What is a Collaborative Business Budget?

And how do you ensure your budgeting software offers a true collaboration?

There’s a growing trend among mid-size businesses who find their budgeting needs have outgrown the spreadsheets they’ve been using. They’re now looking for business budgeting software that will make it easier to collaborate among all of the budget constituents. And to ease the consolidation of input process, and many will begin the process of searching for a budgeting software solution for their business. But be warned: Many business budgeting solutions are barely a step up from spreadsheets, and require a tremendous amount of programming on the part of the user. And that fact alone means that collaboration will be hobbled, as the complex formulas needed to apply expenses correctly will be beyond most of your budget contributors.So the first step is to have a clear idea of what a collaborative budget is. This is a topic I covered in detail for Finance Monthly Magazine, but I’ll summarize the key points here. First and foremost, it must be smart – automatically processing all inputs according to your company’s unique business structure, and automatically update all outputs such as your P&L, balance sheet or cash flow statement. Smart Budgets also tie each contributors’ data into the same cloud-based, centralized relational database, so everyone sees the same financial data or just the portion they need to see. That extends from the most meticulous operational details to the highest consolidated financial rollups. The financial staff and C- level executives have comprehensive information from every corner of the operation, always updated without manual collection and consolidation.Moreover, Smart Budgets promote more collaboration side-to-side between operations and finance. There’s also more collaboration top-to-bottom; importing actual results allows for continuous comparisons to plan – bridging the gap between the strategic and operational plans. Everyone sees the same numbers so there’s less of a divide between stakeholders.

‍Questions to Ask Potential Budgeting Software Vendors

‍If you want to implement a truly collaborative business budgeting solution, you’ll need to ask your potential vendors some pretty pointed questions. Here are the ones I find vital, with an explanation as to why they’re important:

‍How flexible is your interface? A budget is a vital tool for every functional head in your company. But most will resist learning a new program, which means your budget model must feel familiar to them, with rows and data that they recognize. Make sure your business budget software vendor can customize your interface by user/role – it will increase the probability that they’ll use it.

‍What level of support will you provide my company as we implement? A certain amount of handholding will be required to help your team configure and implement the software, so that it is familiar to your end users.

‍How do you ensure financial rigor? In a collaborative budget, most of the contributors will have no background in corporate finance, and little understanding of the differences between a balance sheet, cash flow or P&L statement. For this reason, it is essential that your business budgeting software solution has built-in financial rigor that prevents user errors and ensures compliance. For example, Centage offers pre-built business logic and accounting logic.

‍Can I easily modify my budget to test multiple what-if scenarios? This is one of the biggest considerations in selecting a budgeting software solution. You need the flexibility to change your budget model to reflect critical business questions and assess the impact on your financial statements.

‍Can we change our budget model internally, or do we need to hire consultants? Your budget needs to keep up with the speed of business, and that means you need the flexibility of changing your budget model yourself, without incurring additional expenses. Consultant fees are a barrier to testing what-if scenarios.

‍Do you offer role-based security? Budgets are filled with highly sensitive information, personnel data, salaries and the like. A collaborative business budget should prevent the wrong users from accessing data that’s not directly related to their roles in the organization.