VideoFrom VisiCalc to Lotus 1-2-3 to Microsoft Excel, the electronic spreadsheet has earned a special place in the hearts of finance folk. But when budget time rolls around, that affection can be strained — especially at larger companies, where spreadsheets from many users must be combined. "Spreadsheets weren't designed as a collaborative tool," says Henry Morris, an analyst at technology research firm IDC, in Framingham, Massachusetts. "Just passing a spreadsheet around gives you no control." The result is usually a massive key-punching and quality-control exercise at the corporate level, as spreadsheet data from various departments is painstakingly rolled up into one budget. And the pain isn't limited to finance: fixing broken links has made "the Excel spreadsheet the bane of IT," says Morris.
Spreadsheet fans have little to fear: Excel is by far the most widely used budgeting and planning (B&P) tool, and it is still a viable solution for many companies. But to reduce the time and effort spent on budgeting, and to marry planning with reality, many companies are turning to B&P software packages. "Usually around January, when the budget cycle ends, we get a huge number of calls from people saying, 'I have to get a [budgeting] application, because I'm not going through that spreadsheet hell again,'" says Dan Sholler, senior program director at IT consultancy Meta Group, in Stamford, Connecticut.
"The whole budgeting process was taking too much time and precluded us from getting into true financial analysis and strategic planning," testifies Gordon Khan, CFO of Hunter Douglas Inc., the North American division of Hunter Douglas N.V., a $1.4 billion provider of blinds, shades, and drapes. In addition to its headquarters in Upper Saddle River, New Jersey, Hunter Douglas has 28 operating units, each with its own general manager and controller. "Each division had its own spreadsheets — they weren't standard," says Khan. "They would send them by E-mail or diskette, and corporate would have to rekey or upload them into corporate Excel spreadsheets to come up with consolidated financial reporting schedules." Not counting preparation time, the process of submitting the information and making changes took a month and a half.
"Every time you made a change, it could take a week to get the change through," recalls Khan. What's more, the small army of consultants maintaining the company's spreadsheets cost the company $100,000 a year.
At the end of the first quarter of 1999, Hunter Douglas rolled out Cognos Finance, a B&P tool that was known as Lex 2000 until Cognos Inc. acquired it in March 1999. "Now, when the numbers are entered by the divisions, the consolidation is done," says Khan. "If they want to change something, they hit a button and the consolidation is changed." And as soon as consolidation is complete, Cognos automatically produces 20 business review schedules created by Hunter Douglas executives. The system is distributed; budgeting and business review templates are installed at each unit. Khan is concentrating on extending the system down to the departmental level, where spreadsheets are still the norm.
Top Down and Bottom Up
Cognos is one of several vendors better known for decision-support applications that have made forays into the budgeting arena. They compete with such B&P heavyweights as Hyperion Software Corp., Adaytum Software Inc., and Comshare Inc. Most B&P applications emulate the familiar layout of spreadsheets, but centralized control helps speed the budgeting process through better workflow. The cost of an enterprise B&P system can easily reach six figures, not counting implementation costs and maintenance fees.
Workflow functionality is an important component of centralized B&P packages. It allows a finance executive to determine at a glance who has and who has not submitted a budget. Likewise, systems with a centralized point of control can instantly alert finance executives when someone's numbers are out of line or variance tolerances have been exceeded. Not surprisingly, Web technology is increasingly vying with client/server to provide this centralized functionality via corporate intranets and the Internet.
A number of vendors now offer browser-based B&P software. One obvious advantage of such software is that it does not have to be installed on the users' PCs, which means companies can involve more people in the B&P process. Another advantage is improved collaboration between executives and business-unit managers. Simple enhancements such as the ability to include a note that explains an unusual expense can dramatically improve communication, allowing management to more effectively disseminate its expectations to business-unit leaders (top-down planning). In return, managers on the front lines can respond with more realistic budget numbers (bottom-up budgeting).
"In the past, with spreadsheets, there was a lot of top-down windage on the numbers from headquarters," recalls Mike Varecka, director of financial planning and analysis for the Employer Services division of Minneapolis-based Ceridian Corp. In March, Ceridian executives decided to install Adaytum's e.Planning. "With an Internet deployment, I think we have a much better ability to have more participation from front-line people who know what is going on."
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