The Budgeting and Forecasting Experts Blog

How Much of Your Credit Line Can You Tap?

Forecast your ability to borrow on your line of credit with accuracy and confidence

In a recent blog entry I tried to convey how important it is to be able to accurately and completely forecast a company’s balance sheet and the many benefits associated with it.  For many Budget Maestro customers  who also use Analytics Maestro, this is an everyday reality.

We looked at one important benefit, the forecasting of meeting or breaching loan covenants and how properly planning and continuously analyzing (with Analytics Maestro) can show us in advance how the company is going to perform and what changes need to be made (hopefully well in advance) in order to eliminate or at least reduce negative results that can have severe consequences to the company.

Here is another great benefit of balance sheet forecasting:

Most small and medium size companies have a line of credit (LOC) established with their local bank or a financial institution.  In addition to LOC covenants that are in the LOC agreement, all banks have some restrictions imposed on the use of the credit line.

For example:  The bank establishes a LOC limit (e.g., 13.5 MM).  Then, if the LOC is secured by the company’s accounts receivable and inventory, the lender will almost always have restrictions on these two assets, which means that less than the full asset value can be used to secure the outstanding LOC balance.  In our example let’s assume that only 80% of all eligible accounts receivable can be used to calculate the maximum amount that can be borrowed and remain outstanding on the LOC.  We will further assume that only 50% of the inventory valuation (at each period end) can be used in the calculation.

In addition, the lender may stipulate in the LOC agreement that the maximum inventory value that can secure the LOC is $7.5 MM, regardless of the actual valuation.

Normally, without proper forecasting and analysis tools company managements are faced with the challenge of manually forecasting how much of the credit line amounts may be available to them during the plan or budget period (e.g., 12 month, 24 months, etc.).  In reality, many smaller companies are unable to do that or prefer to ignore it due to lack of proper technology tools.

This is in addition to the difficult task of forecasting cash flow and the cash account balance at each budget period end, unless the company’s balance sheet is accurately and completely forecasted.  In previous posts we saw that balance sheet forecasting is not only possible with Budget Maestro, it is a reality and is routinely used by the companies who use this application.

How would our LOC example work using Budget Maestro with Analytic Maestro?
First, we must complete our company financial plan and budget.  This is done in Budget Maestro and does not require programming or entering any formulas, links or macros.  We rely on using built in business rules and logic and can depend on drivers we enable, as well as other entered forecasted data and business specific assumptions.

The budget entered will automatically generate forecasted financial statements that cover every period included in the budget.  The obtained forecasted balance sheet will show us the forecasted cash, A/R and inventory balances (and all other balance sheet account balances).

Using Analytics Maestro, any data available in Budget Maestro can be displayed in any format we desire.  Since Analytics Maestro uses MS-Excel’s formatting and display capabilities we can customize reporting templates that will automatically pull data from Budget Maestro and display them exactly the way we want them to look.

A custom display showing the available LOC balance is set up using the Budget Maestro forecasted AR and Inventory account balances, in conjunction with the bank’s restrictions on these two accounts.

Using our above example (13.5MM LOC limit, 80% of AR eligible, 50% of Inventory eligible to a maximum of $7.5 MM) and with the following five ending balances:

                           Jan 2015    Feb 2015    Mar 2015    Apr 2015    May 2015
AR Bal(MM)    6.4              7.3                7.1                7.5              8.1
Inv Bal (MM)  13.6           14.4              15.1              15.7             16.2

we can see that in these forecasted periods the available LOC balances (how much we will be able to borrow on the LOC) are:

                      Jan 2015    Feb 2015    Mar 2015    Apr 2015    May 2015
LOC Avail.     11.9              13.0              13.2             13.5             13.5

A graphic representation of the forecasted available cash from our line of credit can be quickly set up and will display the above data as follows:

In this example we can clearly see from the display output that the company is limited in the first two months by the inventory credit limit component of the LOC and in the last two months of this example by the LOC total limit.  This data can be made visible for every period of the budget, for example 12 months, 24 months or longer.  It can easily be compared to current actual data as well as historical data.

As budget data and assumptions are changed, all financial statements are updated in real time.  The data used in our example will also be updated, showing the new results.  If you have more than one version of the budget set up in Budget Maestro, as well as actual and historical data, you can see all that as well.  With multiple LOC’s (in multiple entities) you can see each LOC data individually, globally or in any combination of entities.
With a forecasted balance sheet, using this example, not only can you project your cash balance and other balance sheet key account balances at each budget period-end, you can also clearly see the available cash from your line of credit, using the exact terms and restrictions imposed by the lender.

You can plan ahead to make this available LOC cash work better for the business and can also be better prepared to request changes (e.g., increases) to the LOC well in advance before you run into a cash crunch.  On the other hand, you can plan on reducing the LOC balance over time by better planning your inventory or production demand, better managing your vendors or supply chain, etc.

As is always the case with balance sheet forecasting, Budget Maestro with Analytics Maestro, takes the guess out of your forecasting through a clear and up to date presentation of key balance sheet numbers, financial ratios and other automatically calculated key performance indicators as well as provides a full set of forecasted financial statements just like your actual accounting system, except projected into future periods.

Tags: analysis, budget maestro, scenario planning, what-if analysis, what-if scenario

Are Data Scientists and Financial Analysts Becoming Obsolete?

Why data scientists are still needed in large organizations and how technology can offer great benefits to smaller companies.

I read an article by Nicole Laskowski, Senior News Writer, titled:  “Will the rise of self-service BI tools lead to the demise of the data scientists?”

The author questions whether readily available business intelligence tools used by non-technical company employees, without help from financial analysts and data scientists, may make the reliance on such corporate positions a thing of the past.

It’s true that with the help of some very advanced analytical tools, there is less need to perform intense data mining and other activities that extract valuable data out of corporate databases or data warehouses.  These tools are now available at lower than ever licensing and implementation costs and can be found even in small and medium sized organizations.

Of the many uses of such data analytics tools, business performance management comes to mind, along with analysis of financial statements, actual to budget variance analysis and of course various marketing oriented analyses that can tap vast amounts of information stored in multiple data warehouses around the globe.

As the above referenced article points out, data scientists or financial analysts are still going to be in demand, especially in large organizations where data analysis needs are complex and where the majority of data queries and reports are custom built for specific users or functions.  The tools and expertise required to extract and present the data far exceed the knowledge and experience of the average employee or manager and the conclusion of course is that these positions are here to stay and perhaps even expand.

What about small and medium sized businesses?  As it turns out, these are companies that never had a great number of financial and business analysts on staff and many still have few or even none.  With the availability of analytics software tools, some of which can interface with the company’s accounting or ERP software, many employees and managers in such companies can gain access to specific data and in a format meaningful to them.

A good example is the business intelligence gained from analysis of actual financial performance as evidenced by accounting data extracted from the accounting or ERP software for recently closed accounting periods or a series of historical periods (months, quarters, years).  This data is compared in the analytics software with similar data extracted from the planning and budgeting software, representing future accounting periods.

The result is a clear picture of how the company performed against its approved budget.  The analytics software can be set up to give its users key data in pre-defined formats, either graphical, tabular or both.  Users can slice and dice the data in any imaginable way in order to extract views of specific reporting entities, sales territories, product lines, customer classes, etc., for any desired time frame.

The information gained from this analysis, which can be performed as soon as an actual accounting period is closed, is intended to convey key data to management, who are tasked with making business decisions based on this data.  Since the analysis should never be delayed in a well-executed process, management can continually steer the organization in the right direction, while minimizing business errors and wrong decisions.

Since this process and its underlying software tools are now available to small and medium sized companies, the software and its users jointly become the “data scientists”.  As for large organizations and their much more complex needs, it looks like data scientists, business analysts and financial analysts will continue to enjoy job security.

Tags: analysis, budget maestro, forecasting, scenario planning, what-if scenario

Will you Breach Your Loan Covenants?

How technology can help in forecasting your debt covenants compliance

Having debt while running a business is common; in fact, most companies are never able to grow on their own unless they acquire some kind of debt, such as a bank line of credit, a long-term business loan, or factoring of accounts receivable.  In larger organizations, issuing corporate bonds is another way to secure financing in addition to equity financing.  Small and medium size organizations are almost always dependent on a line of credit and/or long-term loans, generally secured by their accounts receivable and inventory as well as other assets.

These business loans and lines of credit come with covenants, which are conditions that must be met on a periodic basis in order to continue to use these forms of financing.  Breaching these loan covenants can have serious consequences to the business.  If not cured, a covenant breach can cause a loan to be called based on the typical acceleration clause built into the loan agreement.

Loan covenants define what the borrowing company must do (e.g., maintain an insurance policy with minimum required limits) or not do (e.g., borrow additional funds from another lender) as well as maintain minimum financial results, such as certain levels of cash flow, or meet key financial ratios.

When planning and budgeting for the future (e.g., next 12 months, 24 months, etc.), companies forecast and budget their revenues and costs associated with these revenues and other expenses required to run the business.  Unfortunately, most organizations, especially smaller companies, do not or are unable to forecast their balance sheets for several reasons mentioned in some of the earlier articles in this series (provide links here to:  Forecasting a Balance Sheet in a Spreadsheet World  and Why Financial Ratios Should be part of Your Budget and Forecasts.

With the inability to clearly forecast the balance sheet, much of the insight into the future financial health of the organization is lost.  Other than the obvious lack of cash flow (and cash balance) forecast, other very important attributes of the company future financial health are not available.  These are typically key financial ratios (e.g., debt to equity ratio, current ratio) and other indicators critical in assisting management in making important decisions.

It just happens that banks and other financial institutions use certain key financial ratios when implementing and enforcing these loan covenants, which are stipulated in the loan agreement.  These banks expect the covenants (measured through financial ratios) to be met as agreed by their borrowers.  Typical financial ratios that are used in defining loan covenants might be debt to equity ratio, Debt Service Coverage Ratio and possibly others.

Reporting these ratios after an accounting period has been closed is not difficult.  When you do that, you immediately know whether or not your loan covenants have been met.  Wouldn’t it be good (actually crucial) to know that in advance, perhaps 12 or 24 months in advance (or longer)?

The good news is that if you are able to accurately and completely forecast your balance sheet, you’ll be able to know whether or not your loan covenants will be met, in every period included in your budget.

Since it is nearly impossible to predict the future, it is important to note that all financial forecasts are highly dependent on assumptions (e.g., revenue growth during the budget period, forecasted costs during the same period, forecasted operating expenses, etc.).  However, if your planning and budgeting follows a specific logic and a set of business rules, using fair assumptions, your forecast will be accurate.  Moreover, having the right software tools is critical in consistently getting the desired output.

I have already referenced Budget Maestro with Analytics Maestro many times.  One of its greatest strengths is its ability to automatically provide a complete and accurate forecasted balance sheet (and its derived statement of cash flows), using the planning and budgeting data and without any user programming or formula work.

What this implies, especially when it relates to loan covenants, is that using the Analytics Maestro module (essential component of this software solution), one can have a visual display (as well as in tabular format) of all key ratios used to determine whether or not loan covenants have been met (for actual current and historical data) or are likely or not to be met in future periods covered by the plan or budget.

In Analytics Maestro, a set of charts (as well as tables if needed) can be set up to automatically display forecasted financial ratios and actual ratios achieved, using automatically applied formatting.  For example, using conditional formatting, you can easily display actual and future loan covenant breaches in red.  Formatting and using your own custom templates is only limited to the formatting options found in MS-Excel, the display application employed by Analytics Maestro, which is used only for reporting purposes, with no reliance on formulas, functions or macros.

It becomes obvious that by using Analytics Maestro, you can have any imaginable display or presentation of your actual and forecasted data, as provided by Budget Maestro.  This can include presentation quality financial statements that can be filtered by a reporting entity or any other desired dimension.  Financial ratios used in conjunction with loan covenants are just an example of what can be done with the software.

To continue our example, glancing at the Loan Covenants section you set up in Analytics Maestro will show all historic values, how close you were to breaching these covenants in the past or how high you are above the threshold and most importantly, where you are headed with meeting these covenants in the future.

Knowing where your financial statements are headed is essential to the decision making process.  It’s like knowing where the curves in the road are so you can properly anticipate when to steer your vehicle.  Conversely, not having this data ahead of time is like driving blind and risking your vehicle going off the road at the slightest turn.

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

Better Financial Analytics for Everyone

Who can really benefit from this?

Lately I’ve been reading a lot of information on various websites and blogs and listening to client comments and questions about analytics, or more precisely, how to better use the vast amounts of data available in most business environments to create meaningful reports and drive the decision making process that will transform observations derived from this data into action items, ultimately responding to what that data was trying to tell in the first place.

The most common question I hear is: Can a good set of analytic tools be implemented in smaller organizations, especially those with limited resources and more basic IT infrastructures?

10 to 20 years ago the answer to this question would have been simply no.  Information technology was just too expensive and complex to deliver practical analytics tools to smaller organizations.

This has all changed, and very rapidly.  All businesses today, even the smallest have computerized accounting software with all of the basic functions, including manufacturing operations, supply chain management, customer relations management (CRM), financial reporting, etc. being completely automated.

There are vast amounts of data stored in the software’s various databases.  This data is selectively used to preform all required accounting and reporting functions.  Shouldn’t this data also be available to analyze from other perspectives, outside of the required reporting functions?

Incorporating a good and practical planning software solution that closely ties into the actual accounting software (through a general ledger interface), coupled with a simple to use (i.e., will be really used by people after implementation) can provide a good answer to the question posed above.

Those who read this blog have seen my posts on small and medium size company software solutions reference Budget Maestro and Analytics Maestro.  These are comprehensive planning, budgeting and business intelligence solutions that are closely integrated with the company’s general ledger to retrieve actual financial data and using the data from the planning/budgeting modules included with Budget Maestro, perform a real time analysis and display of the exact data in the exact visual and output format the user requires.

I’ve written before that visual representation of data can have a profoundly more dramatic effect on its users than plain data.  When you see your data in a visual format that you have previously established, you can understand it better, usually immediately.  When the same format is used over and over again to display the changing data over time, this function becomes even more powerful.

The organizations that use Budget Maestro with Analytics Maestro have been able to combine the many capabilities of the planning functions (among which are use of drivers and key performance indicators) with the visual display and reporting capabilities of Analytics Maestro.

Finally, even a smaller company can have financial planning and analysis tools that only Fortune 500 companies were able to afford not too long ago.

Now you can ask specific questions and get the answers almost immediately.  These might be:

  •  What was my Gross Sales revenue per square foot of retail space in the last 6 months, by month, by region, or by store?
  • What was our IT spending per employee per quarter for the last 12 quarters? If you want to see this data by department, this can be easily accommodated based on the organization structure set up in Budget Maestro and your actual accounting or ERP software.
  • Show me a display of key financial ratios such as Current Ratio, Inventory Turns, etc., as a graph with monthly data points, and compared with the same ratios as derived from the planning software (Budget Maestro).
  • How is my Balance Sheet going to look in the next 18 monthly periods, or 6 quarters?  Analytics Maestro can immediately provide that report, using your pre-defined format, using the planning software data.
  • How do my actual financial statements for the period just closed compare with my budget and forecast?  With Analytics Maestro you can see these forecasted statements (Income Statement, Balance Sheet and even a Statement of Cash Flows almost instantly) compared with the actual statements.

These are just a few of an unlimited number of questions that can be asked and routinely answered by Budget Maestro with Analytics Maestro.  This can provide valuable insight on the existing and future health of the organization.  The visual display will help users understand the data, convey it to management and enable informed decisions and corrective measures to be immediately implemented.

This visual display, its charts, formatting, colors, etc. can be easily modified by users. Custom templates can be created and used to populate the dynamic data flowing from Budget Maestro for all specified budget data, as well as actual and historic accounting data.

Small and medium sized companies finally have the tools that only very large organizations only a few years ago were able to utilize.  With the typically shorter decision making cycles in smaller companies, using these planning and analytics tools can provide a clear edge over the competition and the ability to steer the organization in the right direction with more confidence.

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

Accounting Technology Tools – Fact or Hype?

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

In another interesting article on the’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 web site, titled “The Accidental CFO” and authored by Samuel Dergel, Director – Executive Search at Stanton Chase International, accessed with a free membership to, 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 (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