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Automated Controls in Budgeting & Analysis Process

Now you can harness the power of IT automation year-round in your Budgeting & Forecasting Process

By Alan Hart, MBA

Even after many years of working in designing and implementing accounting and financial processes and internal control over financial reporting, I am still amazed at how much more reliable automated (IT) controls are over manual ones.

If you stop and think about it for a moment it becomes obvious why.  We, humans, are never going to be as disciplined and reliable as the computers we invented and put to good use.  We tend to be distracted from time to time; we rely on checklists and reminders, and most importantly we make errors.  I guess this is part of being human.

Automated controls are easier to audit and usually are much better at mitigating identified risks.  Once these controls are properly designed and are effective and if change management exists and is deemed to be effective, processes that rely on these controls hardly ever suffer from deficiencies that may cause financial reporting data to be erroneous.

Since the budgeting & forecasting process has such a profound effect on how businesses are run and how processes are aligned in order to respond to deviation from the charted course of the business, wouldn’t it be nice to have automated (IT) controls built right into this process?

If your organization uses spreadsheets or other software solutions in your budget preparation process, you know that many of the risks associated with user provided formulas, links and other programming data cannot be realistically mitigated, as there are no real internal controls in use (in most situations), short of extensive testing of these spreadsheets (or other purpose built budgeting software applications that rely on user supplied formulas and model programming), or perhaps extensive reviews by various persons in the organization, usually unfamiliar with the original author’s design.

In reality, (we all know this), these tools are never properly tested and audited.  The results are many errors and omissions, some of which may be critical.

Imagine having a system that:

  1. Does not rely on users’ manual controls throughout the budget preparation and periodic analysis process.
  2. Can automatically be linked to the organization’s General Ledger to seamlessly pull the actual accounting data used in the actual vs. budget analysis.
  3. Allows organizations to realign their business (almost in real time) in response to this analysis.
  4. Allows the budgeting and analysis process to be performed throughout the fiscal year when it really matters and when it can impact the decision making process.

As someone who always recommends using proven IT controls in the accounting and financial processes, I was delighted to discover a software application designed specifically to do just that:  Provide strong, automated controls over the budgeting and forecasting process.  The software is Budget Maestro, developed by Centage Corporation (www.centage.com/).  The four points mentioned above become a reality with this software solution.

If you, like me, are aware of the power of automated controls over your accounting and financial processes, you owe it to yourself to investigate this technology and be able to reduce, or even eliminate many of the unknowns and unmitigated risks involved in this important process.

My experience shows that when the budgeting process is performed using the right tools, and with significantly less human effort (and errors), the gain is always the ability to realize the benefit of such process, which is close monitoring of any deviations from the charted course, and being able to make timely decisions that will intelligently and positively affect the organization.

Alan can be reached at (310) 384-1453 or alan.hart@pacificshinegroup.com.

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