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What is budgeting software?
Budgeting software is a tool that businesses use to allocate, track, and manage annual budgets. Its purpose is to make the budgeting process accurate and agile, as well as reduce the turnaround time.
The tool makes it easy to analyze financial data and forecast expenses. It eliminates manual errors associated with spreadsheet-based budgeting such as miscalculations and incorrect data entry. It offers features such as cash management, forecasting, and “what-if” scenarios.
The benefits of budgeting software
Businesses can use this software to track and manage their finances based on their overall expenditure. Here are some of the benefits of budgeting software:
- Plan for future changes: The software uses “what-if” scenarios to plan for future changes. The scenarios may include budget shortfalls, revenue fluctuations, price changes, and numerous potentially positive and negative scenarios. Analyzing these scenarios helps business understand the financial impact of each event.
- Enhance transparency: Budgeting software ensures complete transparency into financial transactions and data. This is done using features such as real-time reports, audit trails, and visually descriptive graphs and charts. Some solutions offer a unified view of multiple projects and the related expenses, documents, images, and videos.
- Adapt quickly by being agile: The software helps businesses stay agile despite economic fluctuations or market unsurety. Organizations can accommodate these changes and keep their budget plans updated using features such as rolling forecasts, which reforecasts the budget every month or quarter. These constant updates ensure that the forecasts are accurate and relevant.
- Improve collaboration: Often, different people handle different parts of the budget. In such cases, budgeting software allows employees to collaborate on the exercise. It simplifies the budget approval process and improves communication across teams.
Typical features of budgeting software
- Cash management: Collect and track your company’s cash flow.
- What-if scenarios: Simulate potential financial outcomes and make requisite provisions for the future.
- Forecasting: Use historical and current data to make predictions. Get a realistic idea of where the business is heading.
- Multi-department/project collaboration: Manage your company’s financial needs and improve collaboration between multiple departments and projects on a single tool.
- Profit and loss statements: Record your revenues, costs, and expenses over a certain period to gain a clear view of your company’s financial position.
Considerations when buying budgeting software
- Review the user licenses: Most vendors clearly mention their product’s monthly or annual costs based on the number of users. Some on-premise solutions are sold at a one-time fee for a user license, while cloud solutions charge a per user monthly fee. However, both options could have extra costs such as for integration, data storage, and backup. Therefore, review the services, total costs, and frequency of payments.
- Check for ease of use: A user-friendly interface is vital to simplifying your operations. The software should have an interactive and intuitive dashboard. An easy-to-use dashboard saves time and effort required to plan the budget. This is possible with features such as simple but effective charts and graphs that highlight various stats.
- Make forecasting a core feature: The forecasting feature helps in estimating expenses, sales, and other variables that impact the cash flow. It can reduce operational expenses and capital expenditure as well as help companies foresee issues based on data. This capability is rooted in complex algorithms that allow planning for long-term success.
- Assess the integration capabilities: The right budgeting software can help businesses import data from their systems such as HR, accounting, ERP, or the general ledger. Consolidating all this data in a single database allows the budgeting software to collect the latest, updated information. This improves budgeting accuracy and allows for greater collaboration among different teams or stakeholders.
Relevant budgeting software trends
- AI may plan your budget now: Many businesses believe that artificial intelligence (AI) has great potential in preparing annual budgets. AI can provide real-time insights, make accurate forecasts, and suggest informed financial decisions. It can also spot anomalies and risks with its adaptive learning capability. AI algorithms self learn and can make your budget planning more efficient over time.
- Predictive analytics for accurate expense forecasts: Accurately forecasting your expenses can be tricky if you use spreadsheets. Predictive analytics can play a key role in estimating expenses for the coming year. The feature uses historical data to compare cash flows and expense ratios more accurately. Also, it identifies the key drivers for late-payments and predicts the probability of such instances.