Enterprise resource planning (ERP) solutions are popular for providing a one-size-fits-all approach to financial management; however, are they the best choice for government agencies when it comes to budget preparation and management? The recent Volcker Alliance report, Truth and Integrity in State Budgeting: Preventing the Next Fiscal Crisis reviewed the budgeting practices of all U.S. states for the fiscal years 2016 to 2018 to determine if their budgeting processes were fiscally sustainable long-term. The report recommends best practices for helping governments remain fiscally balanced, but it might not be that easy for your budget team to implement these best practices if you are not using the right tools for budgeting.
Government agencies will quickly discover that ERPs are not budgeting friendly. According to The 2019 ERP Report by Panorama Consulting Services, after going through the laborious process of implementing an ERP system and training staff, “only 19% of the organizations that expected to realize benefits related to growth and competitive advantage actually realized these benefits.” ERPs contain multiple generic applications designed to manage the flow of data between organizational units, but the ability for forecasting, scenario planning, allocations, priority-based budgeting, and reporting, are often severely limited. In addition, most organizations want to include non-financial staff in the budgeting process. The budgeting module of ERPs is a static application that is not intuitive to use, making it difficult for non-financial staff to navigate. Data is also notoriously difficult to retrieve from an ERP for both financial and non-financial staff. Lastly, while workarounds like spreadsheets provide a quick method for getting a budgeting report, they do not provide the insights government agencies need to make data-driven decisions about the programs and services that support their communities.
Don’t resort to using Excel
When ERPs cannot provide the functionality necessary for budgeting, finance teams end up relying on Excel spreadsheets. While Excel’s format may be familiar, using multiple manual-entry spreadsheets that are susceptible to errors puts your budget accuracy at risk. Spreadsheets may be easy to use, but they lack the ability for your team to collaborate, forecast, and provide deeper analysis and planning such as developing unlimited what-if scenarios and models for activity-based costing and revenue projections. Overall, Excel just wasn’t designed to be an enterprise budgeting system.
Why budgeting software is a better solution
The Volcker Alliance report highlights that while governments may find a way to balance their budgets, it does not mean their budgeting process follows best practices. The report emphasizes the importance of following best practices, specifically for budget forecasting, budget maneuvers to offset recurring expenditures, legacy costs, reserve funds and budget transparency. While agencies may be tempted in difficult times to put aside best practices in favor of short-term fixes, committing to improving their budgeting process will put them in a better position for handling any funding and revenue challenges that occur.
In this regard, how can government agencies implement best practices? If you are trying to figure out how get data out of your ERP or consistently fixing a broken formula in your Excel files, you probably do not have time to think about budget best practices. If that is the case, maybe it is time to consider a better solution.
Dynamic budgeting software is a powerful alternative to customizing an ERP or working with spreadsheets. A dedicated budgeting solution should integrate with any ERP, financial, HR or payroll system, allowing data to flow seamlessly for better operating, capital and workforce budget preparation and management.
In addition to the resource and time savings for the finance team to focus on more strategically driven work, the benefits of using integrated budgeting software include:
- Enables accurate data exchange instead of creating and maintaining expensive and hard to change customizations within your ERP system.
- With an all-in-one place for budget information, you have a single source of data truth.
- Creates a secure, role-based budget workflow with a full audit trail and approval process.
- Intuitive and easy-to-use, allowing for better collaboration between finance teams and departmental staff.
- The ability to create multi-year budgets, along with models and forecasts that supports staff planning and capital improvement planning.
- Budget transparency using integrated data visualization and budget book publishing tools to build trust and citizen engagement about how your government agency spends tax dollars to better serve the community.
Even though ERPs are a popular, one-size-fits-all system, they will not provide the functionality government agencies require to prepare, manage and report on your budget. Your finance team needs to quickly make decisions and adapt to change, not waste time navigating a difficult system or entering data multiple times in a spreadsheet. Choosing an end-to-end budgeting software will enable data-driven budgeting and decision-making, while increasing data accuracy, saving time and improving stakeholder trust.
To learn more about how to choose a budgeting software solution, download Questica’s complimentary white paper, “Why ERPs aren’t the best solution for public sector budgeting” or register for one of our informational webinars to discover how the Questica Budget Suite can help transform your budgeting process.
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