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Nine critical features of budget management software
Workflow tools, multidimensional data structures and flexible reporting are among the capabilities that ensure the budgeting process supports strategic and financial goals.
In a previous article, I talked about the importance of building a budget with corporate goals -- both operational and strategic -- in mind. To realize these lofty goals but also to create budgets for cost centers, such as accounting and corporate travel, it is necessary to go back to basics and acquire budget management software that meets your needs. Here are some of the key features to look for in budget management software and the benefits they provide.
1. Built for comfort
First, the software must be easy to "drive." The GUI must be elegant and how to use it immediately obvious. Moreover, the GUI must be extensible and allow extensions that are easy for IT to program. With this kind of GUI, the user can easily enter data by month and budget item. An approachable GUI also requires less training, and budgets can be built more quickly.
If the budget management software has workflow features, budget work can be assigned to individuals within departments and then reviewed at the departmental and executive levels. You can use workflow tools to assign rework as well. The benefit of workflow features -- or separate workflow software -- is that management always knows where work or rework is being performed.
3. Financial statements
Comprehensive budgeting includes inputs and analysis for revenue, costs, cash flow and working capital. As such, the budget management software should contain financial statement templates in each of these areas. Moreover, an organization's other financial statements should be easy to convert to the financial statement format of the budget management software. Once all of the financial statements are embedded, you can quickly analyze and optimize every part of the budget.
4. Multidimensionality and business intelligence
It is somewhat restrictive to only have the ability to store data in relational tables (rows and columns). If the organization wants to budget by region, product, time frame and the like, it is better to be able to capture these factors in multidimensional data structures. Doing so makes it easy to perform top-down analyses and gain greater insights into the underlying data. Coupling such multidimensionality with business intelligence software enables a rich set of queries, analyses, what-ifs and simulations.
Without a doubt, on-the-fly analytics adds great value to budget management software. Nevertheless, you still need the ability to produce the kinds of standard reports that are familiar, expected and well-understood by others in the organization. For this reason, good budget management software will support custom report creation.
6. Planning and forecasting
Building budgets that go beyond the typical 12-month budgeting horizon helps management gain an understanding of whether the annual budget is sustainable into the future. Common methods for achieving this in budget management software include driver-based planning and rolling forecasts. Budgets that are not defensible for the second year and beyond must be redone.
7. Horizontal extensions
Some companies will want more sophisticated budget management software for certain departments. Common focus areas include Enterprise asset management, supply chain management, inventory management and sales and operations planning. Such functionality is commonly available from specialized vendors, but the capabilities of the budget management software package may be good enough to support these horizontal extensions without additional software. Having the right budget management software in these specialties can make operational and strategic goals easier to reach.
8. Vertical extensions
Vendors that have specialized software for your particular industry will likely be leading candidates for your budget management software. Some vendors have vertical extensions for industries such as aerospace, consumer packaged goods, oil and gas, and more.
Consultants can be invaluable in helping you develop a better budgeting approach. Most budgeting software vendors have a consulting staff, as well as relationships with outside consulting firms. Determine how consulting can help your organization and how it has helped other users, and scrutinize a software vendor's consulting offerings with these in mind.
Vendors who provide budgeting software
More than 40 vendors provide comprehensive budgeting software. Many of them are in the corporate performance management segment of the market. ERP vendors also offer some level of budgeting software.
When surveying vendors and products, you need to consider how important it is for your organization to have potentially more seamless integration between the budgeting software and other important modules of your ERP. For example, it is critical that the software allows for data and financial statement conversion from the organization's accounting systems -- which are usually part of ERP -- to the budgeting software.
Every organization should at least consider deploying budget management software. While budgeting may seem simple on its face, it involves significant complexities that dedicated software, often deployed with the help of an experienced consultant, can help you get a handle on, while adding real value in meeting both financial and strategic goals.