Power Budgeting with DataRails: a step by step guide to success

Budget is an elastic financial process shifting depending on a company’s size, stage and industry. Though essential, companies find budgeting challenging for two main reasons: 

  1. Process- The budgeting process can become convoluted with many spreadsheets going back and forth between many stakeholders. 
  2. Accuracy- The budget needs to be built in a way that realistically gives a solid forecast/benchmark of what to expect in the future. It is essential to collect all the relevant historical data. Drivers and assumptions can add additional accuracy to the model.

Struggling with these challenges, companies look to DataRails for a budgeting solution.  Sometimes companies have no budget at all and need to create a budget from scratch, while most companies are looking to take their budgets to the next level. 

Scenario 1: Shh… we never had a budget!

No need to be embarrassed. Let’s start by creating a basic budget. For first time budgeters, we recommend basing the budget off of a consolidated PnL. DataRails collects your financial data and then creates a consolidated PnL for the previous year. For most companies, this is a solid baseline. 

Let’s use an example of a company with no seasonality. We will take the Profit and Loss (PnL) template and use DataRails formulas to populate the previous 12 months data. Using excel formulas we will divide the values over the next 12 months. 

Because we are budgeting in Excel, any adjustment can be made directly into the cell. Let’s say you anticipate a 20K marketing expense in July that never existed, you can override the existing value. 

You can also incorporate monthly growth by using fixed growth rates and apply them to your excel formulas. Once complete, upload the file to Excel and the budget data is stored in the system. 

Benefits from this approach:

  1. Go 0 to 60 extremely fast.
  2. Easy To customize and make any adjustments
  3. Ready to perform variance analysis either in excel management reports, Dashboards and Powerpoint.

Scenario 2: Larger Organizations with Multiple Departments

Larger companies with multiple departments present different budget challenges. Setup, distribution, review, approval and consolidation usually are disorganized and as a result, inefficient.

Set up: 

Many customers will use a standard template made up of Cost Centers. 

Pre-DataRails: The FP&A team will use the template and populate the historical data for each department. The file will then be sent to department heads or budget owners. The department heads will then fill out the template (possibly after a few “nudges”).  Finally, a ping pong match will ensue until the budget is finally approved. This is repeated for each department.

DataRails: The template will be populated with DataRails formulas. The formulas will not distinguish based on cost centers, rather the formulas will present the consolidated totals. Using the “Split” feature, we can instantly create individual files per department. 

The Process

DataRails uses a “Collection Process” for the Budget where each populated template is stored. Each department head will have access only to their specific department. 

From the budget owners perspective, the process is the following: 

Open Budget→ Edit Budget→ Submit Budget

Versioning

The budget owner/CFO reviews the budget and either approves or makes comments and the process is repeated. Every budget submission creates a new version, so you have access to any submission.

Instant Consolidated View 

Each budget is loaded into the cloud giving you the ability to consolidate and review the budget at every level of detail.

Scenario 3: Account Level Budget in a large organization

We just mentioned cost centers, but what happens if the company wants individual budgets based on unique account numbers specific for the department?

Pre DataRails: There is no way to avoid a ton of manual work. Each budget will have it’s own template with its own accounts. The input data will be manually entered in each template. 

Post DataRails: DataRails will connect the individual accounts with the department. At that point, using DataRails Excel Tables, the data will be pulled into the excel spreadsheet. Again using the “Split” feature, individual templates will be created. Because we will use excel tables, only the relevant Accounts will appear in this template. 

Conclusion

DataRails processes increase efficiency and reliability in budget creation. Reliability begins with collection of historical data. This historical data serves as the basis for all the budget. Adding in drivers, assumptions and scenarios will enable companies to set up an accurate budget. An accurate budget will establish meaningful KPI’s facilitating your organizational success.