In the first installment of this article, I wrote:
If every iteration of the budget requires many hours or even days of work to recompile the budget and its derived forecasted reports and financial statements, you are not practicing Lean Budgeting!
Here’s why:
If your budget model is overly complex and you’re using spreadsheets or even purpose designed software with spreadsheet-like modeling, every little change requires hours or days of programming, troubleshooting errors (those detected) is a major and frustrating, possibly futile undertaking and each time you need to produce a slightly different version of the budget or do a quick what-if analysis it takes hours or days to deliver – you need to implement a Lean Budget. I’m willing to speculate that many organizations without proper planning and budgeting tools simply don’t perform the required number of iterations or what-if analyses for the reasons above.
Another characteristic of a “Non-Lean” budget process is the limited or lack of proper collaboration among budget preparation participants across the enterprise. This is where consolidation of disparate sets of budget data (worksheets) becomes cumbersome, time consuming and often error prone. This in turn discourages performing adequate iterations of the budgets and testing various scenarios using what-if analysis.
These companies must realize they need to transform this process or they will lose their competitive advantage and experience shrinking market share and deteriorating financial health. Sadly, some of them will ultimately fail.
Going Lean means that all waste must be identified and eliminated. This typically starts in manufacturing and other operational areas of the company but must extend to all functions of the enterprise, including marketing, sales, finance and accounting. We saw that Lean also very much applies to non-manufacturers and even companies that do not buy, store and sell inventory.
How can waste be eliminated?
To practice Lean Planning, Budgeting and Analytics, you should implement a process supported by a software solution designed for such lean and streamlined operations.
I’ve been fortunate to work with Budget Maestro from Centage Corporation. To me, this is the ultimate Lean Planning, Budgeting, Re-forecasting and Analysis system, especially appealing for SMBs (Small and Medium Size Businesses).
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I particularly like that Budget Maestro is delivered (either on premises or in the Cloud) as a turn-key, self-serve solution. This means that all business logic and accounting rules are already built into the solution and there is absolutely no programming needed when implementing the system or when making changes to the budget model. With Budget Maestro there are:
- No formulas
- No links
- No macros
- No other custom programming
- No expensive external consulting work
Not only can you implement this system in days or weeks instead of the usual months or years, you can maintain the system in house, and as stated above, with no or minimal help from outside consultants, while delivering the exact, up-to-date data that management needs, regularly, consistently and quickly. This means that data can be immediately evaluated and decisions made in response to current financial events or anticipated results as communicated by future-period forecasted financial statements and other reports.
How Lean Accounting and Finance processes can support manufacturing or other company operations:
A Lean Accounting and Finance operation, once implemented, tested and perfected (recall that the Lean concept requires continual monitoring and improvement of processes in all areas implemented), must reduce waste in finance and accounting while more importantly supporting all other areas in the company and especially manufacturing.
Finance, freed from the tedious maintenance of a cumbersome planning and budgeting process, and with a robust analytics process, can finally focus on analysis without sacrificing quality or delivering key data to decision makers far behind the conclusion of business and accounting events.
Finance and accounting can now devote much-needed time to establishing metrics and KPIs (Key Performance Indicators) that must be used to measure current performance and establish future goals, communicated through an agile plan and budget. The ability to use such metrics and KPIs by employing Drivers, Based Upon Sources and Methods can make the difference between an effective plan/budget with integrated, real-time analytics, and a cumbersome, hard-to-maintain and error-riddled system, discouraging users and managers from making changes, trying different scenarios or experimenting with multiple sets of inputs.
Since analysis of actual accounting data versus budget can be performed as soon as an accounting period is closed and is very quick and simple to perform, this approach encourages finance to consistently monitor actual results and apply necessary changes or perform reforecasting, almost in real time. Management is now equipped with all the right data to make timely, informed decisions. These constant improvements are a very powerful concept of Lean and now can be practiced in finance using a software solution such as Budget Maestro.
And best of all, whether your organization is practicing Lean or is in the process of introducing these concepts, or perhaps not even contemplating Lean at this time, using a solution like Budget Maestro is a captivating example of how planning, budgeting and integrated analytics can become a streamlined, agile and effective process, without the common waste and limitations inherent in many other solutions.
To me, this is the ultimate Lean solution in the CPM (Corporate Performance Management) space for SMBs. You can use a fraction of the time previously spent on programming and troubleshooting to perfect your plan and budget and use the rest of your time to perform all the analytics you desire while supporting operations with the data and metrics they need to improve.
Who says that accounting and finance must always be overworked?
