgets in a multi-dimension manner, both of which are impossible to do in Excel.
Budget templates quickly multiple out of control – wasting time and money
Once you have established that your business exhibits the right characteristics in its budgeting process to benefit substantially from an investment in corporate budgeting and forecasting software, it is necessary to evaluate what tools are on the market. It is an absolute must that any software on the evaluation list will interface seamlessly with existing systems (GL, ERP, HR or other), consolidate figures from multiple contributors in real-time, enable simple version management and control, provide for integrated security and auditability and allow for top-down budgeting. Features such as workflow management, scenario modelling and centralised driver based calculations and assumptions must also be a given. Discussions around preferences for on-premise vs cloud or the “look and feel” of the user interface should be secondary, even behind other considerations such as the flexibility of the tool to accommodate changes to models and whether these changes can be made by non-technical users.
Whilst the end-game is a forward looking view of the business that is an accurate reflection of future profitability and cashflow, KPIs upon which the budget is derived will also feed management reporting for variance analysis and tracking of critical business outcomes. Another important consideration therefore must be how the budgeting and forecasting software integrates with other reporting tools, or indeed, whether the software itself includes a Business Intelligence/dash-boarding capability.
So Your Business Needs Budgeting and Forecasting Software – What’s next?
QMetrix has assessed and evaluated a number of software tools that fall under the CPM umbrella and as a result of this review, has decided to offer two competing solutions in CPM. It is clear there is no perfect budgeting and forecasting software tool that suits all requirements all of the time, but we can offer a choice to our customers and prospects and make recommendations that will be based on their specific requirements. Should our independent assessment of needs determine that neither tool is suitable, we will be the first to admit it. Unfortunately there is a lot of misinformation by vendors/partners offering single point solutions that ultimately confuses the non-technical decision maker and often results in poor choices and bad outcomes.
A low cost proof of concept (POC) is also recommended when considering the purchase of a budgeting and forecasting software platform. By focusing on a specific goal or objective of the budgeting process, and with rapid collaboration between your team and our expert consultants, we can quickly prove the value of investing such a project. This approach often leads to greater stakeholder buy in and sets the wheels in motion for approval of the full implementation. A POC essentially reduces the buying risk by needing no upfront software cost, very little time to build, and provides a starting platform from which the full solution can be built.