How a modular approach in preparing and putting together your annual budget process works to your advantage
By Alan Hart, MBA
Those who are involved in the administration of a corporate budget know from experience that many pieces contribute to a complete and consolidated budget. You probably have to delegate many of the individual pieces to managers who are responsible for their departments’ performance and who prepare and submit a budget for the business units they are responsible for. They usually submit their business units’ budget for sales, cost of sales, operating expenses and payroll.
People in the finance group typically submit budgets for capital expenditures, borrowings, investments and other activities that don’t fall under specific business units’ managers responsibilities, although additional budget lines (e.g., capital assets) can also be provided by unit managers, as designated by the budget administrators.
Over the years I discovered how important it is to have all these pieces put together in a clear and logical manner. It makes it a lot easier to consolidate the budget and produce the desired reports, and most importantly, perform periodic analysis and reforecast.
From my experience with various software solutions, I discovered that one modular system, titled Budget Maestro from Centage Corporation (www.centage.com/) makes things a lot easier. The software is divided into logical modules, such as revenue / cost of sales, operation expenses, personnel expenses, assets, etc. Each budget module can accept input from all designated business units (defined as entities in the software). Managers responsible for their business units only submit their relevant data. Finance managers contribute to other areas as needed, and all data is automatically consolidated in the software.
Since Budget Maestro was designed from the start to allow accurate and complete forecasting of all GL accounts, you automatically get a full set of forecasted financial statements, updated in real time, as additional data from business entities make it into the model.
As soon as you have an approved budget, the financial statements that are automatically produced by the system allow you to see and understand your forecasted results. I think I mentioned in previous posts that there is absolutely no user programing in making these standard financial statements and other reports available to use.
Making revisions to the budget becomes much easier because of the modular design of this software solution. You get a lot more time to analyze your actual financial results against the budget, instead of slaving over the preparation of the budget and struggling with errors, omissions and lengthy and tedious updating of data during the budget year. To me it makes perfect sense to look for automation and simplification of this process, as long as you get the expected results.