The Budgeting and Forecasting Experts Blog

Accounting Technology Tools – Fact or Hype?

Do you really get value out of all your IT investments?

In another interesting article on the www.proformative.com’s website, the author Doug Sleeter, President at The Sleeter Group, Inc.  brings up the challenge of identifying good technology products and separating them from products that are often marketed using unrealistic claims; products that rarely live up to the expectation.  Although the author is mainly referring to software products, it is clear that these principles apply to all technology products and service offerings.

Software is a major contributor here, causing disappointment for users of various products soon after implementing these solutions.  This is primarily true for consumer software products but is also widespread among business applications.

I am exposed almost daily to technology products, many of which are software products in the area of accounting and finance.  These products are intended to either interface directly to ERP applications or used stand-alone.  Of these I can mention sales commission automation software, supplier management and performance software, contract automation, fixed assets management and maintenance, etc.  These products, according to their developers and publishers are there to solve common business problems and deal with challenges organizations face on a daily basis.  It seems that everywhere you look there is a solution they want you to believe you cannot live without.

In finance, the most common such application is in the area of planning, budgeting with forecasting, enterprise performance management and business intelligence.  Many of these applications are bundled in one package, as these tasks are usually related.  Others are licensed by function or offered as “light”, “intermediate” or “advanced” or in any imaginable selling configuration to entice people from different business environments and sizes.

In the past 20 or more years I have personally tried a variety of software products, all intended to enhance business functions or solve a real world business problem.  Lately, this has been far more noticeable with mobile device applications, some of which are targeted to business users.  My experience with new technologies and the accompanying new software products is that in many situations it is hard to justify the commitment to acquiring and implementing many of the product offerings, even if it seems appropriate (and most often tempting) to invest in such products.  Proper research almost always proves that.

When evaluating new product offerings we need to carefully weigh the benefits (must be measurable) versus the cost (total cost, not just the software licensing fees).

Here are two examples:

Sales Commission software:  Unless there are more than several persons for whom sales commissions must be calculated and there is a complex commission plan in place, it is hard to justify licensing (either SaaS or on premises) such an application.  There is a one-time license fee (on premises) or monthly subscription fees (SaaS) plus annual license renewal fees (on premises).  To that you must almost always add implementation fees, consulting fees for special maintenance and modifications, training of company employees, and other costs.  When you reach a point where the benefits outweigh the total cost by a good margin, you are ready to commit to such an undertaking.

Payroll Processing Software:  Here there are clear benefits for nearly all size companies.  Experience over the last three decades shows that benefits gained by automating this function almost always outweigh the costs involved in doing it manually and guarantees compliance when correctly used.  Only in rare circumstances and usually in very large organizations is this service performed in-house.

As for the planning, budgeting and business performance management software mentioned earlier, I find that the benefits gained from implementing such software dramatically outweigh the costs involved when the following results are achieved:

A.    A well-implemented plan and analysis process, done year-round provides management the tool to gauge actual company performance against its initial or updated plan or budget.
B.    The planning software allows management to evaluate the forecasted future financial health of their organization, through accurately produced forecasted financial statements, customized reports and dashboards of financial ratios and KPIs, and other tools.
C.    Management uses the data obtained from the system to arrive at relevant decisions and act quickly in response to this data.
D.    Fewer decision errors are usually made when data is available immediately after an accounting period is closed.

Since this type of product is now available to small and medium size companies, many organizations can enjoy the benefits while implementing the software at a reasonable cost.

As with other software applications, there is also marketing hype and unrealistic expectations in the planning, budgeting and management performance product category.  My advice is always to evaluate as many products that are available for the specific market segment and company size and choose the one that can realistically deliver results as described in A-D above.

Remember that marketing hype is human nature, as we all want to present our product or service in the best possible light, sometimes omitting weaknesses or exaggerating features or benefits.  Separating the fact from the hype is what it takes to find the right product for the defined task.

Tags: budget maestro, budgeting software, business budgeting software

Were you unexpectedly promoted to the CFO position?

A great opportunity for positive change.

I recently ran across a blog entry on the www.proformative.com web site, titled “The Accidental CFO” and authored by Samuel Dergel, Director – Executive Search at Stanton Chase International, accessed with a free membership to proformative.com, which is an excellent online resource and professional network for senior finance, accounting and related professionals.

In this article, the author discusses the seldom but possible scenario when an accounting or finance executive is promoted to the CFO position “accidentally”, or unexpectedly for various reasons.  The author then continues and gives several tips to the newly promoted CFO, as well as a little advice on how to grow into the role and develop relationships with senior executives and the outside world.

In my career in accounting and finance I was once “accidentally” promoted to the CFO role in a hi-tech company when the newly hired CFO decided after less than 6 months that the company was “too small” for him and that he missed the larger corporate environment.

I remember the quick transition period and having to come up with answers and solutions where there was no one to ask.  I also remember that for the first time I realized that I was in a perfect position to make good, positive changes and get the executive team to work more closely together on common company goals.

One area that presents a great opportunity for a new CFO, “accidental” or not, is the area of planning, budgeting, and business intelligence.  In recent years, companies of all sizes have been able to make use of outstanding planning, forecasting, reporting and business performance management (BPM) / business intelligence (BI) tools.  You no longer have to be the CFO of a fortune 500 enterprise to be able to harness all the power that your corporate ERP system and all other peripheral information systems can provide.

A forward looking CFO will always look for ways to not only improve relationships with senior executives and key employees, as well as key persons on the outside world (bankers, investors, key customers, key vendors, etc.), but to also improve the way the company translates its goals and visions into actual performance and the ability to monitor this performance and make the necessary adjustments in order to better align the actual performance with the anticipated results.

Today’s CFO, more than ever before, can have the tools designed to do just that.  Using a list of “must have” general features I recommended in the blog entry “10 Must Have Features of a Budgeting & Business Intelligence Solution” , they can implement a planning and BPM/BI solution that will become the best trusted and used financial tool the organization can rely on.

The CFO will work with the organization’s operational departments to have these tools implemented and put to use.  They will also closely work with finance to ensure that all data is correctly captured in the system and is routinely analyzed.

Whether you are a veteran CFO, a newly appointed one or “accidentally” promoted to this role, you have a tremendous opportunity to add value to your organization, value that can be measured and that will be appreciated by everyone involved.  As an added bonus, and amidst the sometimes-elevated stress that is part of this job, you will find great satisfaction in realizing that harnessing the power of current information technology is a major contributor to your organization’s success.

Tags: budgeting and planning, forecasting

One ERP System or Many?

Why completely consolidating ERP systems may not be the right answer

I just finished reading an interesting article published in TechTarget and authored by Linda Rosencrance, Freelance Writer and Editor, titled “Is Consolidating Disparate ERP Financial Systems worth it?

The essence of this piece is the pros and cons of integrating or merging an enterprise’s collection of ERP and other financial and accounting software applications into a single instance ERP software solution and whether it is even practical to do that.  Since many large enterprises, and numerous smaller organizations employ multiple ERP and financial systems, often by multiple software vendors, the debate on whether to consolidate everything into a single solution (and the potential benefits) becomes tempting and often valid.

Wouldn’t it be great to have a single instance ERP solution, where data across the entire enterprise resides in one database; financial operations are consolidated in the same database, and financial statements are produced from data that rolls up from the various business units, while all relevant intercompany transactions are properly eliminated in the same database, under a set of rules embedded in the database, and so on and so forth.

The reality, however, is usually different.  The main reasons an organization ends up with many and varied systems are business acquisitions, rapid expansion, diversifying business operations and sometimes keeping older systems in place, while adding more current or industry specific applications.  The end result is often a myriad of software programs installed in many physical locations, employing numerous servers and IT processes designed to maintain these operations.  To that add the many interfaces among the various systems where data is transferred from one system to one or more other systems.  Sounds grim, but is it really that bad?

That depends, as the above-mentioned article tries to explore.  My experience working with very large companies, some global, shows that having several or more systems in place can work reliably and economically, when IT and business processes are well defined and executed.  To me, whether the data is manipulated in one application and stored in one location or whether it travels all over the globe and is bounced around many file servers and storage locations is less relevant than whether the business processes and their supporting IT functions are well defined and executed.

Looking at it a different way (and somewhat more amusing):  Even the largest global enterprises’ data is comprised, at the system level, of 0s and 1s (or low voltages and high voltages in the electronic circuits that make up all these computer systems).  It fundamentally makes no difference whether these 0s and 1s travel within one or many systems.

Even within a single instance ERP system there are many internal interfaces and numerous data manipulations and transformations.  These 0s and 1s simply don’t care whether they are tossed around one set of file servers in one location or thousands of servers around the world, while passed around from application to application.  It is however fair to say that the more complex the system and the more connections there are, etc., the less reliable it can be.  However, there are many IT controls that mitigate these risks, which inherently exist even within a single system in one location, or a single system with multiple storage and processing locations.

What really matters is how the process is designed, maintained and controlled.  As the article concludes, consolidating everything into a single instance ERP solution may not be practical or economical, or even feasible for even the largest organizations.

However, not being able to reduce the number of systems to just one should not be the reason why simplification should not be contemplated.  In many cases, companies are able to reduce the number of their ERP solutions and other financial or manufacturing software packages, while striking a balance between total project costs and ultimate benefits.

Overall, I’d rather see more effort put into process controls than embarking on lengthy, massive and costly ERP consolidation projects with sometimes unpredictably disappointing results.

Tags: financial planning software

The Determining Factor in Choosing Business Software

Find the right application, embrace its benefits, and accept its imperfections

If you are a frequent user of a particular software application (most business software users are) you become comfortable with its features and operation and learn to live with its inevitable quirks and other so called “bugs” that unless they are severe and cause your system to crash, you’ve most likely found workarounds or learned to ignore them altogether.

When I was in the software development and publishing industry it was common to call these odd behaviors “undocumented features”.  Our customers realized that our software was continually being updated, with new features added and as additional testing was performed, the majority of these issues were corrected.  They also realized that software designed for serious business use was always in a state of development and change, much to the benefit of its users.

Today, as an end user of advanced business applications, primarily in the areas of accounting and finance, I find myself doing a lot of research in an attempt to locate the best software solutions for my own use and also as a service to my clients who are searching for specific applications.

I work with accounting software, ERP software, planning / budgeting and Business Intelligence solutions and several industry vertical packages.  Regardless of how complex the software, or how compatible it is with a specific industry or user need, there is always something to be desired, and we’ve all seen these software feature wish lists, which software developers often encourage their customers to submit to them.

The most important lesson I have learned in both software development and as a user or consultant to users of business software is that what really matters is the overall utility and usefulness of the application and realizing that it won’t always have the exact look I am looking for or the exact features.

To get exactly what you want, customization is required, often at a great expense.  Hopefully, this is thoroughly evaluated and done for the right reasons.  Generally, we see this more often in very large organizations with hefty IT budgets and the ability to engage their software vendors and their internal IT departments in customization projects of specific applications or components (modules) of these applications.

In small to medium size organizations (SMB), software customization is less common and users must always make sure that the application they are considering was designed for its intended purpose and will actually deliver on the promises and claims made by its vendor.  The application delivery method becomes less critical (e.g., on premises vs. web based), and the overall look and feel, while still important, should not be the only determining factor in the selection process.  We caution our clients to never fall for a catchy, good looking interface and vendor claims that cannot be realistically substantiated.  Functionality and overall utility are far more important than the appearance of the product.

A good example that comes to mind is the budgeting, forecasting and BI application Budget Maestro with Analytics Maestro.  I’ve used this software for over 12 years now and have been through all of its major and minor releases and updates, yet I still have my on-going little wish list, which at times is shrinking, yet at other times increasing, of additional features and capabilities, and perhaps needed changes to the user interface the way I see it.  I’m sure other users have wish lists of their own and their opinion on how the user interface should be organized.

However, the reason I use this application and welcome every new release and upgrade is its functionality and value.  While other similar products, designed for the SMB market, may have a somewhat more appealing user interface (although this is open for debate), no application in this category has the usefulness and utility that Budget Maestro with Analytics Maestro have.

In fact, Budget and Analytics Maestro deliver on all 10 must have points I mention in the “10 Must Have Features of a Budgeting & Business Intelligence Solution” blog entry, making it the most comprehensive and practical to use solution, with year-round benefits.  These direct benefits should be the determining factor when evaluating such application for potential implementation at any organization.

While looks can be deceiving, solid performance, value and utility have always been my top priorities when selecting business software applications

Tags: budget maestro

Questions you Should Ask During the Planning and Analysis Process

And the Planning and Analysis tools allowing you to ask these questions.

Recently, there was an article published by SearchCIO.com (a TechTarget publication) and authored by Nicole Laskowski, Senior News Writer.  The title of this article is: “Want Better Analytics? Start asking ‘crunchy’ questions.

One of the main points delivered in this article is that by using key performance indicators, aligned with strategic goals and specific questions used to query the data, business intelligence can be developed and customized to each company, regardless of industry.

Another point is that visualization of data can help a person to better understand it, which means that decisions made using this visualization will be made with greater confidence and are likely to be more accurate in the long run.

A few days ago I was speaking to a financial software analyst about Budget Maestro and Analytics Maestro , relaying my experience with the software and why I thought this solution was so well designed and targeted at the SMB (small & medium business) market.

Some of the points I mentioned to him seem to coincide with the points delivered in the above-mentioned article.  Of these, KPI’s, accomplished through use of drivers, become a very powerful and useful function in the planning and budgeting software (Budget Maestro), while visual analysis is performed in Analytics Maestro, where planned and actual data are seamlessly linked to the analytics software and display the data in any format, size, color and other parameters chosen by the user.

Questions you need to ask regarding performance in different areas of your organization will help you better understand how to established key performance indicators.  These, combined with drivers you enter in the planning and budgeting software, will allow Budget Maestro to automatically create the logic that is used with your assumptions.

Combining this with the basic budget data you enter in your plan will result in system calculated and visually displayed financial results.  These results can be a full set of projected financial statements along with a full set of actual financial statements automatically transferred from your accounting or ERP software into the planning software (Budget Maestro).  Both can be visually displayed in any format and appearance you choose in the analysis module (Analytics Maestro).  Other reports in unlimited formats can also be obtained using this set of applications.

Imagine having a visual display of your chosen KPI and financial ratios for the entire budget duration and for all available actual data (as it becomes available immediately after period-end close).

Example of questions you can ask:
a.    How is my IT spending going to change as I add new employees?
b.    How is my headcount going to change in response to projected increase in revenue (which will also affect item a. above, among other things)?
c.    How is my utilities expense (e.g., power) going to change in response to change in production demand (derived by projected revenue change)?
d.    How are my payroll related expenses going to change in response to item b. above?

As you can see, many of the questions you’ll be asking are going to be interrelated; however, with the proper use of drivers you can obtain the answers you are looking for and with very little effort once the drivers are put to use.

The real good news is that all of this functionality is available to users of Budget Maestro without ever having to write a single line of code or even place formulas and links anywhere in the software.  Now you are finally able to perform exactly the type of analysis relevant to your business.

Tags: analysis, budgeting and planning, forecasting

No Time for Budget

Why is this process flawed in so many organizations?

CFO Magazine recently featured an article titled “No Time for Budgets” authored by Edward Teach. This article points out that traditional budgeting (e.g., the corporate annual budget) is flawed and often irrelevant to the changing economic reality.  It quotes Steve Player who is the North America program director for the Beyond Budgeting Round Table saying, among other things, that using traditional budgeting tools is often based on assumptions that turn out to be wrong, or inaccurate at best, and not being able to continuously monitor and update the data (assumptions, drivers, etc.) can quickly render the budget outdated and often useless.

Another important observation given by John Macrae, a principal at accounting and consulting firm CohnReznick is that the budget process is often too complex, and requires companies to devote too many resources in order to complete it, but in the end, the result is simply used as a “report card” and not as a planning and analysis process tool.
There are additional observations made by other contributors to this article, and the conclusion is not surprising:  Many organizations either are not capable of or are not aware of the fact that their budget and planning process is not really used for its original intended purpose, which is simply plan the organization’s activities based on goals, monitor periodic results and make appropriate adjustments driven by decisions directly influenced by the original goals, planning data and actual results.

I’ve made several entries in this blog pointing out these same principal flaws in traditional budgeting and planning and trying to identify the underlying reasons behind these flaws and deficiencies.

I’ve also written more than several times that having the right tools and the method behind this process are critical to success.  My opinion has not changed and my advice continues to be:  Find the right solution to address your particular situation but most importantly make sure it is practical to implement and will be consistently used and in a manner beneficial to the organization.

The last thing you want is for this process to become an unbearable chore that will always be reluctantly completed and never properly used.  My blog entry titled: “10 Must Have Features of a Budgeting & Business Intelligence Solution” is a good example of what features and capabilities a planning, budgeting and business intelligence software solution should have in order to make it not only practical to implement and use, but also create a whole new approach to this process, deliver the benefits that really matter and reduce or even completely eliminate the traditional flaws in the process.

Tags: budget maestro, budget software, budgeting, budgeting and forecasting software, budgeting and planning, budgeting software

Onboarding a new Budgeting, Forecasting and Business Intelligence System

What to do to ease-in the new process

I just finished reading an article by Rob Livingstone titled “BP&F (Budgeting, Planning and Forecasting) software budget manager training tips”.  This is available to registered users (free registration) at: http://searchfinancialapplications.com.

After registering, the article can be found at: http://searchfinancialapplications.techtarget.com/answer/Ask-the-expert-BPF-software-budget-manager-training-tips

The focus of this article are the four steps needed to be taken in order to successfully onboard a new budgeting, planning and forecasting system and the importance of getting the budget managers and other employees participating in this process acclimated and feeling comfortable with managing the process.

When it comes to implementing a practical budgeting, forecasting and business intelligence solution, especially in a small to medium size organization, having the right persons on board, with sufficient experience and willingness to succeed in the initial implementation is extremely important.  However, having the right system in place is just as important and will often encourage a less experienced team to quickly learn and adapt the software to the particular organization’s needs.

I’ve had the opportunity of working with various software applications, some of which where not intuitive to implement and maintain, where training of employees and budget administrators was lengthy and costly, always dependent on outside consulting, and with constant programming and reprogramming of even the most mundane changes.

On the other hand, my experience with an application such as Budget Maestro proved the opposite to be true.  Because of the way this software application was designed, implementation is short and generally inexpensive.  The modular approach lends itself to different persons contributing budget elements in specific modules (e.g., revenue and cost, operating expenses, personnel, assets, debt, etc.).

Consolidations of the various budget pieces within the business entities, regardless of model complexity, is completely automated and with no user programming.

The driver based system with built-in business rules where persons choose from menus and drop-down lists without entering a single formula or link makes the whole process very intuitive with a much shorter learning curve than all other systems I’ve worked with.

To that add the integrated, built-in financial statements, again without any programming, and there is little wonder why so many small and medium size organizations have been successful in implementing this software with such modest cost and minimal training.

My advice to any organization looking to implement a planning, forecasting and business intelligence solution is to look for a system that can quickly go live with minimal training and that can be internally maintained without programming and complex change management processes.

When budget managers experience an easy and intuitive onboarding process, the effort of obtaining results and the regular maintenance will seem less of a chore and will ensure greater accuracy and willingness to use the process for its intended process, which is gaining insight into the future financial health of the organization and providing management with the tools to make informed decisions along the way in order to align current operations with original or modified goals

Tags: budget maestro, budget software, budgeting, budgeting and forecasting software, budgeting and planning

2014 top accounting software buyer trends

I just read an interesting report published by accounting software research firm, Software Advice titled:  Small Business Accounting Software Buyer View 2014.  It was compiled and written by Noel Radley, Managing Editor, Software Advice and can be found at the following link: Accounting Software Buyer View 2014.

The report was compiled from data acquired from surveying several hundred buyers primarily representing small companies, with the majority of them under 500 employees and under $50 MM in annual revenue.

Buyers were questioned on their search for the right accounting software for their companies, the reasons for their search and what features and functionality they were most interested in.

It was not surprising to learn that many of the survey participants were looking to upgrade from more basic (and older) accounting software applications to packages with more advanced features, allowing greater efficiency and increased automation and accuracy.
Another interesting observation was that the surveyed buyers expressed less interest in web-based accounting software applications than what is experienced these days with general software purchases.  This is an indication that the priority here is functionality first and delivery method second.

What I have personally experienced in consulting to smaller companies (the majority of my work is with larger organizations) is that company managements are seriously looking to leverage technology and advancements in information processing, as well as automated budgeting, accounting and finance functions, quicker period close cycles and enhanced reporting.

These companies are also realizing that software tools that were only available to very large organizations in the past are becoming more accessible to smaller enterprises and with lower cost of ownership and less maintenance and employee training.
I believe the results of this survey fairly represent goals and desires of smaller company managements, as represented by buyers of technology products and in this particular case, accounting software.

Tags: budget maestro, budget software, budgeting software

CEO – CFO Dysfunctional Relationship

An often-overlooked reason

Recently there was a question posted on www.Proformative.com (an online resource and professional network for senior finance, accounting and related professionals) on the often-dysfunctional relationship between CEOs and their CFOs, and trying to explore the underlying reasons for that and what can be done to prevent it. There were a lot of answers posted by Proformative.com contributors participating in the “Ask the Experts” feature of this website, including my own little input in an area I thought was important.

In my work I interact with company upper managements in a variety of industries.  I interview members of the executive team in each organization as part of my various professional engagements (e.g., corporate budget, internal audit process design, external financial reporting, SEC reporting and compliance, etc.).  From these interviews and other opinions expressed by managers and employees I noticed a pattern, which at first appeared to be coincidental and was actually unexpected.   The more experience I gained in working with corporate executives the more I was convinced that there was a fundamental reason contributing to the level of disconnect between a company CEO and his/her CFO.  This is certainly in addition to other, more obvious, reasons usually due to personality conflicts, incompatibility with the company or a specific industry and perhaps other reasons.  Of course, this is only true in companies where this phenomenon occurs; there are many organizations fortunate to have CEO / CFO teams who not only get along but also work as a team and are able to create a great work environment where teamwork is encouraged.

The little insight I gained has to do with the inability of a company to properly plan and then execute their financial plan, including making corrections to the plan and its execution, without taxing the business too much though bad decisions (or indecisions), uncertainties or other actions that aren’t directly derived from a solid decision making process.

A good example that demonstrates this is a company’s CEO expecting certain financial results, based on an incomplete plan or budget and only seeing actual data, which are usually short of the general expectations.  When a CFO is asked to defend the actual results, it appears that due to the lack of proper planning there are no reasonable explanations and suggestions that can initiate a decision making process, in response to the actual results. The CFO and his/her finance team will have certain opinions, usually not backed up by solid data and analysis, and the CEO will often make decisions that are based on intuition, past experience, or based on what other similar companies are doing.  This results with the CEO and CFO not working as a team, and with the company suffering the consequences.

Of course, there are several other reasons for a dysfunctional relationship here, which I have noticed but will not comment on in this blog.
In contrast, having a solid financial plan and discipline to monitor the actual results and compare them to the plan (budget and periodic updated forecasts) can remove this point of tension between the CEO and the CFO.  Expectations become clear and action can be taken immediately following a periodic analysis. In reality, achieving such processes requires, in addition to discipline and willingness to adhere to process execution, a solid and practical information technology that can be realistically implemented and continually used.  The output given by this system must be available to view and understand by all team members, with the CEO and CFO informed on the process and its results at all times.

One of the challenges in the corporate world is to implement such a practical system.  From what I’ve seen, most software solutions designed to help with budgeting, forecasting and business intelligence are not simple to implement, require a significant investment throughout the useful life of the system and are not always capable of providing the data that is really needed to maintain the organization on its planned course.  On the other hand, Budget Maestro was designed precisely to give upper management the information they need, when they need it and in a format that they can quickly understand.  CEOs of small and medium sized companies using this solution can intuitively understand the real financial health of their organization and along with their CFO and other management team members can work together to explore solutions that will correct the course the organization is headed on.

As for personality conflicts between CEOs and CFOs – this is an area I will not attempt to comment on or speculate.  I think I’ll leave it to the experts in that field.

Tags: budget maestro, budget software, forecasting

Automated Budgeting and Business Intelligence for Manufacturers

Are you ready to automate the budgeting process?

In my consulting practice I frequently work with small and medium size manufacturing companies.  While many of them have been able to fully automate their accounting systems, there is still a lot to be desired in the area of automated budgeting, forecasting and business intelligence.

Over the years I saw companies transition from partial or even complete manual accounting (yes, the system where you keep track of your inventory and other accounting data by using inventory cards, account ledger cards, etc.) to fully automated accounting and ERP software.

Nowadays, in a typical manufacturing company, it is common to see full automation in the area of inventory control, production control (e.g., shop floor control, scheduling, capacity planning) and of course the common functions of Sales Orders, Purchasing (with or without MRP), Accounts Receivable, Accounts Payable and General Ledger.
More and more manufacturers have implemented automated employee time collection at work centers or even at specific machines locations or production activities.  Cost accounting has become more automated and shop rates are periodically analyzed and corrected as required to arrive at a more precise product costing, more accurate cost absorption in inventory and more accurate and appropriate inventory valuation.
While all this is encouraging, there is one very important area in manufacturing finance that many companies still struggle with.  Not surprisingly, this is the much-dreaded process of budgeting, forecasting and analysis.

Some of the manufacturing companies I run into still use spreadsheets for their annual budgets.  They may consolidate several or many spreadsheets prepared by their various administrative and operations departments and some of them may have some logic built-in to aid the forecasting process.  Invariably, the end result is only a projected income statement (P&L) with one column for each budget period (e.g., month).  There is usually no further insight into the future financial health of the organization.
Another common behavior I see is the lack of ability or discipline to regularly analyze these forecasts against actual accounting data. The result of this behavior is the inability to make informed decisions and align the company operations with its goals.  In many situations this leads to financial deterioration and having to make drastic corrections, often as a result of overreacting to symptoms. Fortunately, this can be prevented, and relatively easily, by employing a robust approach to budgeting and by using the right software tools.

Today there are many budgeting, forecasting and business intelligence solutions available to manufacturing companies.  What I’ve learned through experience is that no matter what solution is implemented it must be practical to set up and use and most importantly, it must encourage users to embrace the process and welcome it; in other words, encourage people to use it because they “want to” and not because they “have to”.  In many cases, this will make the difference between a successful and failed implementation.
Other than the approach and attitude towards the solution there are, of course, certain technical requirements the system must meet in order to provide the expected benefits to these organizations.

Through using and evaluating various systems I’ve compiled a list of high level features and benefits that a budgeting, forecasting and business intelligence application should have.  This list can be seen at my “10 Must Have Features of a Budgeting & Business Intelligence System” blog.  When the selected system is able to deliver on all the 10 points listed, the organization will be afforded a much better insight into the future financial health of the company and without adding unnecessary burden to its finance and operations functions.

Experience gained by many organizations, manufacturers included, shows that a proper budgeting, forecasting and business intelligence solution that is practical to implement and use throughout the budget year can become the organization’s most trusted tool and will provide the insight and intelligence needed to drive the decision making process, quicker and with greater confidence.

Tags: budget maestro, budget software, budgeting, budgeting and forecasting software, budgeting and planning, budgeting software