Posted on Thu, May 23, 2013 @ 10:14 AM
A recent headline stood out to me: “Argument for Austerity Based on an Excel Error.[1]” I was stunned when I saw it. How could a spreadsheet error be so big that it could shape economic policy? This story shows how drastic the results of a single miscalculation can be.
In 2010, Harvard Economists Ken Rogoff and Carmen Rienhart published a paper titled “Growth in a Time of Debt[2]” that became highly influential. Policy leaders from around the world cited this paper when debating economic plans. Reinhart & Rogoff claimed to show that economic growth normally slows when a government’s debt exceeds 90% of the country’s annual economic output. Since the release of the paper, policy makers have used this data to support the argument for and the implementation of austerity measures to address this potential problem.
The term ‘austerity’ in this context refers to strict measures used by governments to reduce budget deficits during adverse economic conditions. One of the measures most frequently taken is a combination of spending cuts and tax increases, measures that by other schools of economic theory could stunt economic growth. According to Euronews, the observations of Rogoff and Rienhart and the subsequent conclusion that countries must cut public spending have meant hardship for millions[3].
The twist in this story is that the data supporting this theory was recently found to be flawed. There was an error in an Excel formula. Thomas Herndon, a student at UMASS Amherst, could not replicate the results of Reinhart and Rogoff’s paper while working on a graduate assignment. Not giving up, Herndon e-mailed Reinhart & Rogoff, who provided Herndon with the actual working spreadsheet used to obtain their results.[4] Herndon quickly noticed the basic spreadsheet error that had excluded data from Canada, New Zealand, and Australia – all countries that experienced solid growth during periods of high debt. Consequently, in contrast to Reinhart and Rogoff’s paper, Herndon found [5] that countries with high economic debt did not see their economies shrink 0.1% but instead saw them grow by 2.2% over the time period covered by the study.
Many of us who have worked with spreadsheets have seen countless formula errors. No matter how simple the errors might be, we have learned that the results can be significant. Analyzing bad data can influence an organization to form a misguided strategy which in turn can lead to a misguided budget. While your budget may not shape global economic policy, it will be used to shape the direction of your organization. So having a dependable budget process that removes many of the perils of common spreadsheet errors is crucial.
Posted by Nicholas Arriaga,
Client Services Technical Manager at XLerant
[3] European austerity programs based on an excel error? Published by Euronews on Apr 17, 2012 http://www.euronews.com/2013/04/18/european-austerity-programs-based-on-an-excel-error/
[5] Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff. Thomas Herndon, Michael Ash and Robert Pollin, Political Economy Research Institute
XLerant is a software solutions company that offers BudgetPak, a powerful budgeting system for mid-sized organizations and higher education institutions. BudgetPak energizes A Culture of Budget Accountability with your non-financial department heads via its intuitive interface. Engaged people take more ownership of their budgets. The result is higher quality budgets that achieve your strategy.
XLerant: Energizing a Culture of Budget Accountability
Posted on Sun, Feb 24, 2013 @ 02:41 PM
Zombie spreadsheets should be dead – for all intents and purposes they should have been put in the ground long ago – but they refuse to die.
Budget templates are the most prevalent form of zombie spreadsheets. They’re complex. They’re prone to error. They’re difficult or impossible to fully audit. Only a handful of people really understand them. They’re inflexible and don’t reflect what end users really want. You’d never want to bet your house that some error wasn’t buried among all those links and nested if-then formulas.
Put a bullet in it already.
So why don’t otherwise smart and resourceful Finance people do that... what’s keeping the un-dead budget spreadsheets alive? Why do people refuse to kill them off? These are the most common reasons I’ve heard:
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We just don’t know what will replace them. The Zombie budget spreadsheets have grown so complex, so intertwined, or so widely used that we can’t figure out an alternative.
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We can’t afford it. We looked at some budgeting systems that could replace what we have, but they cost and arm and a leg (unintentional reference to Zombie feasting).
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The devil you know is better than the devil you don’t know. Simply put, we’re afraid of changing, even more than we are afraid of the living-dead spreadsheets.
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Who has the time? Implementing a new budgeting system will take us, what… months? We simply don’t have that type of time.
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We’d love to replace zombie spreadsheet budgeting, but I don’t even know how I’d go about justifying it. Does anybody care that we in Finance have to deal with a monstrous process?
There is some good news here. These objections are addressable with a little homework and effort of your part (killing zombies requires picking up a shovel, after all). There are budgeting applications out there, you are not stuck with Excel. They don’t have to cost an arm and a leg, and they can be implemented in four to six weeks (not four to six months) and there some vendors who will do all the work for you. To allay your fears, talk with people who are actually using the product, after you’ve seen a demo for yourself. And if you’re stuck on how to justify your proposal to your management, ask the vendor you’re working with for help. They should have a justification toolkit of some form or another, and be willing to assist you.
“There are multiple ways to kill zombies, of course, and you can be as creative as you like. Remember that each of these methods requires that you destroy the brain…” That’s straight from a Yahoo Answers post called The Ten Best Ways to Kill a Zombie.
So, in the case of Zombie budgeting spreadsheets, heed that same advice. Go right for the brain -- that consolidating monster P&L -- and put it out of its (and your) misery.
Obviously this post is a little tongue-in-cheek, but there is many a truth said in jest. No? If you’d like to add your own comments, please feel free to do so below.
XLerant is a software solutions company that offers BudgetPak, a powerful budgeting system for mid-sized organizations and higher education institutions. BudgetPak energizes A Culture of Budget Accountability with your non-financial department heads via its intuitive interface. Engaged people take more ownership of their budgets. The result is higher quality budgets that achieve your strategy.
XLerant: Energizing a Culture of Budget Accountability
Posted on Sat, Feb 09, 2013 @ 03:12 PM
What’s the one thing every Finance person complains about if their organization uses Excel for budgeting? That users break links or overwrite formulas or somehow introduce errors into the spreadsheet that Finance worked so hard to create. Intentional hacking? Unintentional hacking? Doesn't matter -- the results are the same.
The implications are truly frightening. A single error, introduced at the lowest level of the budgeting process, can go undetected all the way up to the consolidated P&L that’s reviewed by senior management. This isn’t some theoretical risk – like an asteroid hitting your home – it’s a very real risk that every Finance organization needs to cope with.
I worked with a CFO of a joint venture between two very large insurance companies. She told me how a consolidated spreadsheet that produced a P&L was built using multiple linked spreadsheets. Unknown to her at the time, or anyone else, a link with one particular spreadsheet was broken. That resulted in a sizeable error on the consolidated P&L. Sounds bad, doesn’t it? But what made the matter so much worse was the error was not discovered until after the budget was blessed by not just one, but two Board of Directors (one for each of the parent companies).
I worked with the CFO of a university that was in a slightly better position. His team discovered a spreadsheet error before the budget was actually presented to the Board. Good. But in his case the problem was revealed the morning of the Board meeting… so he had to announce that a problem had been discovered and Finance was in the process of reconciling it (and verifying no other errors existed). The Board of Directors review of the budget was pushed back two weeks as a result. Now just imagine standing in front of your Board of Directors and saying “Sorry folks, we won’t be reviewing the budget today after all.”
Broken links. Formulas being over written or deleted. Rows and column being inserted and blowing up elegant formulas that Finance so thoughtfully crafted. Ever wonder why these users seem so intent on making your life miserable? Why do they want to hack the budget?
Excel budget templates don’t reflect how people actually think about the business. So people wind up hacking the budget templates to work the way they think. That might mean inserting rows to add line item detail, overwriting an existing formula, writing a new formula (improperly) or any one of a hundred hacks that introduce errors.
There are two strategies Finance typically employs to try to prevent or eliminate spreadsheet errors. One is to attempt to lock down budget spreadsheets. This can prove fatal because it provides a false sense of security… “Hey, no reason to validate these spreadsheets, they’re locked down!” Most of us have learned the hard way that a smart user will get around passwords and other lock down features.
The other problem with locked down spreadsheets is, by design, they limit choice and flexibility. End users are frustrated enough with the budget process and this only serves to irritate them and make them less willing to engage in the process.
The other common strategy is to spend hours validating spreadsheets, pouring over them to identify potential errors. This strategy is often deployed in conjunction with locking down templates; because hackers may gotten around the passwords, and because Finance itself may have inadvertently created some error (nobody’s perfect).
The “let’s check all the spreadsheets to make sure they’re right” is monstrously inefficient, and significantly limits the time Finance can spend on value added analysis. But it’s also impractical. There is no way to check every cell of every individual budget spreadsheet –and all the cells in all the consolidating spreadsheets. You might think you're doing a good job of this today, but just ask yourself, “Would I bet my house that even after Finance checks the budget spreadsheets, there isn’t an error buried somewhere?”
The bottom line is hackers – of both the intentional and non-intentional kind – undermine the credibility of the budget P&L. Since Finance runs the budget process, confidence in the Finance team itself is undermined.
What’s to be done?
If you’re using Excel for budgeting, the only answer is “work hard and cross your fingers.” But the longer term answer is to move to a real budgeting application, one built on a database (not spreadsheets) that is flexible enough to allow people to budget the way that they think -- in a well controlled environment. That’s exactly what I had in mind when I first envisioned a planning application as a FP&A Manager at Pepsi Cola International, and that an inspired and incredibly talented team brought to life at XLerant.
If you have personal experience with broken links and formula errors and other budgeting nightmares that wake you up in the middle of the night, please share them here.
XLerant is a software solutions company that offers BudgetPak, a powerful budgeting system for mid-sized organizations and higher education institutions. BudgetPak energizes A Culture of Budget Accountability with your non-financial department heads via its intuitive interface. Engaged people take more ownership of their budgets. The result is higher quality budgets that achieve your strategy.
XLerant: Energizing a Culture of Budget Accountability
Posted on Fri, Mar 23, 2012 @ 07:48 AM
According to a recent survey (multiple surveys in fact) most organizations are still using Excel for budgeting. Part of the explanation for that, of course, is “it’s free”. But it’s also because we in Finance have a bias for spreadsheets. No self respecting accountant or finance professional would back down from the challenge of building a budgeting process using Excel (Bill Gates is smiling, I can feel it).
But the key question, if you are planning on involving people outside the finance organization, is “what does everyone else want?” The knee jerk reaction is to say they’d like a spreadsheet look and feel just as much as anyone in Finance would. But take a step back for a moment and think.
People are surrounded in their daily lives with technology that make truly complex tasks look easy – iPhones, booking a trip on Expedia, using satellite navigation in a car. Or here’s another one... think about about how easy the benefits enrollment process is today if your company uses an online service. In the old days, say before 2002, someone from Human Resources would come by with a clip board and ask you a bunch of questions, then enroll you in a family plan even though you’ve never been married. Today you go online, answer a few questions, and get just what you want (or at least what you asked for).
Since we’re talking about an inherently complex financial task (budgeting) let’s look at an analogy that’s closer to home – completing your tax return. In the old days, you had to fill out a paper form which required looking up a lot of formulas and giving your calculator a real workout. If you think you know where I’m going with this – hold on.
Some clever accountants came along and devised an electronic 1090 Tax return that replicated exactly what you saw on the tax form itself, but had built in calculations. The paradigm was simple. Give people what they are already familiar with -- the 1090 tax form -- just make it electronic. They were convenced they’d become millionaires. Instead they went broke. Accountants may have liked an electronic 1090 tax Form, but apparently nobody else did.
Michael Chipman had a different idea. A graduate from the U.S. Air Force Academy with a degree in Computer Science, Chipman spent five years in the basic research arm of the Air Force, attaining the rank of Captain. Following that, he spent a number of years as a research scientist working in the area of computational physics, principally at Science Application International in La Jolla, Calif.
Smart guy. And smart enough to know that while accountants might be familiar with the 1090 tax form, nobody else was (or even wanted to be). So rather than just replicate the form electronically, he threw it away and replaced it with plain English prompts and selections. He brought a Steve Jobs mindset to the problem when everyone else was channeling Bill Gates.
The application he developed is TurboTax, which he eventually sold to Intuit. Now Michael is the owner of the Arizona Diamondbacks (not a bad job if you can afford it).
So, getting back to budgeting. Do your users want a spreadsheet to do their budgets… or would they prefer something more along the lines of TurboTax?
Comments are welcomed.
PS Okay, want to know what Bill Gates and Steve Jobs really thought of each other?
Gates: Steve Jobs was "fundamentally odd," and "weirdly flawed as a human being"
Jobs on Gates: “He’d be a broader guy if he had dropped acid once or gone off to an ashram when he was younger"
Gates on Jobs (again): "He really never knew much about technology, but he had an amazing instinct for what works"
XLerant is a software solutions company that offers BudgetPak, a powerful budgeting system for mid-sized organizations and higher education institutions. BudgetPak energizes A Culture of Budget Accountability with your non-financial department heads via its intuitive interface. Engaged people take more ownership of their budgets. The result is higher quality budgets that achieve your strategy.
XLerant: Energizing a Culture of Budget Accountability
Posted on Mon, Mar 12, 2012 @ 01:19 PM
Every once in a while the sun and the moon and the stars all align just right to deliver an exceptional webinar. Such was the case recently when Linda Murphy Church presented how she used the rigorous Malcolm Baldrige Award criteria to access a critical decision the Rhode Island School of Design was facing. In her case, that decision was around the budgeting process and some enabling technology. But she was able to generalize her example in a way that made the whole approach accessible, even to those few that never even heard of Malcolm Baldrige.
We had a tight timeframe – just 30 minutes – so we had very little time to provide a primer. Instead, we took a “learn from example” approach and it worked (the feedback’s been great). Interested? Just click on the video above.
As always, your feedback and comments are welcomed.
XLerant is a software solutions company that offers BudgetPak, a powerful budgeting system for mid-sized organizations and higher education institutions. BudgetPak energizes A Culture of Budget Accountability with your non-financial department heads via its intuitive interface. Engaged people take more ownership of their budgets. The result is higher quality budgets that achieve your strategy.
XLerant: Energizing a Culture of Budget Accountability
Posted on Wed, Feb 29, 2012 @ 02:30 PM
You’ve been through the drill before. Some process in your organization needs fixing and a team is formed to address it. Before you know it, you’re looking at software as a solution. That’s not a bad thing, but the way we go about it often is.
The team comes up with a requirements grid (often referred to as “wish lists”). Where do these lists come from? Well, some of them are dreamed up by team members. But surprisingly, many of these “requirements” come indirectly from software providers. Someone on the team does a Google search and, unbeknownst to him or her, a lot of the content they read originates from vendors or firms that vendors pay retainers to.
The result? Well, as a Deloitte Consulting Partner I used to work for once said, “It’s like people are told that when they’re shopping for a new car, it’s all about the number of ash trays. So people wind up buying the vehicle with the most number of ash trays and bragging, ‘Hey, my new car has six ash trays, how many does yours have?’”
We all like to think it’s the other guy who will get fooled by shiny objects. But really solid, 3rd party criteria will make sure you make wise choices. That’s what the Malcolm Baldrige Award Criteria is all about. It’s the nation’s highest Presidential award for performance excellence, and it’s an effective framework to evaluate any initiative, including software purchases.
XLerant recently hosted a webinar event on this topic. The Budget Director from the Rhode Island School of Design shared how she used the Malcolm Baldrige Award Criteria to evaluate an initiative and investment to the budget process. While the example used is a specific one, the presentation will generalize the framework so you can apply it to your own situation.
If you would like to see the video of the event, or download the PowerPoint document, just click here.
XLerant is a software solutions company that offers BudgetPak, a powerful budgeting system for mid-sized organizations and higher education institutions. BudgetPak energizes A Culture of Budget Accountability with your non-financial department heads via its intuitive interface. Engaged people take more ownership of their budgets. The result is higher quality budgets that achieve your strategy.
XLerant: Energizing a Culture of Budget Accountability
Posted on Sat, Feb 11, 2012 @ 02:10 PM
Budgets matter in the not-for-profit world to a degree I rarely see in the for-profit world. In the for-profit world, the budget is just a snapshot in time. It can be forgotten about the first time the company produces a reforecast (which, incidentally, can be forgotten with the second reforecast). It’s not that for-profit organizations are wrong to put less credence in the budget than non-profit organizations, it’s just that they operate in different worlds.
Not-for-profit organizations live and die by their budgets. Most of them don’t have a cash cushion to absorb any unplanned increase in spending. And with the level of donor scrutiny these days (especially around the ratio of total expenses spent on charitable programs vs fundraising and overhead) they can’t afford to be wrong. Not-for-profits often derive their revenue from low margin programs and events; and from limited donor appeals. There’s simply not the same opportunity to go out and generate revenue that so many for-profit companies enjoy.
And last but not least, budgets really matter in not-for-profit because they are a way of making the least financially oriented people fiscally responsible. Many not-for-profit program managers don’t have business training. That’s hardly a criticism. Many of them are making contributions to the world that will impact generations. The fact that they can’t recognize a credit from a debit doesn’t matter.
So budgets are deployed as a basic but effective tool to help communicate “stay within these boundaries” to program managers. They get that, even without an MBA.
With all that being said, budgets are mission critical for not-for-profits. I don’t think anyone would argue with that. The question then is what’s required to facilitate an effective budget process?
The Baptist General Convention of Texas was the first non-profit I worked with as a client of XLerant (back in the early days when my partner and I did all client implementations of our budgeting solution). Jill Larsen, the CFO of BGCT taught me more about not-for-profits than could ever fit on this post. But let me highlight a few of the observations she shared with me here:
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Since many program managers do not have a business background, they are not nearly as familiar with Excel as people in the Finance organization are.
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Program managers find the budget process stressful and intimidating. Being sensitive to that is vital to serving them and creating an effective budget process.
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Program managers would much rather work with something that looks and feels more like, say TurboTax, than a spreadsheet.
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Program managers don’t think like accountants, especially when it comes to budgeting. Unlike accountants (who tend to think strictly in terms of G/L accounts and amounts) program managers think in terms of the programs or events they’ll be running, and the resources required to make them happen.
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Taking to heart all the observations listed above, the budget process needs to reflect programs, events, projects and initiatives – all developed by the program managers who will be delivering them through the year.
As I mentioned, I learned a lot from Jill (in fact we all continue to learn from her). If you’d like to read a case study about the Baptist General Convention of Texas, which can provide further insight, you can access it here.
XLerant is a software solutions company that offers BudgetPak, a powerful budgeting system for mid-sized organizations and higher education institutions. BudgetPak energizes A Culture of Budget Accountability with your non-financial department heads via its intuitive interface. Engaged people take more ownership of their budgets. The result is higher quality budgets that achieve your strategy.
XLerant: Energizing a Culture of Budget Accountability
Posted on Wed, Feb 01, 2012 @ 09:23 AM
I’ve had the distinct pleasure of working with some of the best run companies over the years and I’ve come to appreciate what really separates them from “the merely good”. Some of what makes great companies so successful, like hiring great talent, is quite obvious. But in this blog I’d like to share one of their lesser known secrets to their success.
Every company has to deal with complex problems, and many organizations become adroit in dealing with them. Here’s an example of a complex problem, “How can we forecast Revenue by SKU?” Another might be “How can we extract data from our G/L and get it into our reporting package?” Another might be “How can we identify our most profitable Product Lines?”
What complex problems have in common is they do have answers… you just know they’re solvable. If you’re willing to burn the midnight oil (or get someone else to work late) you can deliver an answer. Solving complex problems involves a lot of “sweat and stamina”, as one of my old boss’s use to say… there is an answer at the end of the rainbow.
By contrast, ambiguous problems can’t be addressed by brute force. Here’s an example of an ambiguous problem, “Morale is down in the Finance department, what should we do about it?” Another example might be, “How do we get willing participants in our annual planning process, especially from those people outside of Finance?”
Ambiguous problems can’t be solved by an excel model, they can’t be addressed by formulas or by putting in more hours at work. And that’s the chief reason why average organizations shy away from dealing with them. They’re perpetually stuck at the “Where would we even start?” stage.
But the best run companies recognize the enormous value of effectively dealing with ambiguous problems. They don’t shy away from them, instead they call them out. If morale is down in the Finance department they’ll find out why. And they won’t not stop at a superficial understanding, but dig deeper. When they find out the fundamental reasons why morale is down, they’ll work to address the root issues and won’t waste time with window dressing.
What’s the payoff to addressing an ambiguous problem? Well, in the case of turning around the problem of low morale, you can attract and retain the talent the organization needs to succeed. It could even be the key to being able to beat your competition, rather than being beat by them.
The best run companies get that. Sure, they tackle complex problems every day. But unlike everyone else, they go out of their way to name and frame ambiguous problems – and attack them head on.
Now, what does all this mean for you? Let’s take an example. Say you’re contemplating a redesign of your budget process. One of the complex problems you’ve identified is that management wants to get a better grip on Benefits expenses. An important step they want to take is to separate out Payroll Taxes (a big number) from the rest of the benefits expenses. The complex problem is how to (accurately) calculate Payroll Taxes, both Federal and State, applying the appropriate cap and rate. Oh, and calculate it by individual employee, for increased precision and accuracy.
Figuring out how to address this complex problem requires thinking through the math involved and translating that into necessary formulas. Hard, complex work, but you’ll get it done.
But let’s say the redesign of the planning process also includes the goal of getting more willing participation from front line managers. That’s going to require putting yourself in their shoes, and delivering budgeting solution that allows them to “think like a manager”. It’s an ambiguous problem that requires empathy and understanding; not formulas and models.
While the payoff of addressing the complex problem of modeling Payroll Taxes by employee can be big, effectively dealing with the ambiguous problem of getting more willing participation in the process is huge. And what’s more, Senior Management will value the Finance department much, much more, if they can find a way to get willing participants in the planning process. Senior Management knows that particular ambiguous problem is harder to solve, and has a larger payoff to the business, than say, finding the right formulas and models to project payroll taxes.
As Finance professionals we are trained to solve complex problems, but as managers we need to learn how to solve the ambiguous ones.
As usual, your thoughts and comments are welcomed.
XLerant is a software solutions company that offers BudgetPak, a powerful budgeting system for mid-sized organizations and higher education institutions. BudgetPak energizes A Culture of Budget Accountability with your non-financial department heads via its intuitive interface. Engaged people take more ownership of their budgets. The result is higher quality budgets that achieve your strategy.
XLerant: Energizing a Culture of Budget Accountability
Posted on Mon, Dec 05, 2011 @ 11:58 AM
Raymond Panko, a professor at the University of Hawaii, is the leading expert on spreadsheet errors. Who makes them, why they happen, what rate they’re seen in the average spreadsheet, you name it. He wrote a paper on the subject called What We Know About Spreadsheet Errors first published in the Journal of End User Computing.
You can download a copy of the condensed version here: What We Know About Spreadsheet Errors
In the meantime, here’s an excerpt.
In recent years, we have learned a good deal about the errors that people make when they develop spreadsheets. In general, errors seem to occur in a few percent of all cells, meaning that for large spreadsheets, the real issue is how many errors there are, not whether an error exists.
Most studies looked at errors at the end of the development stage, when subjects said that they were finished developing their spreadsheets. Cell Error Rates (CER) across these studies were similar, despite the fact that subjects ranged from novices to highly experienced spreadsheet developers. One study even compared undergraduate business students, with little spreadsheet developing experience, and MBA students with more than 250 hours of spreadsheet development experience. Their Cell Error Rates were very similar.
Even when a task was selected to be very simple and almost completely free of domain knowledge requirements, the Cell Error Rate was about 2%.
Respondents were keenly aware of the dangers of error and spent considerable time working to reduce errors, including the creation of cross-footings, doing spot checks of formulas with calculators, and having others look at output. However only 1 of the 11 interviewees said that they had done a complete code inspection of a spreadsheet; and in that case it was a spreadsheet given to that person by someone else!
Later, Hendry and Green did a similar study, this time with 10 spreadsheet developers. They added a phase in which the subject walked through a spreadsheet with an author. They found that subjects often had a difficult time explaining parts of the spreadsheet that they had themselves built.
They also found that some of the spreadsheet developers had run into serious problems trying to make parts of the spreadsheet analysis fit the row-and-column layout of spreadsheet program.
We are overconfident about the accuracy of spreadsheets, despite the large amount of information to the contrary. One study gave three spreadsheet development tasks to nine highly experienced spreadsheet developers, all made at least one error, not all of which were caught and corrected. In fact, 63% of the final spreadsheets overall had errors. Yet when asked about their confidence in the correctness of their spreadsheets, their median score was "very confident."
Overconfidence is corrosive because it tends to blind people to the need for taking steps to reduce risks.
Whatever specific techniques of improvement are used, one broad policy must be the shielding of spreadsheeters who err from punishment because a climate of blaming will prevent developers from acknowledging errors. Quite simply, although the error rates seen in research studies are appalling, they are also in line with the normal accuracy limits of human information processing. We cannot punish people for normal human failings.
To read more, including the author’s suggestions for mitigation, please review the article >>>
What We Know About Spreadsheet Errors
XLerant is a software solutions company that offers BudgetPak, a powerful budgeting system for mid-sized organizations and higher education institutions. BudgetPak energizes A Culture of Budget Accountability with your non-financial department heads via its intuitive interface. Engaged people take more ownership of their budgets. The result is higher quality budgets that achieve your strategy.
XLerant: Energizing a Culture of Budget Accountability
Posted on Mon, Nov 28, 2011 @ 11:35 AM
You can’t have a "watch box" -- an on screen running total comparison of the budget versus other benchmarks.
Most of the organizations we talk to tell us that even before the budget process begins, the President or Senior Staff has some type of target in mind. It might be as simple as keeping costs flat versus the last year… or taking a 1% haircut from last year’s Budget or whatever it might be. What you want to do is put that target right on the screen so people won’t forget about it, and so that can see – in real time – the impact of the decisions they’re making against that target. They might want to increase spending in one area, but take it down elsewhere all the while keeping track of the target.
Having more than one comparison on the screen in Excel just isn’t practical. The screen gets too busy and confusing. Apart from that, loading those comparisons in and setting up the variance calculations run a high risk of human error. So that’s why this type of “watch box” isn’t normally part of a budget template – although it should be.
To see a “watch box” in action, click on the video. As always, comments are encouraged.
XLerant is a software solutions company that offers BudgetPak, a powerful budgeting system for mid-sized organizations and higher education institutions. BudgetPak energizes A Culture of Budget Accountability with your non-financial department heads via its intuitive interface. Engaged people take more ownership of their budgets. The result is higher quality budgets that achieve your strategy.
XLerant: Energizing a Culture of Budget Accountability