Computerized Budgeting

Computerized Budgeting MGMT 360 Budgeting has been a major part of forecasting how companies spend their money throughout the fiscal year. In most companies, the words â€Å"it’s budget time†, strike fear in the hearts of employees. Financial officers and management accountants brace themselves for reconciling reams of spreadsheets that may reveal wildly different data depending on order and configuration. Non finance employees in various divisions scurry to understand their role in the budgeting process and struggled to pull together the facts and figures they hoped would appear attractive to management. Traditional budgeting was carried out on a pad and pen, archived in countless journals and ledgers and often stored in boxes and crates. Retrieval was a difficult task. Today, computerized budgeting (E-Budgeting) solutions have streamlined and transformed the budgeting process at all levels of an organization. This research will show the factors that contribute to every day individuals to government; that are now using E-budgeting for accurate budget and bookkeeping strategies. Before the days of calculators, computers, and the internet, companies had to budget their finances the old fashioned way. Many accountants had to have countless ledgers, journals, and books filled with the next fiscal year’s projections. At the end of the year they had to go back and reconcile all figures and see what they could do to make the next year even better. This was a very demanding task, since all they had to use was scratch paper, abacuses, and lots of ink. Since technology was not yet able to provide ease to these tasks, the actual task of budgeting and bookkeeping was costly and largely ineffective. Traditional budgeting had many problems. Many employees of companies were unaware about what the company needed in order to make the budget work. With many employees not knowing what information was important and what wasn’t, many budgets and forecast tools were inaccurate. Another weakness was that historical data and past budgets were harder to access. Steve Hornyak of Management Accounting Magazine explains: â€Å"The biggest drawback of traditional budgeting systems is the inability of participating individuals to access and use historical data during the budgeting and planning process. In fact, employees or managers attempting to allocate their sliver of the company funds often work in a vacuum. Without access to historical budgeting information, creating a budget from the ground up or making alterations to the existing budget may become tedious — and sometimes futile — tasks for nonfinance users† (Hornyak, 1998). With employees unable to contribute true validity to the budget and the key historical data missing, bookkeeping was quite difficult. Another stumbling block traditional budgeting presented became obvious when separate departments or different regions within a parent company would try to pool their records together. All figures and numerical records were united and the CFO would make a final projection. However, if one department’s figures were off or slightly miscalculated, the company’s budget as a whole was inaccurate. Companies knew that something had to be done. Ian Henderson of Management Accounting Magazine states: â€Å"The majority of the problems encountered with budgeting arise from managing the process itself†¦The choice for large [organizations] is either to loose many of the undoubted benefits in planning and control offered by budgeting or to apply a software solution to the process and make it less troublesome, less costly and more effective† (Henderson, 1997). Computerized budgeting allows departments using the same program, to bring all figures into one general location, saving countless man hours. With the introduction of advanced data-entry techniques, the undertaking of budgeting each year became easier and easier. Computers helped add and subtract much faster and more accurately, so entering key figures in a spreadsheet became the wave of the future. It made life easier for accountants so they could show their finance departments and other clients exactly how money was going to be spent. It helped create exact figures making pie charts, line graphs and other figure representatives accurate. E-Budgeting has many different aspects and facets. The most useful part of e-budgeting is that it completely automates the budgeting process. Steve Hornyak defines e-budgeting: â€Å"An e-budgeting solution completely automates the development of an organization's budget and forecast. †¦ Web-based enterprise budgeting systems offer a centrally administered system that provides easy-to-use, flexible tools for the end users who are responsible for budgeting† (Hornyak, 2008). The author of the article points out how the technology computerizes the process of making an effective budget. This helps anyone from a small family to a government department with the means of tracking and monitoring a budget. As technology continued to advance, these methods became easier to obtain and utilize. Anyone from the smallest Mom & Pop Store to government officials could enter the necessary information and see exactly how and where their money was going to be divided. Once the internet was created, companies could create inter-office emails and memos making sharing the information that much easier. Companies were able to save money and focus man power more effectively with each new and improved software addition. Most programs used to make budgets that are available to the general public are stand alone applications. These programs stay on the same computer they were created, and don’t need to interact with other software or computers on a related network or the internet. The data created and stored on these programs also stay in one centralized location. This type of budgeting is useful with small families and companies since there is no need to let the information reach the wrong hands. Programs and applications that use outside servers and client formats are usually associated with bigger companies and departments that have many employees over different parts of the country. Some companies use programs that interact with many different financial agencies across the country and even the world. Financial Executive Magazine reviewed a new service offered by Ebudgeting. com and explained its useful tools: â€Å"Ebudgets. om, a specialist in Web-based budgeting and planning technology, has delivered ebudgets 3. 0, a release that it says give large and complex companies increased â€Å"dynamic control† over their budget processes. The software automates budget consolidation, giving management an immediate budget overview† (14, 2000). These companies need services such as this when there are multiple stores or divisions of a parent company. CFOs and other executives need an instant overview of how certain regions and departments are doing financially, in order to make informed decisions and executive judgments. Having budgeting tools that are able to integrate with other financial programs or systems is quite a useful feature. Companies have learned how to create tools and make the entire financing process become one easy process. A company out of Richmond, VA, The Bookkeeping Department, created a product with the same qualities. Accounting Technology Magazine explains: â€Å"Key to the success of The Bookkeeping Department is the deployment of an electronic document management solution that integrates with the most prevalent SMB [Small –to-Medium Business] accounting system, Intuit's QuickBooks†. Scott Vaden. , President of The Bookkeeping Department, found the perfect integrated solution in CNG-Books, Cabinet NCi's electronic document management system that streamlines Quick-Books data entry and document filing into one consistent and efficient electronic process. By uniting QuickBooks transactions with business documents, CNG-Books makes filing, locating, and sharing documents simple, seamless, and secure† (SR25, 2008). This new program is an excellent example of how financial agencies and departments are able to share information and help ease the process of bookkeeping. Using computerized budgeting tools and programs have many benefits to a company. One major benefit is helping to cover liability when it comes time to interact with the government and make figures public. For example, many times companies who had prepared taxes using older budgeting and bookkeeping methods were held responsible for any mistakes made, costing a company unnecessary fines and expenses. Now with computerized assistance and internet support, companies can avoid such penalties. Wayne Shulz of Accounting Technology Magazine explains: â€Å"Even the best payroll staff can make mistakes with the confusing array of payroll tax deposit rules. Nearly every payroll processing company protects you against costly tax deposit penalties and interest by guaranteeing timeliness of your online tax payments†¦If there's a mistake in computation or timeliness, the processor pays and not your company† (Shulz, 2009). This shows how using computers and having interacting financial agencies saves companies money. Another way computerized budgeting helps companies is by bringing together different parts of the company thus increasing employee participation. Once the process of making a budget is streamlined, many employees don’t mind being apart of it. Lesley Meall of AccountancyMagazine. com spoke with Dave Turner of Coda Inc. in a recent issue. Turner was quoted as saying: â€Å"'We are seeing a lot more collaboration on budgeting,' he says, and the process is arguably becoming more useful. As more people become involved and the process becomes more accurate, people feel more important and empowered,'† (Meall, 2008). With an easier system in place, inter-department collaboration is an idea many are able to grasp. One last advantage new-age budgeting creates is helping save time and money in the budgeting process. By using computers many companies are able to save paper, not having to create and copy existing budgets or taking up space storing old budgets. With the recent growing popularity of going green, many companies have taken conserving resources to heart. AccountancyMagazine. com continues: â€Å"Going green can save money as well as the planet, but it can be difficult to know where to begin, so the sustainable business experts at Envirowise are offering help in the form of an interactive online tool. † It allows businesses to get the information they need to get started quickly and easily,' said spokesperson Mary Leonard, ‘highlighting those measures that are likely to provide them with the greatest cost-savings benefits in the areas most relevant to their business'† (Henderson, 2009). This shows cutting costs in any way helps not only the bottom line for companies but also has a positive effect on the environment. In conclusion, there are many benefits to using computerized budgeting programs both on and off the internet. The use of these programs helps simplify and expedite the making of budgets and bookkeeping for both the financial savvy and the fiscal illiterate. Dragging and dropping figures, more accurate results, effective presentation options make computerized budgeting the best practice for everyone. Traditional budgeting has had its share of inefficiencies and flaws in the past. Today, newer technologies and faster computing methods have helped to alleviate most, if not all, of those issues. References †¢ Henderson, Ian. (October 1997). Does Budgeting Have To Be So Troublesome? Management Accounting: Magazine for Chartered Management Accountants. 75(9). P. 1. †¢ Hornyak, Steve. (October 1998). Budgeting Made Easy. Management Accounting: Magazine for Chartered Management Accountants. 80(4). P. 1. †¢ Meall, Leslie. (February 2008). A Marriage Made In Heaven: Budgeting Technology. Accountancy Magazine. p. 65. †¢ Shulz, Wayne. (April 2009). Online Payroll Can Save You Money: Letting Someone Else Wade Through The Process Can Benefit Clients. Accountancy Technology. p. 18. †¢ Financial Executive review of E-Budgeting. com (September/October 2000). Retrieved April 23rd from Financial Executive Magazine website. p. 14 †¢ Soaring With Integrated Electronic Document Management: Accounting Technology (June 2008). Retrieved from Accounting Technology website on April 24th. p. SR25. †¢ Boost Your Bottom Line: Accountancy Magazine. (February 2009). Retrieved from the Accounting Magazine website on April 24th. p. 55.