Budgeting and Forecasting; Behind the Screens!

Journal of Performance Management, 2005 by Snyder, Kevin

Technology today plays a critical role in defining the way we manage many of our internal processes, including that of budgeting and forecasting. Although we would like to think about it the other way around - the reality is we are all constrained by what we can execute. For years, executives have stated that decisions should not be driven by technology and that technology must be viewed as the enabler for executing strategy. With today's "open" solutions, we can finally have our cake and eat it too.

Budgeting and forecasting ought to be a four letter word. Second to taxes, this is often the most dreaded exercise management executes. There are many new trends in budgeting and forecasting that are reducing the pain and seasonality - including the concept of eliminating the budget altogether. However, nothing is more effective at reducing the pain and increasing the effectiveness than having the right technology

BUDGETING AND FORECASTING TECHNOLOGY REQUIREMENTS

Dynamic technology that changes with the growth of the organization can cure the common budgeting blues. Listed below are ten suggested software and IT infrastructure features that can make a dramatic difference in the budgeting and forecasting process. Consider these factors as you evaluate your next purchased software or redefine your budgeting process.

SCALABLE

Software needs to be scalable in a variety of ways. Most important is the ability to increase the user base. Depending on the method of budgeting, an application may need to support anywhere from one to thousands of users. These users could either interact real-time or function as recipients of the information, data, or reports. Whatever the interaction, the application needs to be capable of growing and supporting the current and ideal user base. The defined user base will test the application's ability to support different hardware configurations.

Hardware configurations can range from a stand alone computer to application servers, database servers, reporting servers, and / or WEB Servers. In recent years, it has become commonplace to move from a client / server configuration to a WEB configuration.

Finally, one needs to consider the application's support of changing bank demographics. When acquisitions and mergers take companies into new markets, states, or countries, it is necessary to understand the application's capacity for support of any new environment.

ARCHITECTURE

Budgeting applications should seamlessly interface into information distribution and reporting applications. Information accessibility for reporting, managing, modeling, or analysis is critical to an effective solution. Add on reporting solutions or additional software should not be required to distribute the information. Demand that this be part of the main solution otherwise your project and application scope will increase as new vendors are added. Software architecture should subscribe to the concept of common components. Hierarchies, security, definitions and reporting formats are examples of common components that are shared across the entire solution for both budgeting and reporting. With both applications integrated, efficiency relating to time and resources, as well as system and data integrity are realized.

PLATFORM

A well known and common development platform allows for quicker migration to new technologies. For example, a Microsoft visual studio.net developed application is by default compliant with all Microsoft products. When Microsoft introduces new operating systems, databases, and / or applications, compatibility is automatic. In a Microsoft environment, vendors can easily react to customer requests or industry trends given the plug and play technology. Although Microsoft products may not boast the best of these capabilities, it is nonetheless the most widely used. Finding technical resources and training options are much easier (and cheaper) when a common solution is selected.

Software needs to be database independent. Database independence allows you to leverage existing database solutions that may already exist at your organization. This saves money, utilizes existing expertise, and supports a common open database for multiple applications.

Be conscience of "client" computer requirements. If client computer requirements are significant, it may prevent enterprise deployment. Avoid a solution that requires each end user to upgrade their desktop just to access and / or download information. Consider a Microsoft Windows 95 requirement as your typical client computer capabilities.

INDUSTRY SPECIFIC

If you are considering purchasing software, demand an industry specific product solution and ask for financial services resources to demonstrate the software. Our industry is unique and any solution you consider must elegantly address the importance of average balances, interest income and expense, transfer pricing, fee income, portfolios, yields, spreads, equity, and ROA. This competency must be reflected in the software and demonstrated as integral to the core product, not an add-on module with banking only reports. Your time should be spent analyzing and managing the information not building the standard banking reports that your management team already receives. Having a banking specific solution also insures that your package will grow with you and the industry. The financial institutions using the system will dictate the direction of enhancements and changes - all of which you can leverage.