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Those Debits and Credits

May 16, 2014
Formula-free FP&A

Eliminate human error, increase confidence, and shave hours (or more) off your FP&A process.

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A budgeting system that actually does the thinking for you

I just finished working with a client on the year-end close, right in time for their external auditor to come in and do their work.  Either my memory was failing me or this year’s close was different than past years, I couldn’t help but notice the large number of journal entries that were required in order to bring the various accounts to their proper balances at year-end.  There were adjusting entries, reversing entries, allocation entries and other miscellaneous entries.As I was reviewing the various entries for accuracy and completeness I reminded myself that fine art of accounting is nothing more than posting the correct amounts in the correct accounting periods and of course, using the right GL accounts.  As usual in situations like this, you have to carefully prepare the entries, making sure you use your debits and credits correctly, applying them to the right GL accounts and so on.  An edit list, additional reviews, approvals and finally the actual posting usually follow this.Those who are closely involved in this process realize how several manual controls must be set up in order to make them as effective (in reality, they can never be as effective) as automated controls (e.g., posting subsidiary ledgers to the GL, usually under full automated controls).This reminded me how in Budget Maestro  the results of the projected financial statements and all other reports are accurately determined by an array of system generated journal entries. Users of Budget Maestro don’t ever need to make any entries (with the exception of optional, user made adjusting manual entries).  They don’t need to remember account numbers, they don’t need to know whether to use a debit or a credit for a particular transaction; what they experience is complete automation as the system performs all these entries in the correct budget periods, in the right amounts and using the appropriate GL accounts, period after period.I still remember the day I first fully understood the profound impact that this software architecture and design had on the final results and why it was possible to obtain these results, especially without any user programming or formula work.This approach to designing and implementing a budgeting, forecasting and business intelligence solution completely eliminates many of the manual internal controls that must be in place in other similar applications.In Budget Maestro there are no formulas to deal with, no user defined functions and links; every piece of data that participates in the budget model, either entered by users or automatically calculated by the many business rules and drivers available in the system, causes the right set of journal entries to be performed in the background.It is these automated journal entries that make all the forecasted financial statements and all other user defined reports accurate and complete, and without worrying about transactions orientation (credits vs. debits).  This is in addition to not worrying about the budget period to post to and the account numbers.With that in mind, I think I’ll take the activities involved in running Budget Maestro over traditional journal entries any time.

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