5 Excel Tips for Better Budgeting and Forecasting
Excel has such a long history in business accounting and corporate finance that it has inevitably become the butt of some easy jokes. Despite the complexity of the program and its decades-long contributions to the world of finance, there’s no question that many professionals have their own personal frustrations with Microsoft’s iconic spreadsheet solution.
As finance technology and financial management solutions evolve and incorporate artificial intelligence, cloud-based software, and other tools and features that enhance financial practices, it’s easy to assume that Excel’s relevance to businesses has either declined in recent years or is operating on borrowed time. But the reality is that Excel, for all of its limitations and warts, still offers value to many businesses and continues to be relied upon in a wide range of use cases.
Excel isn’t perfect, but some of the challenges of using the software have more to do with the user’s lack of expertise. In many cases, you can improve the value Excel offers your budgeting and forecasting activities just by taking time to learn some of its nuances.
To that end, we’ve compiled five useful tips to help you improve your use of Excel when budgeting and forecasting for your business.
1. Use file-sharing tools to make sure all collaborators are working from the most up-to-date spreadsheet.
At large organizations, the budgeting and forecasting process isn’t a one-person job. Collaboration tools are essential to managing large projects and coordinating tasks and workflows among members of the finance team. But even when workflows are being effectively managed, the efficiency of this collaboration is largely dependent on the reliability of your data.
All collaborators need access to the same data sets, which themselves must represent the most up-to-date financial information possible. By integrating Excel with financial consolidation tools, you can ensure these data sets are regularly updated to support your finance team and reduce the risk of data discrepancies.
Excel makes it easy to manage large sets of data across multiple spreadsheets, all of which can be used in enterprise budgeting and forecasting. But your finance team also needs the tools in place to ensure that all collaborators are using the most recent files, which means you need an external platform connected to Excel that organizes these versions and ensures collaborators are working off the same information. In the long run, this reduces your error rates and streamlines collaboration on key financial tasks.
2. Master advanced formulas and functions offered in Excel.
If you’re using Excel for budgeting and forecasting, you’re probably familiar with the basic formulas and functions offered by the software. But you can increase the value of Excel in your financial tasks by taking time to master some of the more advanced functions that may offer particular benefits to finance professionals.
A few of these advanced functions include:
VLOOKUP: This function makes it easy to search through a database and pull information related to an item when all of the items in a list have a unique identifier. This has all sorts of applications, from finance to human resources, but finance teams might use it for invoicing, adding up costs, tracking spending or unpaid balances, and many other tasks. One challenge of this function is that it works only from left to right, meaning the unique identifier you use to find related values has to be placed to the left of your desired value in whatever list or database you’re using.
XLOOKUP: The left-to-right limitation of VLOOKUP is one reason Excel released an updated function, XLOOKUP, which offers one important benefit over its predecessor: Searches can be conducted from any starting point in a database, moving in any direction to find the desired value. XLOOKUP also defaults to searching for an exact match, rather than the approximate match sought by VLOOKUP, which may not always be preferable, depending on the type of values being sought. Still, XLOOKUP generally offers more benefits to users—but because it’s a relatively new function, many professionals might not be familiar with it.
Pivot tables: Pivot tables are one of the more complex functions available through Excel, but they are a valuable tool when dealing with large data sets—which is likely the case at an enterprise organization. Pivot tables allow you to summarize data and even generate visual graphics based on the trends featured in the data. (A great tutorial on setting up pivot tables can be found here.)
If you haven’t brushed up on Excel’s functions lately, it might be time to revisit them and find out what you’re missing out on. Because the list of available functions has grown over time, there might be valuable new functions available to improve your use of the software.
3. Take advantage of Excel’s automation capabilities.
Excel offers the functionality to enact simple automation for various tasks within the software. This is accomplished by creating custom logic within macros, which are essentially structured tasks that you can configure for processes you plan to repeat over time.
Macros aren’t equipped with artificial intelligence or other tools to enable robust automation for time-intensive processes, but they do make it possible to automate simple, predictable processes without having to write any code. That’s a huge benefit for finance professionals, who can use Excel to improve their own individual capabilities, reduce errors, and quickly build new solutions for basic financial tasks over time.
If you need stronger automation capabilities—or you just want to fully realize the benefits of using automation to support your finance team—then you might want to implement a comprehensive financial software suite. But even with that suite in place, Excel can help individual workers create basic automation solutions that make their jobs easier.
4. Use cloud-based data management to support Excel forecasting at scale.
Excel is a complex program that’s capable of managing massive data sets and supporting budgeting and forecasting even at a large business. But there can still be issues when it comes to scaling Excel for enterprise businesses and maintaining a single source of truth for your financial data—among other challenges that are unique to large organizations.
One way to overcome Excel’s limitations of scale and workload volume is to connect this software program with a cloud-based enterprise resource planning (ERP) solution, or a suite that can consolidate and centralize financial data for the entire organization. Instead of functioning as the repository for all this data—and managing the data in all of its complexity—Excel instead uses the cloud-based solution as a resource for acquiring business data and using it for budgeting and forecasting functions.
As a result, Excel’s powerful spreadsheet management and formulaic functions can still be utilized by enterprise organizations. But an ERP or financial suite can do some of the heavy lifting around this financial data, such as maintaining audit trails, organizing and saving different versions of files, improving information security, and ensuring that Excel’s functions have the benefit of a single source of truth when running their calculations.
5. Understand when your budgeting and forecasting have outgrown Excel.
Many businesses, including enterprise organizations, can continue to find value in Excel even as their companies grow in both size and the complexity of their financial data. If you started out as a small organization with simple financial data and limited resources, you were probably able to get by using Excel as a stand-alone solution.
Over time, though, you’re likely to experience growing pains related to Excel’s limitations. Even if you have plans to continue using Excel in the future, you might face a crossroads where additional financial solutions are critical to conducting budgeting, forecasting, and other financial activities at the level you require.
Disparate financial data, a lack of a single source of truth, and incomplete financial statements are just some of the scenarios in which Excel’s limitations can become more glaring. Similarly, you may want your financial data to drive better strategic decision-making through the use of dynamic modeling, custom reports, advanced analytics, or other insight-driven initiatives that Excel isn’t capable of supporting.
Excel can still offer value to large enterprise organizations in some capacity, but its role in overall budgeting and forecasting may diminish as your company’s size and strategic needs surpass what the software offers.