Why Spreadsheets are no longer the preferred tool for Budgeting and Forecasting
Is your finance team working long hours during the budget period?
Are you currently burning through countless spreadsheets and databases?
Are you working with an expensive and outdated budget system or still contending with manual and paper-based processes?
When it comes to budgeting and forecasting, most organisations rely on traditional desktop tools and manual processes. However, a recent IBM Performance Management whitepaper suggested that “88% of spreadsheets, including those used to create budgets, contain errors.”
So, what are the limitations of using Excel for forecasting, budgeting, and planning? Here is a quick overview
Collaboration can be difficult.
Collaboration is critical during the budgeting process, especially when multiple departments exist. While Excel allows users to make edits, it is primarily designed as a single-use tool. With various users contributing to documents and providing input, it’s worth investigating collaborative software that can be shared and updated amongst teams. This will remove the burden of having to manage numerous spreadsheets across departments.
Consolidating data can be complex.
A typical budget process involves receiving input from the entire organisation. Excel's limitations are evident when it comes to consolidating data and creating a holistic view. Before you know it, you have multiple versions of the same spreadsheet, and various business areas are exposed to risk.
Accessing control can be challenging. Maintaining confidentiality and accessing control during the budget process is essential. Success is dependent on the ability to make changes quickly and easily. Unfortunately, Excel is not very accommodating when selecting user group access. Administrators have minimal options for assigning user access, and it can be challenging to prevent users from changing the template structure, editing, or adding additional formulas that aren’t required.
“What-if” scenarios can’t be created. There is a limitation in what excel can model or analyse. Excel spreadsheets generally work with X and Y variables, making it difficult to create multiple scenarios or implement scenario planning. It can also be challenging to adjust plans and budgets based on real-time events.
You are unable to link Finance to Strategy for a complete picture. Working off multiple spreadsheets removes the ability to link finance to any strategic outcomes, making it challenging to adjust plans and budgets based on real-time events.
Formula errors are inevitable. One of the critical limitations of Excel is the risk of human error, and it has been established that 90% of Excel spreadsheets are prone to mistakes. Incorrect information or data errors can lead to much more significant issues, as it did for Barclays in 2008.
Using a spreadsheet to complete a budget process can also be time-consuming and resource-intensive due to time spent checking and validating information. Purpose-built macro templates or extensive formula budget templates become a nightmare when budget-holders and department heads need to navigate documents.
Using a spreadsheet to complete a budget process can also be time-consuming and resource-intensive due to time spent checking and validating information.
Audit Trails are non-existent. An inadequate audit trail increases the risk of fraud in an organisation. Using spreadsheets removes knowing who has changed what or what has changed from one version to another. This can lead to inaccurate or false information. It can also be challenging to stop users from changing the template structure, editing, or adding additional formulas not required.
Workflows are non-existent The non-existence of workflows in Excel means finance departments have no way to track approvals or submission requests. Teams cannot see a bird’s eye view of submissions and approvals of project requests, meaning they must rely on manual updates to keep track of budget changes.
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