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To compete in today's unpredictable economy mid-sized organizations must keep a very close eye on their operational performance and must be able to use that information to continuously update their business plans and budgets. By keeping their business plans fluid, mid-sized companies can quickly allocate additional resources to take advantage of new opportunities or hold back spending and take a cautious approach when appropriate. This capability allows them to better exploit the two attributes that give them an edge over their larger competitors - speed and flexibility. So what is holding mid-sized companies back from better leveraging these two attributes?

The primary issue is that mid-size companies often operate with limited IT budgets. As a result, they do not have the resources and the expertise to implement a planning and budgeting system that integrates with their operational system which would allow them to continually create and update business plans. Without such a system, mid-sized businesses often resort to spreadsheets as their primary planning and budgeting tool. While spreadsheets provide these organizations with a simple and ubiquitous tool for planning, they also create a number of serious issues that affect their ability to create business plans in a timely manner and continuously update them.

Issues with spreadsheets as a planning and budgeting tool

In order to understand the issues created from a spreadsheet based planning and budgeting environment, we need to first look at a typical planning and budgeting cycle. The planning and budgeting process typically begins with the finance organization which creates a spreadsheet template, loaded with the last planning period's data and top-down assumptions about the current planning period. This template is sent to various department managers, who circulate it within their department to create a first cut of plans and budgets for the upcoming planning period. Throughout this process, each department ends up adding more rows and columns to the spreadsheet to document comments or provide additional details before cycling back to the finance organization.

Soon the finance organization has multiple versions of spreadsheets from various departments, each with different formats, which they need to manually aggregate and reconcile to create a first cut of the company-wide plan and budget. This plan is then reviewed and refined to incorporate top down assumptions, and then sent back to the various departments for iteration. This process repeats itself a few times, with the final version taking anywhere from 6 to 10 weeks in a typical company. Moreover, if the company has foreign subsidiaries, spreadsheets have to be consolidated across currencies, another manually intensive process which causes further delays. Since the budgets are in a spreadsheet format,the process of creating budget variance and other management reports at the end of the quarter is also manually intensive. As a result, the planning and budgeting processes in mid-sized companies tend to be chaotic and lengthy.


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