Finance professionals in government and education have several daunting (frustrating, annoying, I could go on..) reporting challenges to address each year:
- the Annual Audited Financial Report,
- the Budget Book and
- some special purpose reports like the FIR for governments in Alberta & Ontario or the CAUBO report for universities & colleges
While automating the annual financial statements is generally recognized as a major win for your finance team, perhaps an even bigger win is automating the budget book.
To an outsider, this might be a surprise. Isn't going through an audit the worst thing possible? Admittedly, it's not a lot of fun and yes it is incredibly time consuming; but the budget book is worse. Here's why..
1) Much more content
How long are your annual financial statements? For many of our clients (governments, universities & colleges, large publicly traded companies) a typical set of statements include:
- a cover page
- a table of contents
- 4 statements
- 20 - 30 notes
- 4 - 6 schedules
All told, the report is perhaps 30 pages. For a regional district or a local government in the USA that must prepare a Comprehensive Annual Financial Report (CAFR) the page count is likely to increase to 200 + pages. In any case, there is a lot of complexity to these reports.
A budget book (sometimes called the "financial plan") is almost always much larger. 200 or 300 pages is actually a small budget document. For those clients that participate in the GFOA Distinguished Budget Presentation Awards program, their guidelines tend to result in very large budget books. Some even approach 1,000 pages!
All of this content means more work. More tables, more text, and more numbers that must reconcile.
2) Considerable emphasis on non-financial data
For the most part, financial statements are focused on financial data. There are text portions (the policies and notes), but even then they are either relatively static (e.g. your revenue recognition policy is not changing year-by-year) or primarily about details of the financial data.
In contrast, it is very common for the budget book to contain hundreds of pages of narrative. Large narrative discussions of the following are required of GFOA Distinguished Budget Presentation Award Program participants in a budget book:
- the budget process,
- entity-wide long-term financial policies,
- organizational charts and
- descriptions of the organization, its community, the population and background information related to the services provided.
Why does this make the process harder? More content means more page breaks, larger table of contents, more pages to number etc. In short, it means more elements to have problems with. Secondly, much of this narrative changes year after year, necessitating a process of collecting, organizing and updating hundreds of pages of content.
3) Graphs & pictures
Annual Financial Statements rarely include graphs & pictures. They tend to be very utilitarian documents, comprised almost exclusively of tables of data and a few pages of narrative in the notes section. Very few of our clients even add a logo or picture to the cover page!
Contrast this with the budget book. The vast majority of these documents contain many graphical elements including:
- organization charts
- pictures of ongoing projects, the finance team, local wild life etc.
A quick review of one of the budget book for one of our clients showed that in the 425 pages, there were nearly 300 graphical elements! Just like the challenges listed above in large narrative sections, graphical elements must be managed and updated year after year. To make matters worse, consider that many finance professionals are not expert in how to use graphical elements to maximize communication effectiveness.
4) A much broader collaboration
In most organizations, assembling the annual financial statements is primarily the task of the core finance team. While dozens of folks may contribute reconciliations and supporting documents, perhaps only a handful of people contribute to the statements directly.
For the budget book, dozens or even hundreds of people contribute to that huge volume of text we mentioned earlier. It might only be a few paragraphs per person, but it seems like every Tom, Dick & Wendy contribute to the budget book content.
That means the team that assembles the book needs to track who is contributing to each section. Then they need to know if that individual provided their content yet, and when they do provide the content someone has to make sure that it gets reviewed, approved and finally correctly inserted into the end report. That is a lot of little steps which must be repeated potentially hundreds of times to arrive at the completed book.
The End Result
The end result of these four points is one absolute fact. If your budget document is hundreds of pages bigger than your financial statements, budget book automation will be an incredibly valuable accomplishment for your organization.