In my previous article, I proposed that a collaborative – rather than an adversarial or avoidant – relationship between the finance team and your operational managers, powered by the right tools, could save you time and increase the value you provide to the business in a chaotic environment. In this article I’ll dive into this in more detail from the point of view of the budget process, and how you can use the right tools to empower non-financial managers.
Spreadsheets: can’t live with them, can’t live without them
At the start of this century, the Enron accounting fraud scandal sent shockwaves through the finance and wider business world. As a sidebar, it also made available a dataset of 15,000 spreadsheets with associated emails that researchers have subsequently analysed. The study showed that 24% of the spreadsheets with one or more formulas contained an error. More than three-quarters (76%) of the spreadsheets used only 15 functions – a fraction of what spreadsheets offer. Further, one in ten emails referred to or included a spreadsheet, and often discussed errors in and updates to the documents.
This does not paint a positive picture of the efficacy and user-friendliness of spreadsheets, does it? But it's not that I dislike spreadsheets. In fact, for small businesses, spreadsheets are the ideal financial planning and analysis tool. But as teams grow this usefulness wanes as inevitably the spreadsheets become more complex, in terms of formulas, number of tabs, and volume of data. Furthermore, there tends to be an excessive dependency on the person who set them up (and knows how they work!) Eventually, spreadsheets become victims of their own success, failing to scale or maintain a single version of the truth. And this is when the soul-destroying spreadsheet shuffle starts.
What do you need instead?
You need a budget process that is easy and accessible for operational managers. This makes it faster and delivers data you can trust. To achieve this, you need financial software that is not a spreadsheet and is designed with the non-financial manager in mind.
Five features of business-friendly software
1. Friendly to non-finance people
This is the number one thing to get right, especially if you want to drive ownership of the budget among your operational teams. To encourage user acceptance, your budgeting and reporting software needs to be as easy to use as Facebook. This means that instead of complex formulas and out-of-context multi-tab spreadsheets, the software offers simple point-and-click user interfaces and other familiar web-based features. A user-friendly tool encourages timely data entry as well as ongoing engagement with the budget process, which in turn empowers users and drives ownership of their portion of the budget.
2. Need to know
If too many people are in charge, no one is. Especially if the task or process is onerous and dreaded by all. This can be solved by a tool that uses custom security settings and access control to make one person in a department responsible for their budget, driving both ownership and accountability.
3. Department focus
Irrespective of existing ERP system coding, the budget and reporting software should manage departments and accounts independently. If departments are built to only include the relevant financial accounts, users won’t be overwhelmed or distracted by accounts and information that don’t apply to them. This further streamlines the budget capture process and drives ownership of the numbers that are relevant to the manager.
4. Real-time access and updates
Today, users need to be able to capture their budgets and review the results immediately to act on them. Likewise, leadership needs real-time access to the budget and its status without having to wait for fragmented reports and manual aggregation of the most up-to-date versions. A real-time budgeting and reporting solution reduces budget turnaround from months to weeks, delivering the right information, in the right format, into the right hands to empower both leaders and managers to do their jobs.
5. Automated data capture
Fewer hands on keyboards mean fewer human errors. Automated data capture reduces input and processing errors, and also enables real-time input of budgets. Reducing the administration load on both the finance team and business units frees up humans to focus on what matters: analysing data and making strategic decisions, and, for non-financial managers, implementing plans to drive sales and efficiencies.
Taken together, the above features enable scalability across the organisation and the creation of a single version of the truth. This ultimately leads to a faster and more efficient budget-capturing process. By giving users a tool that allows them to do a painful, grudge job, in a fraction of the time, you allow them to focus on the more engaging and meaningful parts of their work, i.e., running the business. In turn, this means people like the tool, and are more likely to continue using it rather than reverting to the old ways of doing things, further driving the success and ROI of the software.
Historically the budget process consisted of filling in the blanks on a spreadsheet, sending and forgetting and then getting delivered a final budget that has no resemblance to the original input. This does nothing to nurture collaboration with, and ownership by, your non-financial managers. Now, empowered operational managers leveraging a fast, non-admin-heavy budget process can deliver a budget that is based on what they, at the coal face, are experiencing and seeing coming down the line. Seamless aggregation enables the finance team to review the numbers, understand the build and quickly identify problems and trends, allowing them to add huge value to the process without getting buried in the detail.
Today’s question is: can your business afford not to adapt?
In the next article in this series, I will dig deeper into the budget process and look at how you can extend these capabilities to sales budgeting and planning.
As published - CFO South Africa - 15 July 2023