This content is part of the Essential Guide: A guide to using Excel as financial accounting software

How to move from Excel to financial management software

Before switching from Excel spreadsheets to financial management software, companies need a plan that aligns with their finance processes -- and one that will scale as the business evolves.

Although Microsoft Excel has long been the go-to tool for finance processes, many finance leaders, particularly in larger, more complex organizations, ultimately realize the downside of using spreadsheets for budgeting and forecasting.

Spreadsheets are prone to errors, contain incongruent data, and are difficult to manage if there are many departments. Not to mention that it’s time-consuming for users to collect the information necessary to prepare a budget.

When finance leaders understand that using spreadsheets for major financial processes is not in the best interests of their companies, they often decide to transition from Excel to budget, planning and forecasting (BP&F) financial management software.

Moving to a dedicated BP&F platform is a big step, and you should consider a number of issues before you flip the switch. To help you ensure a smooth and successful transition, users and experts weigh in on what to do to avoid pitfalls when you’ve made the decision to leave Excel behind for a more modern process.

1. Get a commitment from management. "I made sure I had management commitment before I began the process," said Harry Vasels, CFO, South Central Media, a marketing and communications company in Evansville, Indiana, which switched from Excel to software from Adaptive Insights (formerly Adaptive Planning). "I wasn’t going to waste my time and I knew the time it would take."

2. Give the transition enough time. "When you go in and do this, you have to dedicate the time necessary to make this model the way you want it to be," Vasels said. "I dedicated 10 weeks of time to it. A more complicated operation might have to set aside four to five months to the process."

You need the time to bring the data in, you have to clean it, you have to be sure everything you’re putting together is accurate and you have to be testing the results throughout the transition, he added.

"At 10 weeks we had the model and we’ve used the model with only minor tweaks," Vasels said.

3. Bring in the right people. "You need a mix of people," he said. "In my case, I needed to have buy-in right away. So I made sure I had some operational people involved with me. I made sure I had one person from each division who was the designated person assigned to this task by the person running the division."

4. Integrate all spreadsheet versions across the company that have financial information. Lines of business often track specific financial numbers that are not necessarily tracked at an executive level, but need to be integrated into planning, budgeting and forecasting software, said Hyoun Park, principal consultant at Boston-based DataHive Consulting.

"The best way to do this is to ask each manager for the metrics they use and how to calculate them rather than simply hunt through each spreadsheet for potential discrepancies and oddities" he said. "This up-front work can be challenging, but it will result in greater uptake and usage in the long term."

5. Develop consistent methods for projections and rolling forecasts and ensure that these models can be altered based on changes to corporate strategy. The most complicated and "mature" budgeting, planning and forecasting models are meaningless if they cannot be changed over time based on corporate need, Park said.

"Although 'agile' and 'forward-facing' are buzzwords, they are also important aspects to describe BP&F," he said. "Business models are no longer fixed and predictable over a five-to-10-year scale."

Business models, Park added, require tinkering as digital services, mobile, social, cloud, software as a service and the demand for analytics change not only the products and services that businesses offer, but the revenue models, sales structures, cost allocations and accounting assumptions that are used for forward-facing business.

6. Review top-line and bottom-line modeling assumptions together as spreadsheets are moved into BP&F software. A basic example, Park said, is that sales projections may be related to a cost-plus pricing model and linked directly to bottom-line costs in a spreadsheet, but your company may be moving to a demand-driven value pricing model.

"In this case, revenue and cost projections need to be decoupled to fit this strategic shift," he said. "Rather than simply translate existing spreadsheet models to planning, budgeting and forecasting solutions, make sure that these models reflect corporate expectations rather than an individual’s assumptions on how the business works."

7. Determine what you really need. You need to figure out what you really need so you can spend less time managing the BP&F process and more time using what is in the budgeting and forecasting and the reports to help you better manage the business, said Laurie McCabe, partner, SMB Group, in Northborough, Mass.

"In most cases, you’ll want things like financial consolidation so that if you have multiple divisions or departments, you can consolidate [the budget] and summarize it," she said. "You probably want some kind of analysis to help you look at the difference between the planned performance and the actual performance."

8. Select a product that can grow with your company. "You shouldn’t get into a solution if you’re already at the upper bounds of its capabilities with your current needs," said Monica Ross, director of strategic projects at Minneapolis-based Parsons, an electrical and technology provider that migrated from Excel to BP&F software from Host Analytics.

"Find a provider that will give you growth and choices because you’ll want it," she said. "You may not know what all those requirements are yet but they will come because the management team gets hungry for more information."

9. Know your requirements upfront. "We were doing too many changes at the implementation," Ross said. "I realized in hindsight that we needed to be clearer in our requirements upfront and not be figuring them out simultaneously with the build."

10. Don't over-engineer your first solution. Don’t make a forecasting model that is extremely complex, said Ross. "My forecasting model was so complex that it was not user-friendly for my management team to engage in the forecasting modeling," she said. "So keep it simple."

Next Steps

Should you dump Excel for BP&F software?

Tips for BP&F software training

Transforming business processes with technology

Dig Deeper on CPM software