The true cost of planning a corporate budget with Excel

Is budgeting with Excel holding your company back? It’s time to uncover the true costs of planning a corporate budget with Excel–there are more than you might think. While Excel may seem like a convenient tool, it has significant limitations when it comes to corporate SaaS budgeting.

In this blog, we’ll discuss the challenges you can expect to encounter while using Excel for budgeting, such as data connectivity issues, difficulty analyzing past trends, and a lack of easily accessible and usable SaaS metrics. We’ll also explore the real cost implications of relying on Excel-based budgeting, including time investment, accuracy risks, and scalability limitations. If you’ve outgrown Excel for budgeting or think you may have, then keep reading.

Why is Excel detrimental to a SaaS company’s budget process, and how can AI help?

Unfortunately, using Excel for corporate budgeting can have many hidden costs and drawbacks. Manual accounting and data entry carries the potential for errors that will waste valuable time and resources in your department. Plus, if allocations are improperly gauged due to manual mistakes, you could end up with serious cash shortfalls when you’re least expecting them. 

If you don’t catch manual reporting errors in time, even minor manual discrepancies made at the starting point of the process can render an entire budget useless. Additionally, collaboration is essential to effective SaaS budgeting. Excel poses a serious roadblock to the free flow of data because it doesn’t offer a single source of truth (SSOT). 

However, accounting automation improves this state of affairs in many ways. It increases efficiency and accuracy in the budgeting process, providing real-time visibility into the key financial data that forms the backdrop of all your major budgeting decisions.

Before we do a deep dive into the dangers of Excel-based budgeting, let’s look at automated budgeting as a point of comparison.

The role of automated software in SaaS corporate budgeting

When creating a new budget, nothing feels better than confidence in your tools and processes. Automation provides that by streamlining the budgeting process and reducing errors that often arise from manual calculations. With AI in your department, your team can collaborate in real-time, ensuring everyone can access the most up-to-date information.

You’ll also find it easier to:

• Analyze budget variances
• Track your SaaS metrics

• Reference previous years’ data
• Securely encrypt your data
• Spend more time on strategic plans instead of manual tasks

Automation features save time and increase efficiency in data entry and reporting. Financial planning software can help your business make more accurate and informed budgeting decisions by providing better visibility into financial data. Incorporating automated software into the budgeting process is considered a best practice for SaaS companies–it’s not hard to see why.

Keep that in mind, and let’s return to the pitfalls and perils of Excel-based budgeting.

The shortcomings of Excel for SaaS budgeting

Planning your SaaS company’s budget with Excel comes with a very real set of challenges. For one thing, Excel has limited scalability, which means it may struggle with complex budgeting scenarios or large amounts of data. When you think about it, it doesn’t make sense to use a budgeting tool you know you’ll have to replace down the road. Wouldn’t you rather choose the right way upfront and know you’re covered in perpetuity, no matter how large your organization becomes?

Other than a lack of built-in scalability, what other problems do SaaS CFOs encounter when they settle for Excel?

Data connectivity and performance issues

When planning a corporate budget with Excel, data connectivity issues can arise when importing or exporting data between Excel and other software tools. You might also encounter compatibility problems when trying to integrate Excel with cloud-based or enterprise systems, hindering collaboration and data sharing among team members.

For a highly collaborative workflow like SaaS budgeting, that can bring the entire process to a standstill. Additionally, Excel’s limitations in handling large datasets can result in performance issues and slow down the budgeting process even more.

Difficulty in analyzing past trends

When planning a corporate budget with Excel, one of the major difficulties is analyzing past trends and financial performance data. Unlike automated solutions with detailed reporting drill-down, Excel may not provide an easy way to analyze and incorporate historical data into your budget planning.

The lack of automated tools in Excel results in time-consuming manual analysis of past trends, which can be inefficient and prone to errors. Reliance on Excel for budget planning may lead to overlooking insights from past performance that could turn into future profits.

Managing critical business drivers and KPIs

Managing critical drivers and key performance indicators (KPIs) in Excel can be challenging. The manual data entry required for tracking and managing KPIs increases the risk of errors that can result in large budget variances. Moreover, Excel lacks real-time visibility into SaaS metrics like committed monthly recurring revenue (CMRR), so it’s difficult to make informed budget decisions.  

Even in the face of all this, some CFOs might be able to say, “That’s true, but for right now, it works well enough for us.” If you found yourself agreeing with that statement, it’s only because you haven’t considered the actual costs of using Excel for budgeting. Let’s change that.

RELATED: Automation, Metrics, and MUD: a CFO’s Guide for SaaS Success

The real cost implications of Excel-based SaaS budgeting

Creating and managing a budget in Excel can be a time-consuming, expensive, and labor-intensive process. Manual spreadsheets are prone to employee error, which can lead to significant budget inaccuracies.

Relying on Excel for corporate budgeting can have significant cost implications in terms of time, accuracy, and collaboration, leading to missed opportunities for strategic planning and revenue growth. Let’s look at some of Excel’s “invisible costs” in more detail.

Time investment

Excel-based budgeting is a time-consuming process because it involves extensive manual data entry. Troubleshooting errors and formatting issues can further waste your team’s valuable time and impact their productivity. Imagine if all the time your department has spent on insignificant manual budgeting tasks over the years had gone to strategic business activities instead. AI makes that a reality–with Excel, it’s only a “what if?”

Serious accuracy risks and intolerably high variance rates

When it comes to corporate budgeting, relying on traditional budgeting processes and tools like Excel poses variance risks. Manual data entry and formula errors are extremely common, leading to budget calculation mistakes that result in financial losses.

Inaccurate budgets also make it difficult to forecast and plan for future expenses. To mitigate these risks, using automated budgeting software is crucial. It minimizes errors, ensures greater effectiveness in financial planning, and results in SaaS budgets you can trust.

Limited scalability

Excel may struggle to handle large amounts of data and the complex calculations that accounting departments often carry out. As businesses grow, the limitations of using Excel become more apparent. Even if you’re a smaller company now, you should transition away from manual budgeting as early as possible in your business lifecycle. Growth should be on your mind before it occurs–that’s the only way to achieve it unless you get lucky somehow. Profits don’t just fall out of the sky.

By embracing technology and adopting modern budgeting tools, businesses can streamline their budgeting process and achieve more accurate and efficient FP&A. Now that we’ve reviewed the hidden risks of Excel-based budgeting for SaaS companies, let’s dissect each step of the manual budgeting process. This is important because each of these steps–taken by almost all companies that use manual budgeting–presents its own distinct risks.

The nuts and bolts of planning a SaaS budget with Excel: specific problems for SaaS CFOs

Planning a SaaS budget is complex, and trusting Excel to do the job makes it significantly harder. There are two primary reasons for this. The first involves the shortcomings of Excel itself, which we’ve spent the first part of this post covering. The second reason is that every step of Excel-based SaaS budgeting presents companies with multiple layers of organizational risk.

Let’s briefly review each step involved in manually assembling a SaaS corporate budget with Excel.

There’s no role-based functionality for data viewing

As we’ve mentioned, SaaS budgeting calls for deep involvement from many different stakeholders at your company. One of the major benefits of automation is that role-based dashboards allow everyone involved in the process to instantly see all the essential data for their role, and nothing more.

This is a huge time-saver for SaaS CFOs and other leaders involved in the corporate budgeting process. With Excel, everyone has to isolate their relevant data, which wastes a lot of time. And the frequent changes to metrics and financial information at SaaS companies only compound these problems.

Excel makes it extremely difficult to see how deferred revenue should impact your budget allocations.

As recurring revenue businesses, SaaS companies are beholden to ASC 606. Since you can’t recognize all your revenue upfront, it’s critical to have crystal clarity on how your deferred revenue will impact your allocation choices. Excel offers no functionality specifically for SaaS deferred revenue waterfalls.

For CFOs and anyone else involved in planning a SaaS budget, that’s a huge problem.

Excel creates too much dependence on specific team members

One of the biggest problems with Excel is that it creates “weak links” in your budgeting by making your company highly dependent on specific people. Excel-based budgeting and formula creation is a tedious and complex business, so the natural result is that specific workflows get siloed to micro-teams of 2 to 3 people or sometimes just a single employee.

If those people leave the company, you could be staring down some serious problems–missed budget deadlines, broken formulas, unworkable budgets, and more. There’s something else to consider, though. Excel lacks clear process and model assumption documentation. These are important documents explaining the details behind financial formulas–how were they arrived at, and how should they be used?

Without clear documentation, anyone stepping into these processes for the first time will find it difficult to get their bearings.

Excel requires manual forecasting, drastically limiting scenario comparison capabilities.

The more clearly you can predict the future, the more effectively you can budget for it. SaaS budgeting calls for detailed “if-then” scenario forecasting on everything from churn rates to revenue metrics and much more. Excel’s lack of flexible scenario planning makes expenditure tracking and cash flow monitoring very difficult.

Especially if your company has variable costs you need to plan for, this shortcoming of Excel will make it much harder to reach your financial goals. Your entire company depends on data derived from the finance team’s forecasts, so it pays to give yourself a leg up by moving to AI-based tools.

Seemingly helpful Excel features can create time-wasting headaches for collaborators

Excel is full of features that seem useful at first but ultimately create issues for other stakeholders in the budgeting process. Take Excel’s “hide date” feature, for example. Spreadsheet-based budgeting is a very data-dense experience–sometimes the column and row layout gets redundant and takes up space with information you’re not currently using. In that moment, the “hide data” feature makes total sense, right?

But fast-forward 3 or 4 hours when someone else is using that spreadsheet. They can’t find the data you hid, and now they’re tearing their hair out because the budget deadline is approaching. 

Has your SaaS company outgrown Excel for budgeting?

Are you finding managing your budget in Excel to be time-consuming and cumbersome? It might be a sign that your business has outgrown spreadsheet-based budgeting–that happens to every company at some point. Creating a business budget with spreadsheets in the age of AI and ML is quaint at best and potentially disastrous at worst. Excel makes it difficult for business leaders to hit their strategic objectives and ensure budget alignment with organizational needs.

Our recent ebook can help you assess whether automation can improve your department’s business planning and enhance your company’s budgeting approach. You can check it out here.