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Why Spreadsheet Models Don’t Work for Budgeting & Forecasting

Roger Knocker • November 27, 2023

Why Spreadsheet Models Don’t Work for Budgeting & Forecasting


In order to understand how to best use budgeting and forecasting software in your organisation, it is important to understand the difference between budgeting and forecasting.


Budgeting entails planning that is divided into departmental areas of responsibility in the organisation. More people are involved in the budgeting process, and it is therefore also a slower decision-making exercise than forecasting.


Indeed, budgeting can take weeks to complete, because the process involved is only performed once or twice annually. This leaves the problem of the budget being outdated, even before it can be implemented, because it is not flexible enough to make provisions for changes in the business environment. As such, it is almost always out of sync with the overall company strategy and goals. That is – if the traditional approach to budgeting is used, and especially if spreadsheet models are used.


Forecasting can be described as the summarised version of the budget, and is more inclined to show the changes in the marketplace. It is also indicative of the changes in the strategic plan, and corrections made to the original budget. Forecasting is often made monthly or when needed, in order to make provisions for the unpredictability of the business environment. Because only a few finance staff members are involved, it is done quicker than the budgeting process.


The solution is to make use of budgeting and forecasting software that makes it possible to develop a modular budget that is also multi-dimensional, which allows for more accurate budgeting according to the different needs in the organisation. With such a budget, it is possible to distribute the workload correctly among the various stakeholders, and the people with the necessary insight can develop the various modules. By breaking up the responsibilities, it is possible to shorten the budget cycle’s timeframe, and the most important modules can be completed first.


Moving away from spreadsheet budgeting and forecasting models is essential. Spreadsheets are two-dimensional, and thus already not well-suited for the budgeting and forecasting functions. With advanced software, you can budget income by product, customer, or even month or function.


Spreadsheets are difficult to keep up to date and to maintain. Just adding or updating one department can mean having to change several macros and spreadsheets. You want the changes to automatically reflect across the budgeting and forecasting process, which is made possible with our advanced budgeting and forecasting software solution.


Unlike spreadsheets that are not easy to integrate with other systems and data sources, with advanced budgeting software, you are able to import and export files in various formats to and from systems. You are able to do so with ERP and HR systems – not known to be exceptionally compatible with spreadsheet models.


Even though spreadsheet models can be shared, it is never without difficulty, because single-user focus is so common with spreadsheets. With such also comes the problem of not being able to consolidate the data retrieved from several sources. Add to the above, how difficult it can be to share the data contained in one worksheet with one in another workbook, and it becomes clear why there are errors and why the budget becomes outdated, even before being implemented. You want to speed up the process and allow for more collaboration and wider transparency, which is only possible if you use software that supports sharing, updating, collaboration, importing and exporting, and integration with other systems.


Spreadsheet models are by no means easy to understand. Have you ever received a model designed by another person and then have to figure out the formulas used? You need to use cell references, and double check whether they are correctly used.


A budgeting and forecasting software solution that works on the principles of best practices ensures accuracy, and with analytical tools available, it is easy to interpret and use the data in the budgeting models. With such also comes improved collaboration, higher accuracy, flexibility, and reduced time spent on the budgeting cycle.


Get the tools you need to ensure the best practices in budgeting and forecasting. View our solutions and contact us to help you migrate from the outdated spreadsheet models, to modern and flexible budgeting solutions.

By Clerissa Holm March 18, 2025
In the world of finance, numbers tell a story. However, that story is often buried beneath layers of spreadsheets and complex datasets. For financial professionals, the challenge is not just about understanding these numbers but also presenting them in a way that drives decision-making and inspires action. Enter data visualisation – the art of transforming data into clear, compelling visuals. Among the tools that have proven especially powerful are the line graph and the waterfall chart. These visuals help finance teams translate dry statistics into impactful narratives. In this article, we explore how these graphs can transform financial storytelling. The Importance of Data Visualisation in Finance Finance professionals are accustomed to handling vast amounts of data, from profit margins and revenue growth to expense tracking and risk assessments. Yet, presenting these figures effectively to stakeholders is a different ballgame. Visualisation simplifies this process, turning complex data sets into accessible insights. When done correctly, data visualisation: Enhances comprehension: Humans process visuals 60,000 times faster than text, making it easier for stakeholders to grasp key information quickly. Drives decision-making: Clear and compelling visuals help executives make informed decisions without wading through dense reports. Highlights trends and outliers: Visual tools can bring hidden trends and anomalies to light, prompting timely actions. Improves understanding and communication with business - Business doesn't always get what Finance is trying to communicate and good visualisations go a long way to bridging the gap. Better communication improves alignment to strategic financial goals. The line Graph: Unravelling Trends Over Time The line graph, also known as a stream graph or a stacked area graph, is a powerful tool for visualising changes in data over time. It is especially effective in showing how multiple categories contribute to an overall trend. In finance, line graphs can illustrate revenue streams, expense categories, or investment performance in a visually engaging manner. Use Case: Revenue Streams Analysis Imagine a financial report for a company with diverse revenue streams, such as product sales, services, and subscriptions. A line graph can display how each stream has evolved, highlighting peaks and troughs. The thickness of each ‘line’ represents the contribution of that revenue stream to the total, making it easy to spot which areas drive growth. Benefits of line Graphs: Trends Made Simple: Displays how multiple components evolve over time. Visual Impact: The fluid, organic design makes it easier to follow changes. Comparative Insight: Helps compare different categories intuitively. The Waterfall Chart: Bridging the Gap Between Figures Waterfall charts excel at breaking down the cumulative effect of sequential data points, making them ideal for financial analysis. They help bridge the gap between figures by showing how individual elements contribute to a total. Commonly used in profit and loss statements, budget analysis, and variance reports, these charts provide clarity in understanding how specific actions impact the bottom line. Use Case: Profit and Loss Analysis A financial analyst preparing a quarterly report might use a waterfall chart to demonstrate how various factors—like increased sales, higher marketing spend, and cost savings—impacted net profit. The chart’s structure, with its clear progression from starting figures to the final result, makes it easy for stakeholders to follow the financial narrative. Benefits of Waterfall Charts: Clarity: Simplifies complex financial data by showing individual contributions to total figures. Transparency: Clearly distinguishes between positive and negative impacts. Decision Support: Helps executives understand the key drivers of financial performance. Choosing the Right Visual for the Right Data Selecting the appropriate visual tool depends on the story you want to tell: Use line graphs for illustrating trends across multiple categories over time. Opt for waterfall charts when you need to detail the step-by-step impact of specific factors on an overall financial figure. By mastering these tools, finance professionals can enhance their storytelling, transforming raw data into insights that drive strategic decisions. Conclusion: From Data to Decisions The ability to visualise data effectively is a powerful advantage. The line graph and waterfall chart are more than just visual aids—they are essential tools for financial professionals looking to make data-driven decisions that resonate with stakeholders. By adopting these techniques, finance teams can turn numbers into narratives that not only inform but also inspire action. In the end, the power of finance lies not just in analysing data but in presenting it with impact.
Financial KPIs Every CFO Should Track in 2025
By Clerissa Holm February 17, 2025
In the ever-evolving financial landscape of 2025, CFOs are tasked with navigating complexities ranging from global economic shifts to technological advancements. The ability to track and analyse the right financial Key Performance Indicators (KPIs) is no longer a luxury but a necessity. These metrics not only provide insight into an organisation’s financial health but also support strategic decision-making. Here are the top financial KPIs every CFO should prioritise in 2025: 1. Revenue Growth Rate Revenue growth is a clear indicator of a company’s ability to generate sales over time. This KPI allows CFOs to evaluate the success of business strategies and identify trends in market demand. Formula: Revenue Growth Rate = [(Current Period Revenue - Previous Period Revenue) / Previous Period Revenue] x 100 Why It Matters: Monitoring revenue growth helps CFOs assess performance against strategic goals and anticipate future cash flow needs. 2. Gross Profit Margin Gross profit margin measures the profitability of core business operations, excluding indirect costs like administrative expenses. Formula: Gross Profit Margin = [(Revenue - Cost of Goods Sold) / Revenue] x 100 Why It Matters: It reveals the efficiency of production processes and pricing strategies, enabling CFOs to identify areas for improvement. 3. Net Profit Margin While gross profit focuses on operational profitability, net profit margin considers all expenses, including taxes and interest. Formula: Net Profit Margin = (Net Income / Revenue) x 100 Why It Matters: A high net profit margin indicates strong financial health and the ability to manage expenses effectively. 4. Cash Conversion Cycle (CCC) The CCC measures how quickly a company can convert its investments in inventory and receivables into cash flow. Formula: CCC = Days Inventory Outstanding + Days Sales Outstanding - Days Payables Outstanding Why It Matters: In 2025, with supply chain disruptions and rising interest rates, efficient cash flow management is critical. The CCC helps CFOs identify bottlenecks and optimise working capital. 5. Operating Expense Ratio (OER) This KPI compares operating expenses to revenue, offering insights into cost management. Formula: OER = (Operating Expenses / Revenue) x 100 Why It Matters: Keeping operating expenses in check is vital for maintaining profitability, especially in uncertain economic climates. 6. Debt-to-Equity Ratio This KPI highlights the financial leverage of the company by comparing total liabilities to shareholder equity. Formula: Debt-to-Equity Ratio = Total Liabilities / Shareholder Equity Why It Matters: With interest rates fluctuating in 2025, maintaining a healthy balance between debt and equity is crucial to avoid over-leveraging. 7. Return on Equity (ROE) ROE measures the efficiency of a company in generating profits from shareholders' investments. Formula: ROE = (Net Income / Shareholder Equity) x 100 Why It Matters: A strong ROE signals to investors that the company is effectively using their capital, which is vital for securing future funding. 8. Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) EBITDA provides a clear picture of operational profitability without the influence of financing and accounting decisions. F ormula: EBITDA = Net Income + Interest + Taxes + Depreciation + Amortisation Why It Matters: CFOs use EBITDA to benchmark performance against competitors and industry standards, making it a key metric for strategic planning. 9. Customer Acquisition Cost (CAC) As businesses invest in growth strategies, understanding the cost of acquiring new customers becomes crucial. Formula: CAC = Total Sales and Marketing Expenses / Number of New Customers Acquired Why It Matters: Tracking CAC helps CFOs ensure marketing spend aligns with long-term profitability goals. 10. Economic Value Added (EVA) EVA measures the value a company generates beyond the required return of its shareholders. Formula: EVA = Net Operating Profit After Taxes (NOPAT) - (Capital Employed x Cost of Capital) Why It Matters: EVA provides a holistic view of financial performance, emphasising value creation over short-term profits. Final Thoughts In 2025, CFOs must adopt a forward-thinking approach, leveraging advanced analytics and real-time reporting tools to stay ahead. By focusing on these essential financial KPIs, CFOs can drive strategic growth, ensure resilience, and foster long-term success in an increasingly competitive landscape. Tracking these metrics isn’t just about numbers; it’s about enabling informed decisions that align with the company’s vision and goals.
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