An unexpected benefit of Acumatica Cloud ERP is its ability to make the budgeting process easier. Companies preparing their annual budgets may find that the wealth of information found within their Acumatica system makes it easier to anticipate income and expenses and to assess how much is needed for each line item for the new year’s budget.
Budgeting Methods and Cloud ERP: ERP Helpful for Many Budget Systems
Whether you are building a budget from last year’s models, historical records, or a clean slate, your ERP system can be a great help.
Zero-based budgeting is popular today with many companies, and data from Acumatica ERP can also be helpful to begin a zero-budgeting process. This form of budgeting uses a method whereby each line item in the budget is thoroughly evaluated and justified, rather than adjusted from the previous budget. The assumptions and rationales driving last year’s budget are never 100% valid for this year, although an analysis of actual results is relevant to the preparation of this year’s plan. A “Budget vs. Actual” (BVA) Analysis is often the starting point for a new budget.
BVA – Budget versus Actual
A General Ledger System can facilitate the BVA and budget preparation process. It can also provide accuracy and assists with control over the results. As a minimum starting point, the BVA analysis should identify, for each line item, the budgeted amount, the actual amount, and the difference.
As each group or individual prepares its budget, each individual department budget may be consolidated into a major area of responsibility such as division, office, or branch. The hierarchical levels available in the General Ledger should reflect the actual structure of the organization when it comes to areas of responsibility. This can be easily accomplished with an ERP system such as Acumatica or Sage ERP.
After each budget is consolidated, the next step is to compare it to the actual results in the BVA. Last year’s budget may be difficult to recall; many companies use an interim checkpoint such as quarterly or six-months so that budgets can be reconciled on a regular basis. This is helpful when assessing actual business conditions, such as a better-than-anticipated product launch, or loss of a key distributor.
BVA can be misleading if only the original budget is used as the baseline. This happens all too often. The BVA process should include a comparison to both budgets to highlight any incorrect assumptions in the original plan and reveal the latest impact of revising those assumptions, treating the revisions as an important input to the new budget exercise.
Small to mid-sized businesses using BVA may find that spreadsheets lack the flexibility they need for the task. In the past, more advanced accounting and financial software may have been out of reach for SMBs. Today, however, the versatility of cloud accounting software and tools such as Acumatica offer sophisticated financial management.
With its flexible deployment and licensing options, Acumatica’s general accounting software solution can provide faster budgeting and analytics to accommodate smaller organizational structures, and empower strategic business planning and budgeting.
As you work on next year’s budget cycle, consider how software such as Acumatica can make the budgeting cycle easier for all concerned. The faster, simpler, and more streamlined the budgeting process, the faster everyone can get back to work—and achieve their revenue goals!
Accounting Systems Incorporated
Accounting Systems Incorporated (ASI) provides ERP, accounting, and other software and systems to help your company grow. We focus on helping small to mid-sized companies improve operational efficiencies through the power of software and technology. Software such as Acumatica ERP and Sage 100 can provide the business intelligence you need to grow your company. For more information, visit our website, or call us at 803-252-6154.