Many organizations are moving away from Microsoft Excel to dedicated budget, planning and forecasting (BP&F) software because they need more modern systems to help them turn data into business insight, analyze performance management and reduce errors.
Proponents say BP&F software can also help by consolidating and centralizing financial information. And that means it's easier for finance managers to develop more accurate budgets and analyze what-if scenarios.
But how do you know when to make the switch?
Here are some signs offered by experts and users that it's probably time to say goodbye to Excel:
1. Information contained in Excel is being moved from a standalone to a more transactional process. "If Excel has to automatically receive input information and data and then process information and data and push it out the back end, that's not what the Excel model supports because it requires constant human review and intervention," said former CIO Rob Livingstone, owner and principal of Rob Livingstone Advisory Pty. Ltd., based in Sydney, Australia.
2. Extra rigor is required to validate data analysis. When the design, logic and algorithms in an Excel spreadsheet need to be independently reviewed for accuracy using the same testing and validation processes used in software development, that's a good indication it's time to question whether the Excel approach is still valid, Livingstone said.
3. Budgets are managed for numerous entities. "We were collecting budget information for eight different business entities and managing it all in Excel," said Monica Ross, director of strategic projects at Minneapolis-based Parsons Electric, an electrical products and services provider that migrated from Excel to BP&F software from Host Analytics.
Ross said it was extremely burdensome to consolidate the information that various departments submitted to the finance department.
"They wanted it analyzed and reconsolidated in multiple different ways to make comparisons to prior periods, to make comparisons to other similar business lines within the company -- and that was so hard to do in Excel," Ross said. "It just took so much time to even produce the information for a first view, and then you'd find things wrong with the consolidation. And we never really got to the meaningful analysis that people were seeking."
4. More than one person is putting data into a spreadsheet or trying to pull reports from the data contained in it. Excel is very good at crunching numbers and serving as a convenient tool for calculating specific values. But that means a lot of the decision-making processes -- and all of the data-sharing and data-quality processes -- are dependent on the person who set up a specific spreadsheet, said Hyoun Park, principal consultant at Boston-based DataHive Consulting.
"That person who builds that spreadsheet is the point of failure for anything that can happen with the data," Park said. "When a company reaches the point where one person can no longer be the single point of failure, it's time to start looking at a more dedicated software solution."
An organization can probably scale to 20 or 25 employees and have one person in charge of the day-to-day numbers, but after that it starts getting more challenging, Park said.
"Then you start having a real CFO and a real VP of sales who needs to crunch numbers, a real chief operations officer, and that CEO role that typically has done all of that, starts getting broken down into multiple roles that need to be able to get into that information," he said. "And when you reach that point in your corporate maturity, when you have multiple C-level officers and you have multiple ways you need to look at the data, that's a good time to move from Excel to a more mature application."
5. The organization is growing larger and more complex. "You may have more products, more employees, and you may be in different markets and trying to do new things. And you may also be facing more regulatory compliance," said Laurie McCabe, a partner at SMB Group, a consultancy based in Northborough, Mass. "And you have gotten to the point where it's just time-consuming and labor-intensive to set up and maintain budgets and forecasts in Excel."
It's easy to use Excel when you're a small company, but when you start growing, it's tough, because you have to get input from different people and consolidate their spreadsheets, McCabe said. "Those horrible macros and formulas can get broken, and you have all these iterations of stuff floating around your company," she said. "It becomes just a massive black hole of time and energy to pull that together into something usable."
6. You need consistency -- and want happy users. "We had three divisions, and each division was sending into our corporate [headquarters] different forms of budgets. And every form had broken links. They were inconsistent in the way they organized the information, and it was difficult to reconcile the different formats and bring them into the corporate format, which was even a different model," said Harry Vasels, CFO at South Central Media, a marketing and communications company based in Evansville, Ind., which switched from Excel to software from Adaptive Insights (formerly Adaptive Planning).
"We had a lot of inconsistencies. It was not well organized, and it was taking a tremendous amount of time to do the process and the budgeting, and forecasting -- the whole thing -- was considered a chore and nobody wanted to do it. It was a dreaded function."
7. You want confidence in your budgeting, planning and forecasting processes.
When South Central Media's finance department was using Excel, it was never confident that it had a really tight budget put together, Vasels said.
"At the final budget meeting, there were always things that would pop out of the woodwork," he said. "It was difficult to get people to agree on how to do things. They'd say 'We've always done it like this and this is our model.' So, they'd take ownership, but they'd only take ownership of their model and not the process."
Get advice on moving from Excel to BP&F software
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