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5–18 Store Budget Information in a Central Database
5–18 STORE BUDGET INFORMATION IN A CENTRAL DATABASE
Too often, a budget manager assembles all of the information needed to create the
annual budget, has done so with days to spare, and yet somehow cannot release
the budget on time. The reason is that the budget pieces are just that—in pieces—
and cannot be easily put together, requiring a great deal of labor to rekey them all
into a central budget model. The information is especially difficult to assemble if
department heads have added new line items for new types of expenses, or
deleted or merged existing ones. When this happens, someone must contact the
department managers to request a clarification, sometimes resulting in last-
minute changes to the underlying budget model that may introduce errors into the
budget formulas, resulting in incorrect cost or revenue summarizations. When
there are many departments or subsidiaries, it is possible for all these issues to
add up to more time to assemble the data than it took for the rest of the company
to complete its part of the budget!
The solution to this problem is to centralize the budget into a single database.
Department managers are issued templates for the budget that are derivatives of
this database and they must fill in the blanks provided—no exceptions allowed.
When these budget forms are turned in to the budget manager, it is a simple mat-
ter to quickly peruse them and determine which revenue or expense line items
have been left blank and which additions have been made that do not fit into the
standard template; managers can be contacted at once and asked to revise their
budgets to fit the existing model. It may even be possible to give managers direct
access to the budget model through modems or the internal company computer
network (see the ‘‘Use On-Line Budget Updating” section, next), so that man-
agers are forced to enter information into the existing budget model. This
approach is a quick and easy way to greatly reduce the back-end work by the
accounting department to assemble incoming budget information.
The only problem with this best practice is that sometimes there will be new
company activities that cannot be easily shoehorned into the existing budget
model. This is an especially common circumstance when a company acquires
another corporation that operates in an entirely different industry. For example,
the expenses in a freight-hauling company will vary significantly from those of a
mail-order business. In these cases, the budget model obviously must be changed.
The best way to do so is to have the budget manager be informed of decisions by
senior management to acquire or start up businesses, so that the manager can
make changes to the budget model in advance, which eliminates the need for any
last-minute changes to the model.
Cost: Installation time: