Centage Blog

Cold Pizza, Taxes and Quarter End

We’re shifting toward the end of the first quarter and many financial professionals are getting ready to hold their breath and brace themselves for the coming weeks of late nights, leftovers, and a good deal of pressure. Are you as ready as you can be for it?

The guidelines I included in “3 Steps to a Quicker Financial Close are beneficial at quarter end whether you’ll be in a crunch to close more quickly or not. This is your first round of producing 2016 financial statements and to get a good look at how 2016 is stacking up against the budget. You don’t want surprises.

Apples to Apples

Comparisons are the heart of financial analysis. How will things flesh out against your budget? How will they compare with the first quarter of 2015? Are you on track with expectations or will you need to revise your budget given new conditions that occurred?

It’d be awesome (and unrealistic) to do a 1:1 comparison across the board. The unusual spike in travel expenses last year from a product introduction might be replaced by capital expenditures upgrading outdated manufacturing equipment at your off-shore plant.

Location. Location. Location.

The real estate mantra that we’ve all heard forever could be our jumping off point for our own quarter-end slogan. “Preparation. Preparation. Preparation.”  Okay, maybe it isn’t as catchy and you might not see it show up on reality TV, but it is sound advice.

If you haven’t already done so, circulate your quarter-end close calendar to your team, the department heads, and the execs. Setting expectations of your availability is a side benefit to prompting others to be ready to provide answers to your staff as they need them. You don’t want to have their sudden interest after close if the results from a large purchase order get attributed to a different business segment than what they expected.

Keep your quarter-end schedule on track and make everyone accountable for the financial responsibilities of their departments. Equally important is that you don’t want your team to have to track down someone when crucial sign-offs are needed.

April 15th

Another factoid we have cemented in our brains is the date when our personal taxes are due. Businesses, of course, aren’t exempt from tax obligations. The state and local governments are salivating for electronic fund transfers of your estimated taxes just as much as the IRS is.

The key to easing the tension about filing business taxes is naturally, preparation. Did the income statement you budgeted for include accruals for taxes? Did your Cash Flow forecast incorporate the fluctuations of the monies needed to pay out your taxes each quarter? If your forecasted Cash Flow is smoothed out instead of accurately reflecting the timing of the remittance of sales and other taxes, it’s just not really useful in managing your organization’s funds.

Imagine a financial statement reader seeing available funds at the end of March without distinctly viewing the forecasted disbursements for the almighty taxing authorities. He might spend those funds on a replacement cement truck before you’ve actually got the money to handle the expense. If the wheels are already in motion for a custom order without the money earmarked for to pay for it, you may find yourself riding way too close to the line of whether you’ll be able to meet your payroll next week or not.

Will your quarter-end statements require footnoted disclosures about committed funds instead of showing them embedded in the data?

Categories: analysis, business budgeting software, cash flow, financial planning software Tagged , , , ,

Is Desktop a Dinosaur? Consider Moving Your Budgeting & Forecasting to the Cloud

You’re finally able to come up for air and this is the year you’ll be updating your planning solution. Beyond the essential features (user friendly, GAAP compliant, scalable, etc.), you’ve got another element to consider. Cloud or Desktop.

Typewriters and VHS Tapes

Increasingly, Desktop applications aren’t being created or supported by many progressive companies. It’s nothing personal. It’s just not efficient or cost effective for companies to develop on two distinct platforms – desktop and online.

QuickBooks™ is a classic example. The Intuit Developers website quietly notes that we’ve just passed the line in the sand (March 1, 2016) and they’ve discontinued service of Quickbooks™ Desktop REST API. That’s developer-speak for saying they’re not going build or enhance interface tools for their Desktop application anymore. Ready or not, the world is shifting to the cloud.

A lot of us are set in our ways and Cloud-based software (a.k.a. SaaS – Software as a Service) is still a foreign concept to a good segment of the population. Make sure you’re aware of the significant limitations if you’re thinking about sticking with implementing a desktop program for your Budgeting and Forecasting solution.

Resources and ROI

Once you’ve isolated the features you need, here are some points to consider when you’re updating your planning software.

  • How available is your IT staff? For Desktop applications, IT will need to evaluate their tasks, test and install the new software and maybe write some code to connect it to your GL. How much lead time do you need to get Desktop software up and running? Cloud software on the other hand, allows for quick implementation and virtually no IT involvement.

Does your team use different operating systems? With Desktops, you’re often restricted by whether the software was created for a PC or a MAC. You may have to buy separate licenses if you need to operate in both OS arenas. …And dare we consider whether the software is compatible with Window® 10? New laptops and PCs are being shipped with it pre-loaded. You don’t have to worry about the OS with Cloud applications.

If your Sales VP, who lives on their iPad, finds that the Desktop software isn’t responsive in a tablet environment, they might have to back-peddle and resort to dusting off an old laptop. Platform barriers like this will deter users from accepting ownership of their budget… and the work associated with it.

Nothing gets by without considering the ROI. Desktop software tends to have significant start-up costs involved with licensing, implementation and training. Those are often coupled with ongoing maintenance agreements and potentially, upgrade fees as well. SaaS applications, like our Budget Maestro Cloud Edition, usually come with low entry costs and reasonable monthly subscription rates.

Common Concerns

Now that you’ve gotten your head wrapped around several of the benefits of Cloud software, what about your concerns? Make sure to ask the software rep about them. All of them.

  • Security? – Encryption, password requirements, the sign-in process, etc. Is there vulnerability in the interfaces to the GL or other systems?
  • Privacy? – Where will your data be housed? Sometimes you’ll have a choice; onsite, with the software provider, or with a third party vendor. What if you don’t have a choice? Who can see your data? Can it be mined?
  • Availability? – Can you get on it 24/7? What’s the backup process? Is their disaster recovery plan sound?
  • Response time? – Will the speed be sluggish? All the time or during certain hours?
  • Support? – How’s their training documentation? Are there dedicated support staff for the application? Do they read from a script or know the product intimately?

While desktop software versions bring with them the familiarity of well-worn slippers, the tide is definitely shifting to a cloud-based environment. When you’re ready, be sure to dive in with your eyes wide open.

How many man-hours a year would you gain by not having to manage your budgeting and forecasting spreadsheets or application onsite?

Categories: budget maestro, budgeting and forecasting software, budgeting software, business budgeting software Tagged , , ,

Profit Payouts; Bonuses and Profit Shares

After wrapping up the 2015 financials, many companies are preparing payments for bonuses and profit shares. It’s one of the few times that it’s actually fun to cut big checks since it’s a celebration of your company’s success.

If you’ve been on target with your budget and accruals for bonuses, the expenses were taken back in 2015. But if they were short, you’ll be taking a knock against your 2016 income statement. The importance of it is obvious but what might not be so obvious are some things you can do to mitigate the risk of having it happen again in 2017.

Salary Bonuses

Segmenting the individuals participating in the bonus program from non-eligible employees is always the first step. Sometimes the selections are made through business roles, performance ratings or consist of complete departments.

Consider these aspects -

  • The gross revenues or net profit of the full company, division or department are the main drivers used to calculate the amount of money you’ll put into your bonus fund.
  • You’ll set minimum and maximum thresholds as the parameters for the amounts able to be earned by any one group or individual.
  • Key Performance Indicators (KPI’s) gauge the measure of success of the individual and their values determine the expense amounts that you allocate to different departments.

Profit Shares / Contingent Commissions

Rewarding business partners for choosing to work with your company is a long-standing practice in many organizations. In the Insurance industry these incentives are referred to as Contingent Commissions. They’re a good example that can be easily extrapolated to other situations.

Contingent commissions are frequently paid by Insurance Carriers to the Producers they work with and reflect the amount of ‘good’ business that they’ve brought to the company.

  • Earned premium is the primary factor in calculating commissions. Booked premium is recorded as policy contracts are executed while earned premium gets recorded when payment has been made and the coverage period has started.
  • Claims incurred is the main expense consideration. Insurers distinguish between claims that have been reported or are anticipated (such as from a tornado) and those that have been physically paid out. The loss ratio is the KPI where claim amounts are compared with premium.
  • Other factors considered in many Contingent Commission contracts are year-over-year growth, reinsurance ceded premium and commission, as well as Producers achieving specific milestones.

Mitigating Your Expense Risk

Insurance itself is the perfect example of mitigating the risk of expensive events devastating any one individual, family, or company. The same concept applies when you want to reduce the risk of your bonus payment and profit share expenses hitting your books in the wrong year.

  • Set up your report layouts for each unique contract and segment your Producers into tiers or groups that have similar contracts.
  • The values and KPI’s should be pulled directly from your master budget plan so you never have to worry about typos or formula errors causing your premium dollars or your claims amounts to be inaccurate.
  • Salary Bonus programs work in the same way. Pull the indicators you need into a Wage Bonus Report that you create to match your specific program. Have the report populate automatically with the salaries of the individuals or groups that participate in the program, any multipliers needed, and tie them to the KPI’s. Then let the report do the work for you.

By using monitoring tools, such as Analytics Maestro, you’ll import the actuals from the GL and populate the remainder of the year with your forecast and you’re ready to determine if any adjustments need to be made.

Planning, monitoring and revising your expense expectations are critical to the success of your business. Using business budgeting and planning software, such as Budget Maestro, is an ideal way to perform those functions. Custom reports that are set with the indicators and KPI’s that your company focuses on allows you the control you need to best manage your expenses.

How can you open up your thinking and find ways to increase the efficiency and accuracy of your profit share and bonus planning? 

Categories: analysis, budget maestro, budgeting and planning, budgeting software, business budgeting software Tagged , , , ,

You Can Control the Compliance Beast

There aren’t many words that make so many people cringe as the word Compliance. Even taxes. Yes, even taxes. While many begrudge the need to pay taxes, what makes us most uncomfortable about taxes is the thought of having to go through an audit.

The time, money, and energy audits take and the personal stress they impart are often more dreaded than an emergency extraction without Novocaine. No matter how upstanding, ethical, and prudent we are, it’s hard not to fear being ‘caught’ doing something wrong. That leads back to understanding that compliance with the tax code is the mangled root of our stress.

Following regulations are an integral part of doing business but most SMBs simply don’t have the budget or manpower to employ someone specifically as a compliance officer.  Just how big is compliance?

Skimming the surface

It’s not ‘simply’ tax payments that are audited, the list can seem (and probably is) endless. Take a high level glance at some compliance concerns with a couple examples:

  • Operational audits – industry and safety standards, self-imposed guidelines.
  • Payment Card Industry compliance – never record a Credit Card Validation number!
  • SEC regulations – 10-Q reporting, disclosures and SOX compliance.
  • AICPA – GAAP guidelines, accounting principles and pronouncements
  • Tax – enough said.
  • Data security – HIPAA regulations, privacy, encryption
  • Compliance as an employer – discrimination, disability, min wage …and lest we forget, healthcare regulations.

Why the Fear?

Complexity is baked into compliance.

The inherent fear around compliance has to do with interpreting regulations, continually training staff, and the omnipotent prospect of change. Government leadership after an election year, runs on Wall Street, and natural disasters can all trigger rapid-fire changes in regulations. And we need to keep up.

Who feels the brunt of it at an SMB? Just as anything-with-a-plug falls into IT’s domain, if it’s got a number in it – most of the responsibility lands with financial professionals to act as de facto compliance officers.

Keep up

Compliance changes follow a typical path. We need to be aware of them, interpret how they apply to us, implement them swiftly, report our compliance with them, and audit them. Ad infinitum.

To keep a handle on compliance, we need to put our arms around it:

  • Assign a point person for compliance. No matter how large or small your company is, it’s important for everyone to know exactly who to go to for information and direction.
  • Utilize check lists and systematic reviews to develop protocols for monitoring adherence to regulations and a clear path to follow when changes inevitably occur.
  • Analyze new rules and rates against your future projections.

Do What-if analysis to look at how a state mandated sales tax increase might affect your sales revenue in the coming months and years.

Use the metrics in your planning software to understand the impact of a new 401(k) withholding threshold.

Budget for the cost of compliance implementation and monitoring. Consider this one both in terms of dollars and manpower.

Segment your revenue goals by state or region to give you the most accurate picture of the affect of tax changes that occur.

Make sure you can trust the results of the calculations in your planning software or that you budget the time needed to check your spreadsheets for errors.

Relax… but get ahead

The best thing you can do to thwart compliance concerns are to improve your knowledge of regulations and your accuracy for implementing, forecasting, and monitoring them. Being proactive is always better than being reactive.

Take another look at the category list of compliance examples. Do you instantly know who to go to for firm answers on the state of your compliance with each of them?

Businesses of every description rely on the Budget Maestro™ family of software solutions by Centage Corporation to improve the efficiency and effectiveness of their business budgeting and planningfinancial forecastingfinancial consolidation and reporting processes. For more information, take a tour of Budget Maestrocontact Centage, or call 800-366-5111 now.

Categories: budget maestro, budget software, budgeting and forecasting software, budgeting and planning, budgeting software, business budgeting software, what-if scenario Tagged ,

Securing Funding – Two Critical Factors to Get the Money You Need When You Need It

Our latest survey showed that a significant challenge for financial executives is securing funding for their organizations. The reasons vary – for mergers, acquisitions, making a major capital investment, financing business growth, supporting inventory production, etc. -  but the requirement is the same, you need cash.

Regardless of whether you’re going the investor or banker route, they’ve first got to trust you. Your award-winning software and viral YouTube video will be worthless if you don’t get the respect of the lender. Second, be able to delve into the details. No one will spend their time reading your 35-page business plan if you can’t summarize your needs, tell them how you’ll mitigate risks, and articulate the amazing ROI that they’ll earn by giving their money to you.

Factor One: Management Skills

As you’d expect, having key personnel in place is essential. Did your sole data scientist recently head out on her own? Does your Sales team lack a VP to oversee your foreign market expansion? If you’ve got any major gaps, it’s in your best interest to disclose them.

Now, think beyond daily operations. Who are the advisers that drive the direction of your company? Their reputations and industry experience impart the longevity that your company may lack.

Illustrating management performance is an excellent way to show outsiders your leadership skills.

  • Did your management team meet last year’s budget?
  • Were your expenses over your projections by a long shot? Why?
  • Are you managing your cash flow effectively?
  • Do your inventory numbers support your sales projections?
  • Did you course-correct midyear and revise expectations?

Your answers will showcase your business acumen, your ability to adapt to change, and your financial prowess. Lenders need to have confidence in you to meet their fiduciary responsibilities of managing their own risks appropriately.

Having immediate access to supporting documentation for both your past performance and future projections could be critical to earn the trust of an investor.

Factor Two: The Numbers

Needing to know your numbers isn’t a surprise, but the depth you need to go to might be. If you’ve passed the litmus test of being trustworthy, it’s time to really scrutinize your funding request.

  • What are you going to do with the money you’re asking for?
  • Is it needed as a lump sum or would a staged release of the funds work for you?
  • Are your projections supported by market analysis?
  • Does your business plan reflect multiple What-if scenarios?

Risk and reward, that’s what it boils down to. Are all the risks inherent in your industry and business model embedded in your plan? Did you cover what you’ll do with that added inventory if regulatory approval doesn’t come through when you expect?

And the all-important return on investment. Make sure to prove how your business is scalable and how it will triple in value in two years after you’ve secured the funds you need to grow.

Despite having a small team who’s in them daily, you’ll want to be agile with your financial software and spreadsheets yourself. Often, Excel budgeting spreadsheets are unwieldy and unfortunately, inaccurate. And they rarely focus on cash flow. Investors need to see where the money is going in order to put their faith in you. Be ready with cash flow projections that support your expansion needs.

Opportunities can come out of the blue. If you’re asked to secure funding for an acquisition tomorrow, are you ready?

Businesses of every description rely on the Budget Maestro™ family of software solutions by Centage Corporation to improve the efficiency and effectiveness of their business budgeting and planningfinancial forecastingfinancial consolidation and reporting processes. For more information, take a tour of Budget Maestrocontact Centage, or call 800-366-5111 now.

 

Categories: budgeting and forecasting software, cash flow, cash flow analysis, cash flow budgeting, cash flow reporting, forecasting Tagged ,

Use of CPM Analytical Tools in the Budget Process

What really matters in the budget preparation and analysis process and why it should be implemented

I was just reading an article on TechTarget.com by Barry Wilderman of Wilderman Associates, titled: The Benefits of using CPM (Corporate Performance Management) analytical tools for budgeting. Here the author walks the readers through the benefits of using CPM data and specific analytical tools throughout the budget preparation process and during the entire budget period where the budget data is compared to the actual performance of the company as communicated by its accounting system reporting data.

The author also emphasizes the importance of using a central database where all of the organization’s business entities (divisions, departments, revenue centers, cost centers, etc.) have their individual budgets which consolidate to the corporate budget but with the ability to process each individual budget separately, arrive at individual approvals for the entity level budgets and then roll up to the corporate budget. This recommendation implies that there are software applications written specifically to handle these budget requirements and using a relational database as the storage medium for all the data.

I particularly like Mr. Wilderman’s assessment that there is great value in storing all data in a multi-dimensional structure, in addition to the implied row and column format that each relational database table provides. Additional data dimensions can be geographical territories, product lines, customer classes and others. The advantage of doing that, and assuming the budgeting application allows additional data dimensions, is that analysis of data can be more meaningful and lends itself to greater visibility and clarity of data and reports, when communicated to senior management.

Another important feature according to the author is the ability to employ drivers within the budgeting solution, as well as availability of financial modeling were KPIs (Key performance Indicators) can be created in the planning process, based on actual, historical data, as well as desired forecasted data.

Finally, Mr. Wilderman mentions the importance of data visualization, where CPM data can be visually displayed, using both actual and forecasted data, and communicated in a manner that is simple to read and understand by managers and those in charge of the organization (CEO, CFO, etc.).

While I was reading this article, I was thinking to myself that these important points are what really matters in a planning, budgeting and analysis environment, where senior management must be given exactly the data they need to make informed decisions. This data must be communicated periodically and timely, so these decisions can be made in response to actual accounting data compared with anticipated results (represented by the budget) plus all relevant economic and market changes as they unfold during the budget period.  The formatting and appearance of this data must be such that management can easily see and understand the data.

Categories: budgeting and forecasting software, budgeting software, business budgeting software Tagged , , , ,

Cash Flow Forecasting Best Practices

It is time to demystify existing misconceptions and practices

Earlier this year I participated in a discussion on the Proformative.com site, titled: Cash Flow Forecasting Best Practices. A Proformative member asked a question which is very common in many finance organizations: What are the best practices when it comes to developing a cash flow forecast model? The person indicated that it was for a large publicly held company with global operations and that they have a comprehensive P&L forecast but struggle with a large and cumbersome Excel model which must be tied to the budget (P&L). This person was looking to start from scratch and build a more robust and manageable model. It was clear that they needed help. Does that sound familiar?

  • Is your company struggling in forecasting its cash flow or is unable to forecast its Balance Sheet and the derived Statement of Cash Flows?
  • Are you using home grown spreadsheets you inherited from a person who is no longer with the company?
  • Have you noticed broken link messages and suspect that other errors may exist in these worksheets?
  • Are you unable to maintain these spreadsheets, or add records without introducing new errors?
  • Are these new additions properly linked into the model?
  • Most importantly, is the output from these worksheets meaningful and reliable?

If you answered yes to any of the first four questions and no to one or more of the last two you probably realize that you must make a change in this process. You also realize that you are not alone which explains why many people responded to this question on Proformative.com and why the topic of cash flow forecasting is popular on that site.

What surprised me was that a good number of the answers were focused on developing a more robust spreadsheet approach to solving this problem, convinced that the spreadsheet is the answer to this challenge; some claiming that they have a model that works and is able to provide a forecast of the cash going in and leaving the organization.

What about the sources of this cash, or the inflows and outflows of cash into and out of each of the three main categories and in each forecasted accounting period? And what about the one or two people who suggested that a cash flow projection can be easily obtained if you have a reliable forecasted Balance Sheet? But how do you reliably forecast a Balance Sheet, complete and accurate and always synchronized to your P&L forecast?  Do you use another home grown Excel model to do that?

As I have written before on this blog and in other forums, Excel is a fine application with a tremendous amount of power and features. One, however, must understand its limitations (and their own limitations in using this application) when using Excel in certain financial processes such as financial reporting, planning, budgeting and forecasting, processes that should always include a Balance Sheet and a Statement of Cash Flows. The blog post titled “Should Excel be Expelled” touches on this idea.

It seems to me that many finance professionals, greatly skilled in using and programming Excel, don’t realize that much of Excel’s apparent power and seemingly endless features may lead to a false sense of believing that anything can be done with the software. This results very often in gigantic models being developed, incorporating many workbooks containing many worksheets each. The risk of having material errors in these models increases exponentially as the complexity of the model increases. To that add the often lack of documentation and rarely used change management controls, even in large organizations, and you begin to see the magnitude of these unmitigated risks.

Even in a perfect world with perfect Excel programming, a robust internal control environment and other positive factors, a cash flow forecast, or more accurately, a forecasted Statement of Cash Flows cannot realistically be modeled in Excel because it requires a complete and accurate forecasted Balance Sheet, perfectly synchronized to the P&L budget model. My blog posts “Can you Really Forecast your Cash Flow?”, “Forecasting a Balance Sheet in a Spreadsheet World”, and “Why you Must Forecast your Balance Sheet” (and Part 2), further explain these concepts.

To me it makes a lot more sense to implement a purpose designed solution to accomplish the tasks of planning, budgeting, forecasting and analytics. Many of the blog posts on this site cover this critical set of business processes. Before embarking on new, complex projects, we need to realize Excel’s strengths and limitations, and our own challenge of controlling our desire to solve any problem with this tool.

Categories: cash flow, cash flow analysis, cash flow budgeting, cash flow reporting Tagged , , , , ,

3 Steps to a Quicker Financial Close

A perennial financial planning goal for CFOs and controllers each year is to shorten how long it takes to close the month. Free up resources? You bet! If each person on your team had another 8 hours a month, I bet you’ve got a wish list of projects right now that you’d love to have them dig into.

Step 1: Identify Your Motivator

Before you dig too deep into the metrics, you’ll want to really zone in on why you want to close sooner. The more precise you are about the reason, the better you’ll be able to articulate it to your team.

  • Are significant mistakes getting carried forward into the next month because they just weren’t noticed until after close?
  • Are you meeting filing deadlines by the skin of your teeth?  Is it the printing schedule, tax filings, or your 10-K reporting? Or all of the above?
  • Does having a small team mean restricting which balance sheet accounts you’re able to review at month end?

Step 2: Conduct a Review

It’s not just about getting done sooner. It’s about making sure you have enough time to complete the financial close activities, give sufficient time to the business owners to review the numbers, and for you to produce the reports that you need to run your business.  Here are a few metrics to consider:

  • Find your bottlenecks. Track the completion times of each activity then zero in on what looks out of sync. Are the accruals not being done earlier because of a backlog in A/P? Was the consolidation delayed because you didn’t receive timely reports from an overseas office?
  • Consider the current close deadlines. If the duration of time from the end of the reporting period to when the financial statements are issued were to be shortened, would something suffer?
  • Check the number of adjusting entries that were made. Are the main problems from posting mistakes or is it due to coding errors by a team member using an old chart of accounts?

Step 3: Implement the Financial Close Solution.

Now that you’ve identified the key time-consumers during close, it’s time to put some changes into action so you can see real results.

  • Prepare and review the close schedule as early in the month as possible to get your team all on the same page.
  • Communicate your timeline to all department heads so they take ownership of their revenue goals and expenses throughout the month. It’ll also encourage them to be timely in providing the data and operational reports your team needs to close the books.
  • Consider daily or weekly balancing for A/R receipts, A/P checks, and invoicing if you’re not already doing them.
  • Don’t sacrifice accuracy for speed. Meeting those deadlines is critical but doing so with bad data is worse.
  • Use technology to encourage collaboration and streamline the work. Consider what you’ve got and acquire what you need.

If you’re using Budget Maestro and Analytics Maestro, you can pull in up-to-the-minute data during your financial close to isolate unusual fluctuations, missed accruals, and unexpected discrepancies between the budget and actuals. There’s no need to wait until after close to find these things during the reconciliation process.

You can drill down on the totals to identify the specific offending line item. Operations will appreciate the help is pointing them right to what needs to be looked at. Review your Cash Flow against your projections too. You might find that a deposit receipt got processed at the bank but misfiled in the office and missed getting recorded in the G/L.

What can you do to make your financial close more efficient without compromising accuracy?

If you would like to see how budget maestro can help you with a quicker close, join us for a live webinar on Thursday, February 11, 2016 2:00 PM EST/11:00 AM PST. Click here to register.

Businesses of every description rely on the Budget Maestro™ family of software solutions by Centage Corporation to improve the efficiency and effectiveness of their business budgeting and planningfinancial forecastingfinancial consolidation and reporting processes. For more information, take a tour of Budget Maestrocontact Centage, or call 800-366-5111 now.

Categories: budget maestro, budgeting and forecasting software, budgeting software, business budgeting software, financial planning software Tagged , , , , ,

Major Financial Planning Trends for CFOs in 2016 [Infographic]

Each year we conduct a survey to find out what matters most to CFOs. It’s interesting to learn both what they anticipate their top priorities to be as well as the challenges and opportunities that they face. This year we expanded our scope to include other executives in the finance community such as VPs of Finance, Financial Managers and Controllers.

These are some of the questions we asked:

  • What are your top finance priorities for 2016?
  • Rank the issues you believe pose new risks, challenges or opportunities for finance functions.
  • Are you currently using spreadsheets in Excel as your budgeting and financial planning software? If yes, what is your biggest challenge associated with using spreadsheets?

What landed as the top financial priority for 2016?  Cash flow.

While not entirely surprising, the details shared with us show distinct patterns. Managing Cash Flow and increasing and diversifying Revenue came in as the primary concerns among our survey respondents. Monitoring and improving the cash flow process, managing current debt, and selecting the right investments were some of the top concerns.

Funding and Cost Control were the next layers of priorities. Several answers indicated the desire to raise funds to support acquisitions and need to secure financing for capital expenditures. Those clear signals of growth and expansion are great to see.

Budgeting and Software Updates rounded out the top 2016 Financial Planning Priorities. Improving projections and conducting long range planning were right up there with meeting the budget numbers. The key word among the executives that chose financial planning software as their top priority was Automation. ERP implementations and integrations, improving data analytics and mitigating security risks were other leading responses.

For new risks, challenges, and opportunities – most of our respondents said that Compliance and Regulations ranked as their #1 concern. That was followed by organizational performance and economic conditions.

For example, finance executives showed their concern for increased regulations. Tax code changes, SEC filings, Affordable Care Act rules, PCI compliance and Department of Labor mandates each have their own sets challenges. Each financial professional must not only keep up with the changes to ensure they’re implementing them timely but also has to manage the costs associated with them.

According to the survey results, 80% of finance executives use Excel spreadsheets as their business budgeting and financial planning tool. The #1 challenge associated with Excel for budgeting isn’t a surprise to any of us. It’s error prone. I’m sure you’re intimately familiar with broken links, circular formulas and faulty macros. So why are people still using cumbersome spreadsheets for budgeting?

As a leader in your organization, I’m sure you’ve set performance goals for yourself and your team that are in alignment with your company’s top priorities. Hopefully this data has provided you with valuable insights and information that can give you a competitive edge in the marketplace.

Take a few moments to consider what your own answers are to these survey questions are so that you are well prepared for what the new year brings.

Businesses of every description rely on the Budget Maestro™ family of software solutions by Centage Corporation to improve the efficiency and effectiveness of their business budgeting and planningfinancial forecastingfinancial consolidation and reporting processes. For more information, take a tour of Budget Maestrocontact Centage, or call 800-366-5111 now.

 

Categories: analysis, budget maestro, budgeting and planning, financial planning software Tagged ,

Make Faster, Better Decisions: How to Use Your Budgeting Tool for What-If Analysis

The budgeting process for most companies occurs over several months. You prepare the budget model by adapting last year’s Excel spreadsheets, plan and distribute them to each department head, and answer their questions about how to use it. Then, once they’re done, you proceed with the painful process of consolidating all those spreadsheets together to create your overall budget.

Keeping all the pieces straight and tracking which have been updated and which haven’t, isn’t so easy. Unfortunately, sometimes your best analyst spends their time managing the logistics of the budgeting process instead of being able to do the actual evaluation, analysis, and updates to the plan in order to make it helpful for running your business.

Is This You?

Half of the preliminary budgeting spreadsheets have been integrated into the Master budget workbook. And something changes.

A new criteria is introduced. Your company has the opportunity to acquire a competitor. Great news! …Or is it? While you try to keep your focus on the details of the deal, your mind curses at the fact that the budget for nearly every department will be affected. You start thinking of the logistics of essentially starting over with the spreadsheet distribution process. Re-consolidating everything into the Master. You hope the new VP of Sales can work his numbers up quickly since they’ll have such a large impact on the other divisions.

Consider this.

What if you didn’t need to operate on hope? What if version control of your budget model wasn’t a concern? What if your best analyst focused on analyzing the impact of the purchase rather than using their time to manage the logistics of your budgeting model?

How quickly could you use your current budgeting tool to determine the ROI of the proposed purchase if it finalized in two months verses in six months? How valuable would it be to know how your current year cash flow will be affected by the integration of their book of receivables in those two scenarios?

Acquisitions don’t happen every day for most of us but things do change. You need to be ready for it.

Something new.

Let’s add a new product. How will it affect your inventory? Will your current cash flow be sufficient to cover the ramp up time? How would the additional staff to launch it affect your bottom line?

When you use a modern budgeting tool, life can get easier. If you were using Budget Maestro today, you can pull in your YTD actuals, apply your budget model to the remaining months of the year and see where things are at. Now save that set up under a new name, “Scenario 1.” Enter in the specs of the new product that’s being considered. The cost, price, anticipated sales volume, etc.

Immediately you can review the impact on your income and expenses and your bottom line. Check your cash flow reports. Will money be freed up when the revenue starts flowing? Do you need to anticipate investing it? Or do you need some short-term funding to get your stock established before you can do that launch?

These situations happen for us every day. I’m sure you’ll have a gut feeling of what the results will be. Does that match what you came up with in completing this 20-minute exercise? What if it doesn’t?

Save where you’re at now as “Scenario 2.” Update the proposed price point and cost of the new product if you were to make a luxury version of it instead. Sales volume may be lower, but your new profit margin could more than make up for it. You can run those numbers in just a few minutes and compare them on screen to see which product helps your bottom line more.

How quickly would you get to the same answer using your current spreadsheet method? Modernizing your budget process can help your company with decision making year-round.

Categories: analysis, budget maestro, budgeting and forecasting software, scenario planning, what-if analysis, what-if scenario Tagged , , , , , , ,