You can't build the perfect IT budgeting template in a spreadsheet
Spreadsheets are brilliant tools for arranging data, but they aren’t designed to be an IT budgeting template. What are you giving up by forcing spreadsheets to do something they weren’t designed for?
Turns out, quite a lot.
Let’s take apart your typical spreadsheet and call out the pain (which you are no doubt familiar with), and the steps you can take to alleviate it.
Your budget process involves many players. Each cost center owner (CCO) builds their own budget that rolls-up to the corporate IT budget. If one spreadsheet is an opportunity for manual error, rolled-up spreadsheets are an open invitation for compound errors.
Spreadsheets do not flag budgeting errors. A spreadsheet populates cells based on rules—and formula errors have plenty of places to hide in multiple versions of any given plan.
The budgeting process is slowed down by the iteration of versions going back and forth between CCOs and IT Finance. The only way to speed it up is through version tracking and a paper-trail of submission and approvals.
Spreadsheet versioning “governed” via back-and-forth in email is a sure-fire way to lose accuracy (and your sanity).
Steps you can take to eliminate errors from spreadsheet wrangling:
- Create a single source of truth spanning OpEx & CapEx, fixed & variable budgeting.
- Consolidate budgets into a roll-up view without manual effort.
- Automatically build multi-year contract and asset line items from the prior year.
If you want to speed up the budgeting cycle and elevate its value, start with an area that consumes a significant amount of your budget: labor spend.
Labor budgeting goes awry when cost center owners are asked to budget around abstract account numbers rather than the people they manage. An accountant will happily descend into account level detail for salaries and benefit details, but they aren’t the ones building the budgets—that’s the job of cost center owners (CCOs).
An IT budgeting template needs context that allows a CCO to make headcount choices (“I need to retain my current headcount for last FY and add +5 for H2”) that automatically translate into monthly OpEx spend.
But automated translation of labor resourcing into account numbers is hard. A role in an organization has a base salary (plus benefits) that varies by region, seniority, or employee type. A CCO has to navigate around these variables to produce an all-up labor spend—which doesn’t pass the threshold of “automation.” The CCO wants to move away from the world of accountancy, but they are pulled back by the complications of translating resourcing needs into account number detail.
Spreadsheets report numbers, they don’t capture governance. Salary information is a private matter and shouldn’t be widely circulated, but a budget approval process has many players that need to access to—amongst other things—salary data. That’s a difficult circle to square.
Your spreadsheets share salary information because there is no satisfactorily way to restrict access while enabling approval flows.
Contract spend rarely stays in the confines of one financial year: vendors proffer solutions and procurement approves purchases out of sync with the budget cycle. CCOs need to plan out their vendor spend across multiple years and ask “what-if” questions around amortization and renewal rates. Spreadsheets can’t deliver that without elaborate logic statements and complicated formulas.
CCOs must understand an organizations treatment of OpEx and CapEx to budget with confidence. This asks a lot of someone without a finance background.
If IT Finance wants to farm out responsibility for building budgets to CCOs, they must automate the process of CapEx account spend showing up in OpEx depreciation accounts.
Spreadsheets do not help CCOs build budgets in line with finance rules for asset life and depreciation methods (e.g., straight line, double-declining). These are dictated by corporate finance, and budget process owners are responsible for making sure the rolled-up IT budget complies. Disparate IT budgeting templates, built in silos, make it easy for CCOs to roll-up budgets that run afoul of internal accounting rules.
A spreadsheet is not the right budgeting solution to build stakeholder engagement while enforcing financial rules.
Here's what you can do to break the pattern of no buy-in:
- Empower cost center owners to easily manage budgets using their terminology & context.
- Plan IT resources (assets, labor, and contracts) by cost center and department using IT definitions and structures.
- Automatically generate budget line items for headcount, contract renewals, and assets.
Budget process owners have no confidence in baseline budgets when they cannot communicate plan parameters and targets. When targets are miscommunicated, CCOs prep their budgets off of different assumptions that lead to plan-to-target variance. This is usually discovered late in the budgeting process leaving little time to course-correct.
When CCOs do not trust the budgeting process, they build in their own planning contingencies. And nothing kills confidence in budgeting like an error-strewn spreadsheet. If there is a forecasting process, budget padding is identified during a fiscal year and spend is repurposed. But annual budgets lack a cadence to course correct spend leaving padding as a surplus at the end of the year. At that point, IT Finance is in a crisis mode of spending quickly to avoid corporate finance from cutting next year’s IT budget.
Here's how to prevent the miscommunication of targets:
- Create new plans using prior plans or imported budgets as baselines.
- Adjust baselines for new plans before opening to cost center owners.
- Establish and communicate targets for each department to guide cost center owners.
Here's the bottom line: you’ve sunk a lot of time and effort into making spreadsheets act as your IT budgeting template, but admit it, you have never been happy with the results. Your business is paying an opportunity cost of time, effort, and accuracy when you budget in spreadsheets.