What kind of car do you like to drive? Are you attached to your trusty ol’ machine that helped you get to Woodstock, or are you drawn to a more modern transportation solution? If, like me, you love your Jeep from back in the day, you may need a nudge in a more up-to-date direction. In my old car, I counted on my rear-view mirrors to check for traffic obstacles, but have to back that up with a quick rubber-neck glance when changing lanes. The mirrors are somewhat distorted, and my dependency on this outmoded solution is dangerous at best. If I were to use more modern technology, my car would give me visual, auditory, and even physical warnings that I need to make small adjustments before changing lanes or guiding my travels through traffic.In the same way, a more modern accounting software solution will have the technology that allows you to manage you budget to actual finances with confidence and accuracy not possible from software that’s more than five to ten years old. Today’s ERP software packages have the ability to work with you and your staff in real-time so that you can operate with more transparency and in a higher quality management style for your role. Here’s what you can expect:
WARNINGS OF OVERSPENDING BEFORE IT HAPPENS
When you enter a budget into your software system, that software often will have the ability to notify you or your manager before an approval is given for a purchase that goes over your pre-defined limit. This helps reduce the challenge of wasteful spending or misuse of funds.
When you cyclically review your software set-up, you may adjust annual budget figures and set new flags in your system that won’t allow the uninformed and inappropriate use of funds that may no longer be available.
MAKE SURE YOUR BUDGET FOR YOUR NEW FISCAL YEAR IS SUSTAINABLE
A common problem for governments and nonprofits is to “borrow” funds from an unsustainable pool to address current accounts payable. For example, if an organization sells assets or pulls from reserves of funds to take care of ongoing expenses, you can see that eventually that organization might run out of money.
According to the GFOA (Government Finance Officers Association), a government needs to “make sure that it is aware of the distinction between satisfying the statutory definition and achieving a true structurally balanced budget.” You can do this by setting up multiple funds in your software solution, and only using those funds that are earmarked for specific purposes (restricting the funds to appropriate expenses).
PRODUCE AN AUDITABLE BUDGET TO ACTUAL REPORT
As one of the main financial reports for governments, the budget-to-actual report should be run with each period end process. The best way to keep budget problems small is to review them regularly and not let things slide.
Also, if your audit company or CPA can drill down to source documents from within that report, your annual reports to the public or, in the case of governments, the CAFR (Comprehensive Annual Financial Reports) are going to be more reliable in the eyes of your constituents.
In today’s software, many ERP systems have the ability to run a budget to actual report when you request, but some go even farther with the ability to have this comparative information at your fingertips each time you login to your software. Learn to check this report daily, and you will develop a reputation for integrity, strong management, and accountability that others respect.
If you’d like to learn more about the challenge of balancing your budget to actual spending, Tangicloud will be hosting a webinar on Thursday, June 15, to discuss your options. We’d be happy to have you join us.
Meanwhile, when you think about whether or not your organization can live within its budget, you may think about the savings you’ll generate by using the most up-to-date software versions possible. By looking ahead instead of into your rear-view mirror, you can use the tools and “bells and whistles” available in modern software to give you more accurate reporting and decision-making power.