Misleading budgets

We were given the task of converting a very detailed ‘budget’ from a 20Mb Excel workbook into Azquo.   When we had produced our version the result was very different from the original.  Instead of a profit of £2m on a turnover of £30m it showed a loss of £2m.  Why?

It turned out that the answer was simple.   In one sheet a formula which should have added four lines was only adding three, and in another sheet, someone had overwritten a row of cells that should contain a formula with fixed values.   The difference of these two changes was £4m, but this had not been spotted because the result seemed to be about correct.

There were other errors, including a calculation that showed staffing in the call centre on the first and last days of the month was hardly necessary, thus calling into question as to whether it was a good idea to try to calculate the call centre staffing levels in the first place, but the overall point was that the original highly-complicated budget was, at best, useless, at worst very misleading.

In Azquo, we extract all the presumptions – the cells which are not based on a formula – and create a separate workbook which is our ‘setup’ workbook.   This turned out to be a substantial workbook in this case, as there were very large numbers of assumptions.   The CEO and FD could then look through these assumptions to find some figures which surprised and alarmed them – in fact it would not be an exaggeration to say that half the assumptions were simply wrong – numbers of personnel, prices for services etc.   In addition there was a lot of data that had little or no relevance to the budget, and should not have been part of the budgetting process.  All this became immediately apparent.

Once we have extracted the assumptions,  it turned out that only half a dozen spreadsheets were needed to express the functions of the business – each one a model of a single business unit.    Azquo can load these spreadsheets many times with different data, each time representing a transaction, or a division, or a month, clearly indicating the cells which contain imported data, and cells which contain data to be passed on.   There is never more than two stages between the final outcome and the source data.  And this can create both a budget and a cash flow forecast simultaneously.

We are proud to say that an Azquo budget

  • can be adapted to any business
  • will always allow users to inspect the assumptions easily
  • will always produce a correct result based on those assumptions
  • will always be fully auditable – showing who uploaded or entered any item of data, and when and where it was entered or uploaded. 

  No other system can, as far as we know, make this boast.

In addition, it is simple, in Azquo, to upload more than one version of the budget, compare versions, and compare budgets with actuals as they occur.