After years of developing, implementing and supporting complex Budgeting and Forecasting solutions, I can confidently say these are the top 5 essentials you need to look for:
- Structure your processes
- Promote data integrity by the separation of data from logic
- Prevent duplication by having a single version of the truth
- Facilitate transparency with a detailed audit trail
- Allow ‘What-If Analysis’ via robust scenario management
1. Structured Process
A well-designed Budgeting and Forecasting solution should provide budgeting managers with:
- The ability to control the entire process by letting them choose which steps of the budgeting process are open for users.
- Visibility of the budgeting process across the entire corporate structure, typically via a drill through dashboard.
- A budgeting workflow where managers can approve or reject budget numbers.
This process-based workflow reduces costs by saving time and effort and increases productivity. It also minimises the chances of incorrect data entering the system.
2. Data Integrity
When data integrity is compromised, it affects management’s decision-making capabilities. This is particularly important when financial data is involved.
Therefore, the principle of data integrity should be at the core of any Budgeting and Forecasting solution, via:
- Storing the business logic for calculations separately from the data itself.
- Users can change data, but not the logic or formulae behind the data.
- All data write-backs should be protected with multiple tiers of checks and validation
3. Single version of the truth
Multiple copies of the data on client devices cause unnecessary duplication, which is one of the leading causes of data integrity issues. This bumps up costs by reducing productivity and allowing erroneous data to enter the system.
Instead, there should be a single version of the truth with the underlying data stored centrally in a full atomicity, consistency, isolation and durability (ACID) compliant database that is accessed remotely.
ACID compliance guarantees the validity of the data even if there’s a sub-system or entire system failure.
4. Detailed Audit Trail
A good Budgeting and Forecasting solution should be able to answer “who changed which data at what time?” This comes via a detailed audit trail which can report on various levels of granularity.
When an undesirable situation arises, the audit trail helps investigate the issue by tracing back the steps. It also keeps employees responsible and accountable for their actions and helps revert and restore the system back to the last known good state.
5. What-If Analysis
What-If Analysis helps organisations model their business financials on multiple possible scenarios in parallel. Each scenario can be independent and predict totally different outcomes. It can be a powerful tool to simulate the effects of multiple changing variables on a business.
A flexible Budgeting and Forecasting solution should create scenarios based on existing ones, change drivers and variables to provide predicted budget figures based on those particular settings.
There you have it. Your 5 essentials.
So, in a nutshell, a robust Budgeting and Forecasting system should:
- Streamline the budgeting process by following a structured process to save time and costs.
- Always separate data from logic to promote data integrity and help management make more accurate decisions.
- Have a single version of truth to prevent duplication, promote user productivity and avoid possible errors.
- Facilitate transparency and enforce accountability via a detailed audit trail and granular reporting.
- Equip users with robust ‘What-If Analysis’ to model their business financials on multiple possible scenarios in parallel.
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