For many companies, spreadsheets are the tried-and-true tool for creating and managing budgets. And manual spreadsheets do have certain advantages, including easy access, formulaic transparency, ease of use, and low cost.

But they also have their drawbacks. For example, creating a complex spreadsheet can be time-consuming, and the results are prone to errors because of the manual entry required.

Additionally, spreadsheets created in various departments across an organization may not “communicate” well with one another. Data synchronization, data consolidation, consistent data definitions, and the need to alter formulas can pose big frustrations and challenges.

For some users, simply getting the rows and columns to line up may not leave much time for analyzing resource allocations, let alone optimizing them. And few would argue that spreadsheets are the optimal tool for forecasting the future, unless you favor straight-line extrapolation as a forecasting tool.
 
That’s where an integrated budgeting software application can help. Even the most basic financial planning software system can simplify the budgeting process, enhance a company’s ability to forecast and enable an organization to perform active financial planning. Armed with the proper software, companies can get a better handle on what’s happening today and improve future-focused decisions, rather than spending an inordinate amount of time shuffling historical data.

Exploring the financial-time continuum

Financial planning software can align the budgeting and forecasting functions throughout the year, removing the disconnect that typically occurs once the budget is established. It can tie in analytical data, business intelligence, and even tax-law changes -- and let companies respond more quickly to changing market conditions. Rather than basing this year’s budget on last year’s, it allows for planning dictated by anticipated needs.

By aligning these processes, these specialized tools not only provide detail for analysis, but also allow for “what if” scenarios that inevitably arise, and which are impossible to calculate with spreadsheets. Forecasting then becomes an easier ongoing process, which can produce big efficiency gains.

With ongoing forecasts, organizations aren’t locked into budget data that begins Jan. 1 and ends Dec. 31, or whatever your fiscal-year start and end dates happen to be. Instead, each month’s information is added to provide a 12-month (or longer) continuous projection into the future. This allows companies to get out of the annual budgeting mindset and into a focus on business functions as ongoing operations, thus managing them accordingly. By getting real-time access to real-time information, companies can allocate resources appropriately and improve forecasts. 
Of course, what is tracked is also of vital importance. It’s imperative that companies build active financial planning around key business drivers. Data should never be tracked for data’s sake. Instead, narrow what’s tracked to items that have the highest volatility, or the ones having the biggest impact on the business, and plan accordingly. 
 
Getting to the really useful data

Budgets tend to be built and organized piece by piece, as in the case of numerous and not necessarily compatible spreadsheets. Improvements can be achieved through specialized tools that organize and manage information into one location. Often, software allows for information to be input into a common, centralized database, eliminating the need to maintain a variety of spreadsheets.

Budgets also become more realistic with involvement from front-line employees, and new technology can make the task of incorporating front-line data infinitely easier. Because sophisticated budgeting software provides robust financial reporting, each department, unit, or team will be able to keep real-time tabs on what they’re spending now, as well as gain insights into where the company’s finances are going if they continue their course. The process encourages ownership and collaboration among employees at all levels of the organization.
 
Even with sophisticated new software, the tried-and-true spreadsheet still has its place: for performing ad hoc analyses of data, for example. And while not every company is prepared to implement the latest budgeting software tools, those that do are often better equipped to view their company’s financial status at a glance, find ways to trim the bottom line, and increase profits.