You probably think about investing in a budgeting software package each year when you start your annual budgeting process and are about as frustrated as you were the year before. You are faced with preparing numerous spreadsheets for your team and sending them out only to receive them back filled with errors, missed line items, and broken formulas. You think to yourself, “how is it possible they managed to break a protected worksheet!?” After you succeed in correcting all of the mistakes, you then have the burdensome task of consolidating all of those spreadsheets into one in order to be able to import into Dynamics GP. Then, depending on your version of GP, you import and cross your fingers that all the totals import in and match up with your original spreadsheet (if you’re on GP 2016 or older, there is no warning message if an account isn’t found in GP from your import, and it just gets skipped). If your totals are wrong, then you get to spend days, or hours if you’re lucky, to figure out which account got missed. And to top it all off, you’re left with limited data from GP to be able to report against, like line item assumptions being budgeted for a specific account. What makes up this $50,000 Sue is budgeting for Supplies in the Marketing Department? You have to reference back to her spreadsheet and hope those details are there.
Does this sound familiar? If any piece of this scenario applies to you, there is a better way. Better yet, you can justify a better way in ROI.
What is ROI?
ROI as a financial measure is used to determine how a company’s resources will be used to provide profit. The goal of any software purchase is to generate more revenue than the cost, or at least break even. Calculating ROI has more than simple financial impacts, it also allows for a project to be fairly judged and ensures the company is getting value for their money. It can also help quantify benefits over a period of time. So how do you determine ROI for a budgeting solution? The basic ROI calculation is the ratio of present value (PV) of expected benefits over the present value of expected costs, or:
ROI = (PV OF EXPECTED BENEFITS / PV OF EXPECTED COST) * 100
Stated in simpler terms, ROI is essentially when your benefits exceed your costs. Let’s assume that you spend 2 weeks, or 80 hours each year preparing budget templates, correcting returned spreadsheets, and loading data into GP. If we assume an average hourly rate for a Financial Analyst at $35/hour, that is $2,800 per year. Let’s also assume we have 20 people inputting data, and those folks are making $20/hour and spending 20 hours each working on their budgets. Add another $8,000 to your $2,800. These are conservative figures since you most likely have a CFO reviewing the budget as well as a range of wages that go into preparing and approving your budget. And keep in mind that these are totals per year for an inefficient process that is not providing any insight into your business. Would you be interested if I told you that you can purchase a robust budgeting solution for less than your year 1 total?
1 FTE Financial Analyst Annual Budget Preparation ($35/hour * 80 hours) $2,800
20 FTE Budget Managers ($20/hour * 20 hours) $8,000
Cumulative Total Year 1 $10,800
Cumulative Total Year 2 $21,600
Cumulative Total Year 3 $32,400
Real Time Insight into Your Data
A robust budgeting solution can quickly and easily give you and your managers insight into variances and provide a more routine process of reviewing discrepancies. Budgeting solutions with real-time access to actuals from GP allow users to run their own reports more frequently, look for variances that exceed a specified threshold, and finally comment on those variances. A solution like allows those monthly variance comments to be pulled in and reviewed in future budgets, which is not only a time-saver, but also assists users with remembering what happens throughout a given year. Identifying a key variance early on in a budget period allows managers to adjust revenue and/or expenses to maximize ending net income, thereby saving the company potential lost profit.
Flexible Forecasting
You’ve probably read numerous articles in last few months on the importance of forecasting, and I cannot stress it enough here again in this article. Having the flexibility to build out various types and blends of forecasts is vital in our current environment. Forecasts that combine actuals, budgets, annualized values, inputted values and/or percentages is necessary in any budgeting solution you are evaluating, and you should not have to be a skilled report writer/software guru to create these forecasts. Once you’ve determined your type of forecast, you want to be able to easily see it side-by-side next to your original budget, actuals, etc., calculate a variance, and drill into points of data. You might even want to see numerous versions of a forecast as circumstances change. What is key for you to keep in mind is the ease of use of creating and reporting on those forecasts in order to quickly and intelligently make business decisions that will save you money. The Forecast Builder tool in not only makes the task of creating forecasts easy, but it also makes it simple to update forecasted actuals, for example, as months are closed.
Find out how a budgeting solution like Dynamic Budgets will save you time and money and contact us today to schedule an using your own data! We can install in 1 to 2 hours and only need 15 minutes of IT’s time.
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