A budget is effectively the quantification of an organisation’s strategy and is used as a tool to drive behaviour, steering the organisation towards its long-term goals. That’s the theory anyway. In practice, despite the vast amount of time and effort which goes into the creation of a budget, its output is seldom followed, even when using a modern finance system.
Though it is tempting to blame budget holders, we must question whether this assertion is fair. Can anybody really be expected to manage an entire budget on a set of outdated reports provided once a month?
With this in mind, here are some tips on how to truly utilise a finance system to help your organisation stay on budget.
Real time reporting
If budget holders can access live information at any time, they have the power to monitor expenditure and drive behaviour before they go over budget.
Real time information starts with a cloud-based finance system, but truly harnessing its potential relies on utilising the power of automation and system integrations.
While modern integration tools such as GraphQL can provide seamless links between disparate systems, automation can be used as a tool for removing month-end processes.
A good example of this is automated prepayments. These spread the financial impact of a multi-period transaction from the point that it’s entered in the system, eliminating the requirement for a month-end journal at the same time as generating live data.
As accountants, we recognise the importance of matching costs with revenues. But for managing budgets, we need visibility over the total amount of committed cost. Purchase orders and commitment reporting is a good way of ensuring that budget holders have true visibility over what is left in their budget.
Multidimensional reporting & KPIs
True multidimensional reporting ensures that reports can be created in-system - providing one, live version of the truth.
Multidimensional reporting also opens up the opportunity for budget holders and finance teams to slice and dice data in complex ways, which is often imperative for measuring operational performance against budget. A good example of this is cost of sales, which needs to be understood in the context of specific revenue streams or projects. In these instances, setting budgeted KPIs can be a particularly useful way of understanding operational performance.
Although summary financials provide budget holders with the ability to ‘see the wood for the trees,’ it is only when numbers can be interrogated at a transaction level that they can truly be understood.
Look for ways your finance system can reduce the number of ‘ins and outs’ shown to budget holders. Should a budget holder be presented with the reversal of a prepaid expense? Do they need to see the reversal of an incorrectly posted transaction?
Integrated document management systems
An integrated document management system is the best way to lend insight and confidence in the given financial numbers. If a budget holder can see the underlying purchase invoice or expense receipt in the system, it provides credibility and understanding of the numbers being presented.
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