CTO Budgeting - XLerant

Why The CTO Should Care About The Budgeting Application

While CTO’s have always been very busy people, these days the job is even more taxing with constantly evolving software, technology platforms, and now the introduction of cloud computing. That said, there is one application area that has slipped outside the boundaries of the CTO sphere of influence. This application has become mission critical and highly visible in the organizations. It is the budget process (or, if I am kind…system). The reason for the sarcasm is that most organizations have allowed finance to build a budget “system” based on Microsoft Excel…but is that a true “system”?

Excel is neither a development environment nor a database. This means that financial people (who are not development experts) have become the developers and are using a two-dimensional spreadsheet tool rather than a true development environment and a true database. This leads to a lack of functionality, flexibility, controls, security and lots of manual manipulation and re-keying of data. And the possibility for errors is huge since more than 90% of all spreadsheets (regardless of complexity) have errors in them. You would think the CTO would be worried, no?

Many organizations that use Excel have submitted budgets to their boards with errors in them; budgets that actually had to be recalled- ultimately embarrassing the CEO, CFO and CTO. The board always asks “How could this happen and what other errors have we missed?” And, as budgeting becomes more and more critical to the financial success of the organization, an issue like this becomes more and more alarming to boards and management alike.

The reason that organizations have allowed this move to Excel to occur is that general ledger systems are even worse at budgeting. While they are professionally developed systems with a true database, general ledger vendors do not understand budgeting, end-user computing or the specific needs of non-financial end users such as department managers. General ledger systems are generally client/server based, transaction oriented (debit/credit journal entries), focus on strict controls and, by their nature do not support creativity or flexibility. Budgeting is an end user application, using account balance information and requiring both a balance between controls and flexibility, as well as a unique user experience (think Turbo-Tax for budgeting). General ledger vendors turn budgeting into a manual data entry exercise. This is not budgeting.

But CTO’s don’t have the resources to focus on a new application area. And while Excel budgeting is a rogue application, it’s easy to turn a blind eye to it based on a lack of alternatives.

But there are practical solutions that can be endorsed by the CTO without requiring him or her to spend valuable resources supporting it. Budgeting is a perfect fit for cloud-computing. Users obviously already know and use the Internet, use browsers, and have extensive access from work, home road or other places. A good budget system will support “collaborative budgeting”, be built as a database application, provide budget intelligence (or the right functionality for budgeting), balance flexibility with controls, and provide the right user experience for the needs of non-financial people (who make up 90% of the users of a budget application). It will have the proper interface into the financial transaction systems to eliminate the need for re-keying of data. Finally it will possess the right security and encryption to make the data safe.

It is also important to note that, while functionality is important, user experience is even more important. For instance, what good is a feature if the intended user can’t use it effectively? Here is a quote from a recent WSJ CIO Journal article:

“At a time when people are accustomed to using well-designed applications from companies such as Google Inc. and Apple Inc. in their personal lives, they have little patience for workplace applications that leave them confused. Functionality is no longer the definition of success. Usability is key.”

Basically, users will accept less crap today, when it comes to software,” says Michael Krigsman, an independent industry analyst. “That is because the world of consumer software has become easy and simple to use and has trained users to expect that business software will follow a similar model. And if it doesn’t, people are much less patient than they were in the past.”

Excerpt from The Wall Street Journal, Dec. 11, 2013, Steve Rosenbush

So selecting the right system is more about selecting the best fit for user needs based on usability in addition to (or even at the expense of) functionality.

Benefits of collaborative budgeting include:

  • Better participation in the budget process by department heads as well as better ownership of the numbers
  • A more accurate budget that the organization can have confidence in
  • A budget that better reflects and supports the organization’s strategy
  • Better flow of ideas for discussion
  • Better overall financial performance

CTO’s can support a pre-built budgeting application as a dramatically better and safer alternative to Excel. These cloud-based solutions should be housed in professional web-hosting environments, have proper security, availability and the best encryption capabilities available. The budget database should maintain separation between companies to make sure that there are no breeches of security or confidentiality. Using these criteria, the company can get a better product, better security and controls and require no internal hardware or software support. The users win, finance wins, IT wins and management wins.

So CTO’s need to look carefully at the current rogue application of budgeting and effectively guide the organization away from potential disaster and towards a solution that can boost productivity and help the organization better achieve desired financial results.

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