Budgeting and Planning are essential business processes for organizations of all sizes. For the past 20 years, however, many companies are still relying on spreadsheets to support these processes. Budgeting and planning processes require departments and teams to work collaboratively. One can anticipate such challenges as the lack of security, limited process governance and collaboration, spreadsheet formula errors and files versioning.
Both Oracle Hyperion Planning and IBM Cognos TM1 were software tools with centralized data models, centrally defined calculations and distributed data collection processes that attempted to manage more complex spreadsheets that were necessary for the budgeting and planning exercise for larger organizations.

Problem solved? Not really.

A recent survey by the American Productivity and Quality Center (APQC) (www.apqc.org) shows that the majority of businesses (even larger enterprises) still use spreadsheets for budgeting. Two thirds of respondents reported more than US$1B in annual revenue and 56% said they still used spreadsheets in combination with technology for budgeting and planning. 39% use only spreadsheets. A majority stated that these spreadsheets had no documented governance or control processes, increasing the risk of errors.

Why spreadsheets are still being used, given its issues?

We think budgeting applications and models are still focused on separate organizational areas (sales, operations and finance), and there are no corporate guidelines which technology to use to create the individual budgets and plans.

Is there a better solution?

A change of behavior must come with strong incentives. From a user’s perspective, there is a strong resistance of not using spreadsheets that are most familiar with them. From management perspective, there is an expectation on improved efficiency and better alignment with strategy as far as budgeting and planning processes are concerned.

These requirements call for an integrated approach to budgeting and planning and a platform that can support such an integrated and common data model and the familiar spreadsheet interface, while addressing security, collaboration and governance needs. Ideally, it should also leverage driver-based budget models that business users may plan on measures they can influence (like volumes sold, units produced, new hires needed etc.). The budget is then mainly a result of driver based calculations.

Tagetik has delivered a platform that addresses these needs for an integration planning process. In the upcoming blog articles, we shall introduce how CFOs needs on budgeting and planning can be achieved.

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