Why People Hate Compiling Budget Spreadsheets

Originally Published on January 12 2011, 2:47 PM

There’s a discussion going on on LinkedIn about why people hate compiling budget spreadsheets. It is by far one of the most interesting discussions I've had in the last months. Some different  points of view emerged but, in my opinion, a few fundamental points have gained a shared consensus.

 Budget spreadsheets are often designed by finance, with an implicit business model in mind that could not be more different from what other departments think. The Marketing dept thinks in terms of initiatives, campaigns, sponsorships, new products and dismissals but finance keeps asking for marketing expenses split in tax deductible and not tax deductible.

 If they have such a different view of the business (BTW, that’s the reason why there’s nothing like a single version of truth and it is ok this way ), their plans for the period are guaranteed to be misaligned with the budget. No need to say, they care much more about their plans than the company budget.

This will create frustration, with people fighting the system and the company risks spending countless man hours to collect meaningless figures. The company branches will operate in a disconnected environment and having the company under control will soon become impossible. Every function will react to the actions of the neighboring stakeholders, seeing them as disruptions.

Sales will always oversell or undersell in respect to stocks, production will overproduce or under produce, marketing will promote not existing items, finance will strive to keep the cash flowing etc.

To fix all these issues, which, remember, originate from the spreadsheets question, a shift in the process is required.
There should be a specific function in charge to orchestrate the budget process and this should be the comptroller’s job. The comptroller thus should accurately model each branch of the business and reach consensus on that from all the business functions.
Than, each function should be allowed to plan in their own terms and the comptroller must identify the rules to connect the dots.

The final result should be a reference book for all the functions, where all the figures are closely related, and everyone can always know what the others are going to do and be prepared.

So , the point was not about the spreadsheets, after all.



4185 views and 1 response

  • Feb 14 2011, 3:45 PM

    Bob Champagne responded:

    The model that I have seen work most successfully (although it takes Executive commitment to put in place) is to establish an Office of Performance Management (most commonly reporting to the CEO or CFO, but variants do exist) and that individual is the "hub" that establishes the performance architecture (financial, operational, customer and workforce metrics), process, roles, interfaces and systems to effect the EPM activity for the company. It can be an individual or a group (the later if it is a large company, the former if a small business (sometimes the controller himself)), but most of the stakeholders will reside in operating units- NOT the central group (central group is a coordinator- kind of like an "asset manager" for a capex intensive business). But it provides for the kind of "orchestration" you refer to and ensures proper coordination and consistency. Otherwise you end up with budgets, operational metrics, HR processes, and systems being managed from many different silos. @bilafer was right, technology is critical and SAP can be a key part of overcoming the challenge (as can many vendors), but in my view it all starts with some strong central coordination. Hope that is helpful.