"Is it in the budget?" If we had a dollar for every time we've said that, we'd probably be rich. That's because budgets are the foundational backbone of every company. Many organizations integrate updated technology to do everything from streamlining processes to facilitating marketing and sales initiatives. However, many push back against upgrading their budgeting and forecasting systems. Using Excel for budgeting may be a workable solution. But is it the best one? In many cases, there are other more robust, intuitive choices.
When Is Using Spreadsheets Smart and Helpful?
Excel isn't without merit. There are a couple of reasons it's still the go-to solution for many organizations.
- It's the familiar option. Part of the Microsoft family, Excel has been part of the business landscape for decades. That means there's no ramp-up time in learning how to use it. Plus, its popularity makes it a low-risk to use.
- It handles simple, straightforward tasks well. Excel is still a valuable business tool. The software makes it easy to organize and analyze large amounts of data. It also allows users to leverage data in visually appealing charts and graphs (making it easier for others to absorb and understand). Excel is also a master number cruncher, calculating figures and saving the user time.
Why Spreadsheets Are Not the Best Tool for Modern Budgeting and Planning
As more software platforms built specifically for budgeting enter the market, Excel continues to decline as the best option. There are obstacles within the system that don't perform well when compared to other options.
- Limited functionality. Excel provides some helpful aspects, but it doesn't give users enough of them. The software typically doesn't integrate with a company's enterprise resource planning (ERP) software, and it's challenging to store and secure the data. In addition, large Excel files often crash.
- Files/numbers are static. There's no way to update numbers and files automatically within Excel. This issue creates lots of manual work for users.
- No automation. Other systems provide handy tools like drag-and-drop and ways to automate repetitive tasks. Excel has none of these options.
- Formulas break easily. Excel relies heavily on human knowledge. If a formula is input incorrectly, it can break or cause data errors.
- No collaboration. Excel doesn't allow multiple people to collaborate within a spreadsheet. This type of collaboration has become necessary because of the number of employees working from home. A lack of collaboration options can create disjointed teams and cause work errors.
- Manual data entry. Data can't be downloaded or sent from a file to Excel. The human element can mean more errors, which generates inaccurate data.
- Time-consuming. Excel is an older tool that hasn't been upgraded much in the past few years. It lacks time-saving features like automation options that can increase user efficiency.
How Will Using Spreadsheets Affect Your Finance Team's Ability to Budget, Plan and Predict Financial Performance?
Using spreadsheets for budgeting and forecasting can have negative consequences for your company. They can make it difficult to:
- Adjust plans. Excel is one-dimensional and doesn't have a way to link what was planned (the forecast) to what ended up happening (the outcome). This shortcoming makes it almost impossible for an organization to agilely change and adapt to unforeseen events. Excel can make companies sluggish.
- Allow for alternate scenarios. A good Plan B (and C, and D) is integral to any organization's success. Excel, however, doesn't have the functionality to run alternate scenarios and weigh their impact on the business outcome.
- Guarantee error-free data. Even a small data-entry error can dramatically throw calculations off. It's detrimental for companies to work with incorrect information, especially in an error as critical as budgeting. This issue can cause big problems if the error goes unnoticed.
Why Are Modern FP&A Software and Platforms the Better Solution to Budgeting and Forecasting Tasks?
Financial Planning & Analysis (FP&A) software gives companies several advantages in budgeting that Excel just can't match.
- Improves reliability. Using a budgeting software platform makes it easier to enter data, keep track of real-time changes from multiple users, and avoid mistakes. This approach offers the peace of mind the data accurately represents the company's forecast.
- Provides greater scalability. The bigger an Excel file gets (and the more people who contribute to it) the more likely you are to experience problems. Software tools that are built for forecasting and budgeting provide easy-to-scale features that handle your company's growth without hiccups.
- Increases automation capability. Automating manual, repetitive tasks saves the user time and keeps them focused on important projects and tasks. FP&A platforms typically provide several ways to add automation to your processes.
- Enhances collaboration. With more employees working out of the office, a remote-friendly solution keeps everyone in the loop and able to make contributions. Instead of sending Excel versions back and forth via email, FP&A software connects team members within the system.
- Maximizes data security. Unlike Excel, most FP&A software includes a "role" feature. Managers can assign user roles that give them access to only the information they should be privy to. By protecting data this way, it's easier for managers to pinpoint errors or tampering and deal with them earlier in the process (before they do damage).
Modernize Your Budgeting, Forecasting, and Planning with FP&A Software
Excel may seem like the old stand-by tool you can trust for your budgeting needs, and to a point it is. However, there are new ways of handling organizational budgeting that increase efficiency, accuracy, and overall success. Move your organization forward by modernizing your budgeting, forecasting, and planning tools. You and your team will reap the rewards of more predictive, accurate data that helps you reach more informed decisions.