Episode #3 in our ‘Making Life Easier for Finance’ series looks at budgeting
Budgeting and budget management plays a crucial role in organisational success.
Senior management, budget holders and the finance team work together creating an achievable plan and carefully monitoring the progress of actuals against budget.
Budget holders are responsible for ensuring that the organisation is able to meet its goals without missing its financial targets.
In this article and webinar, we will dive into how to use cloud accounting software to make budget management easier. We will also share some thoughts on how to improve the budget setting process and how actuals to budgets can be managed more easily using Oracle NetSuite.
The two aspects of budgeting
- The budget setting process:> organisational planning and strategy feeding into setting financial budgets.
- Budget management:
managing income and costs against the allocated budget.
Making the budget setting process easier
There are a number of steps within cloud accounting software that can facilitate the budget process.
· Single data source. A cloud-based system allows for multiple subsidiaries in diverse geographical locations to all access the same single data source in real time. This significantly simplifies budget setting process.
· Multi-segment budgeting. NetSuite has multiple analysis codes/segments. For example, department, location, fund, customer/donor, item. This enables a more informed approach to budget setting.
· Automatic consolidation. A cloud system makes budget and actual to budget consolidation, including across currencies, locations and subsidiaries easier.
· Multiple versions. Budgeting often takes more than one version. A first version. Then a second version. And what happens if something changes during the year? A forecast as well as a budget can help. A cloud finance system allows actuals against multiple versions of the budget.
Simplifying managing budgets
Once the budget is set, the on-going management of budget reporting and variance analysis is completed on a monthly basis:
· Real-time actual to-budget reporting. Both budget holders and finance want to know where they stand. How much money has been spent? How much is left to spend? How much is committed but not yet spent?
Having real time data helps budget holders and finance make the right decisions.
· Drilldown functionality to vendor bills. A single cloud system lets budget holders see their vendor invoices and expenses that make up actuals without contacting the finance team.
· Approval routings. Online approving of purchase orders and invoices allows for approving spends in advance. This puts the budget holder in control of their budget and creates an audit trail of approval and rejections.
· Multiple versions. Finally, budgeting often takes more than one version. A first version. Then a second version. And what happens if something changes during the year? A forecast as well as a budget can help. NetSuite will allow for this.
· Budget holder dashboards. It’s important that information is easily accessible to the budget holder. This includes a dashboard making it easy to see actual to budget reports, reminders of outstanding approvals and a clear view of how much spend is available for the remainder of the year.
A client example
Let's use the example of one of our INGO clients. There are donor/funder budgets. There are internal department budgets. There are programs budgets. There may be multiple subsidiaries.
And then during the year, external factors change.
NetSuite makes it easy to:
- Manage the budget
- Reforecast
- Customise/schedule email/see the real time budget position on a dashboard
- Drilldown to the transactions that make up the actuals to see what was spent
- Report back to the donor/funder
All with the ability to pivot in the system to see greater granularity by subsidiary, by location, by program or by department.
The budget setting and reforecasting process can be a lengthy and time-consuming, often managed using excel spreadsheets with numerous iterations and complex consolidation. This can be simplified and standardised.
Where to start
First, does your finance system allow budget holders access to their actuals and budget directly in the finance system on a ‘look but not edit’ basis?
If you can get budget holders to access their finance numbers easily, this is a great starting point. So, rather than everyone running their numbers on separate spreadsheets, finance and budget holders refer to the same numbers. It's a simple way for finance and budget holders to work closely together.
Conclusion
Budgeting is crucial. Simplifying budget setting process and simplifying budget management are key. Taking advantage of a cloud finance system built for budgeting makes the work less stressful, more efficient, and provides the systems foundation for finance and budgets holders to work together more easily.
Author: Iain Goldmann, Chartered Fellow of CIPD, leads Cloud Doing Good, Oracle NetSuite’s social impact specialist partner for cloud accounting and charity management software. With over 15 years’ experience working with Oracle NetSuite, he is passionate about simplifying finance as a more human NetSuite solution provider.