Enterprise Resource Planning System CRM - XLerant

15 Things You Can’t Do in Excel Budgeting (But Should)

Budgeting is “mission critical” in organizations today.  Yet many organizations still use Excel for budget preparation.  Many organizations have turned to Excel because their ERP systems had weak budgeting capabilities.  ERP systems were designed especially for financial people, with strict controls and transaction processing.  But successful budgeting involves non-financial department heads, requires flexibility, and account balance information (numbers).

Excel is not a good match for necessary budgeting capabilities either.  It isn’t a programing language or a database.   Therefore financial people are building a mission critical application in a two-dimensional spreadsheet and then managing the data themselves.  This is enough to give the IT department the creeps and cause senior management to lose confidence in the numbers.

Plus, due to the limitations of Excel, there are 15 (or more) things that are critical to the budget process that simply can not be done, or can not be done sufficiently.  Here are 15 things that Excel can’t handle for budgeting but need to be done:

  1. Excel is not cloud-based, which is the current direction of application software.  As mentioned above, Excel is neither a development environment nor a database.  It does not protect the integrity of the data.
  2. Excel does not offer a Turbo-Tax like interface for non-financial people. Face it: department heads do not like the budget process and certainly do not like Excel the way financial people do.  So providing an application that walks the department head through the process makes for a better budget with more ownership from the department managers.
  3. Excel does not provide for situational budgeting. This involves allowing people to budget different accounts in different ways – depending upon their needs.  Some want to put in an annual number, some may want to have an increase or decrease from last year, some may want to budget by head, others may want to enter detail behind a number, others may want to use drivers, and some may want to use a free-form modeling environment.  Allowing users flexibility is key to a better process.
  4. Excel does not allow for justification and documentation for every number in the system, and does not allow for this documentation to follow the number throughout the approval and reporting process – which significantly limits the value of the final budget for strategic decision-making.
  5. Excel does not allow for proper asset planning; proper budget accounting allows for depreciation, amortization or expensing of the asset, and a system that will keep track of what was requested, what was approved, and when the asset is scheduled to be deployed in the forthcoming fiscal year.  These things are all hugely important to finance, purchasing and the people who need to deploy certain assets to certain departments (think IT or other service functions).
  6. Excel is terrible at personnel planning down to the individual and department level.  This often represents 70% of the actual budget.  Successful personnel planning allows for raises, incentive compensation, permanent or temporary leaves, raises by person or category, taxes, benefits calculations, and new hire policies.
  7. The days of simply keying in and approving numbers are in the past.  Executives want to approve plans, not numbers.  So, Excel does not allow for special initiatives that cross different accounts.  This functionality is required for proper budget preparation and review.
  8. Excel does not allow for the intelligent monthly spreading of annual numbers.  Either numbers need to be individually input into months or simplistically divided by 12.  Proper budgeting requires a variety of ways to spread annual numbers including examining the historical seasonality of each account and using that method.
  9. Excel does not allow for account “pegging”. This is the concept of having a department head make special requests for funds in particular months without impacting the total amount requested for a specific account.
  10. Excel has no concept of workflow, approval or version control. This is critical to both ensuring proper data, as well as making sure that proper approvals have been done for each department budget.
  11. Excel provides finance no visibility as to where each department is in the budget process.  It is critical for finance to understand who has not started their budget, who has started but not completed it, who has completed  but not submitted, who has submitted but has not had the budget approved, and so forth.
  12. Excel does not allow for intelligent reporting.  Budget assumptions, special initiatives, asset and personnel planning, consolidation and other reporting should dynamically occur as part of the process without effort or re-keying of data.
  13. Excel does not allow for practical “what-ifs”.  This is the concept of having department heads see the impact of certain common questions such as, “What if we delay headcount adds?”, “What if we reduce salary increases by certain percentages?”, or “What if we reduce expenses by a certain amount?”  This is extremely valuable near the end of the budget process when people are trying to achieve certain management goals.
  14. Excel does not easily allow for building revised budgets or forecasts as the actuals become available.  This is the concept of mixing actuals and budgets together and doing budget revisions or adjustments to provide more visibility and accuracy into the plans as the year unfolds.
  15. Excel does not permit a parameter driven set-up which would free-up finance from programming.  This concept allows finance to easily and
    powerfully maintain the application without complex macros and other difficult-to-build, and follow, programming concepts.

So, Excel is not the best choice for corporate budgeting.  It has been used as a makeshift fix for the lack of functionality in the ERP system.  But a specialized application designed for budgeting can dramatically improve the overall process as well as the financial performance of today’s organization.


XLerant is a SaaS software solutions company that builds and implements innovative, practical and incredibly powerful browser-based budget preparation software for mid-sized and large organizations and higher education institutions, energizing a “Culture of Budget Accountability” among users. The company serves customers in several industries. XLerant’s premier budgeting and planning application, BudgetPak, replaces spreadsheet-based budgeting and provides maximum user flexibility and financial controls. Improved communication, greater ownership of the numbers and increased transparency enable companies to better manage financial performance throughout the fiscal year.

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