Top 6 Reasons Why Budget Planning in Excel is Becoming Outdated
A study from the accounting and tax advisory company WeiserMazars shows that 87% of CFOs rely on Excel for their financial budget planning. Another survey conducted by Centage Corporation shows that almost 90% of CFOs still use Excel for their business budget, even though nearly half felt that they needed better financial forecasting software. So why do most companies still rely on Excel and where are the tool’s limits?
In this blog post, read what makes budget planning in Excel difficult and the benefits of using a budgeting software like LucaNet.
What is a budget?
A budget is a plan of how you intend to spend your money. This plan allows you to determine in advance whether you will have enough resources for future investments. If, however you don't have enough money, then a budget needs to be created to help you plan and prioritize your spending and focus your money on the things that are most important to you.
Before we discuss what makes budget planning in Excel difficult, it is important to understand why companies still rely on Microsoft Excel for budget planning. Here are some reasons:
Excel is readily available
Every organization regardless of its size, has a Microsoft Excel available to them. It is easy to include various members of your team and all stakeholders in the budgeting process without additional onboarding or licenses required.
Excel is familiar
Due to Excel being easy to access, most users are familiar with Excel’s interface. They may not be experts, but they know how to navigate the program quickly. Therefore, employees don’t need to be trained on how to use Excel.
What are the challenges in using Excel for budget planning purposes?
There are numerous reasons why companies shouldn’t use Excel. Here are the main challenges:
- Highly dependent on the creator: Excel spreadsheets are typically dependent on one person who constructed the budget and who updates them every year. Most challenges with Excel come from the fact that there is lack of knowledge transfer when the person that created the spreadsheet leaves the company.
- Time consuming: There is a lot of work spent on modifying and correcting Excel spreadsheets.
- Large and linked files are difficult to manage, prone to crash, and full of potential errors: A common pain point in using Excel are the errors that arrive from data and link files in different SharePoint/sources.
- One user at a time: It is difficult for multiple users entering and analyzing data at the same time. The file becomes more prone to errors when multiple users are editing and accessing the data at the same time.
- Data security: It is difficult to control how financial data is entered, formatted, stored, and secured. There are also some difficulties concerning back-ups.
- Source system integration: Excel doesn’t connect directly to ERP system (E.g. SAGE, SAP, Xero etc.) source data seamlessly. In most cases, the data needs to be converted into a specific format before it can be imported, thereby causing human errors.
Transforming your budget process by moving away from Excel
Our experience shows that transforming your budget process from Excel is key in achieving more efficient and effective budget planning. It is evident that Excel has some challenges in terms of human errors, data quality, data securing, and efficiency. Therefore, see the reasons why a budget planning software is required to carry out your budget and financial reporting below.
Benefit 1: Long-term projections for efficient budget planning
A budget planning software like LucaNet can help a company’s expenditure management. The software will provide a long-term projection of the company’s financial statements. This will therefore detect early problems that may arise and consequently help the company to adjust accordingly in advance.
A budget software will deliver transparency and ensure managers and cost owners are supported in the organizational drive to pursue and implement cost reductions within their area of responsibility.
Benefit 2: Data integration from multiple sources
Using a software that is compatible with all data sources removes the need to convert your data into a specific format before it is imported. Therefore, you can import data directly from the source, thereby ensuring data is thorough, accurate, and on time.
Benefit 3: Minimization of Errors
Whilst Excel (being manual accounting) increases the chances of errors in calculation, a financial software automatically performs all calculations accurately and timely.
A budget software will replace the dependence on the cumbersome, error prone spreadsheets with an easy-to-use budget process. There will also be one central database, which means that you can always rely on the numbers to be correct.
Benefit 4: Data Security in accordance with IDW PS 880
A budget planning software like LucaNet is controlled, secured, and password protected. This capability allows users protect confidential information from being accessed by unauthorized personnel. Most software’s are cloud-based with additional security features. The data is therefore invulnerable to risks like fires, floods, and malicious/cyber-attacks.
Benefit 5: Efficiency, reliability, and accurate information
A budget planning software will simplify your budgeting process and greatly reduce the time taken to create your annual budget and periodic forecasts, whilst adding more granularity, confidence, and reliability. There will only be one database which means that any changes made by budget holders will flow across your whole budget making budget versions quick and easy.
Summary: How to transform your budget planning
It’s clear that budget planning software is designed to simplify and streamline the budgeting process. It saves a lot of time compared to using Excel, and companies can use the hours previously invested in manual efforts for more value-adding activities. Companies can also earn a competitive advantage by gaining deeper insights into their data and being more agile, enabling them to react to current and future developments in their businesses. Security, controlling, reliability, and accuracy of financial data is greatly enhanced using a budget planning software.