I Have to Ask: Making Budgeting Easier

Posted on January 8, 2020


In this series, guest columnists respond to one of three topics selected by ELGL co-founder Kent Wyatt. This week, John McCarter, Assistant Finance Director for the City of Pearland, Texas, writes about the tools available to make your budgeting process easier.

I started in Pearland almost exactly five years ago as Management Assistant in the City Manager’s Office. The City had just selected a new ERP system and I was given the role of project manager. Our legacy system served the City well for a long time (some might say a little too long) but in 2015 the AS400 interface was out of date, to say the least. It took about 2 ½ years and a ton of effort from our Staff to successfully implement our new ERP system, New World. Through that experience, my biggest lesson about technology is that it should be just one component of your overall strategy to accomplish a given task. If you’re not thinking big picture when you’re considering how you’re going to use technology in your processes, that technology will become a liability very quickly.

In the Budget Office, our world can be split into two pieces; budget development (“Mayor and Council, it’s a pleasure to present the City Manager’s Proposed Budget”) and budget oversight (“Your office supplies account is almost over-budget again, Karen”). We utilize technology to be more effective at both of these.

On the budget development side, we use a quasi-Priority Based Budgeting approach that boils down to four basic phases:

  1. Establish the operational budget, including all expenditure and revenue accounts, to support current services;
  2. Vet and prioritize all Supplemental Requests (AKA Enhancements);
  3. Create scenarios for various funding levels and determine proposed scenario; and
  4. Presentation, deliberation and adoption by City Council.

We rely heavily on our ERP system as a mechanism to develop operational budgets. New World has some really helpful reporting functions that give our departments tools to analyze historical spend, plan for a new fiscal year and submit a detailed operational budget to our Office. Specifically, we require departments to submit transactions, or specific items, that make up line-item accounts. This allows us to compare the planned spend with historical spend on specific contracts without creating a ton of unique GL accounts. Last year we got a request from Council for the detail behind all professional development line-items in the budget and all we had to do was run a report. We preach departmental ownership of operational budgets, so transparency between our Budget Office and departments throughout the process is huge. Our system allows us to document every change we make to operational budgets in the system itself so departments can check our work – this has been immensely helpful halfway through the year when we forget what we talked about during the budget process.

The next three phases are based almost entirely out of Microsoft Office and our shared drive. We have intentionally kept this simple because all three of these phases require participation from a number of individuals. For example, we have our Department Heads rank our Supplemental Requests. We could use an online survey platform to get responses but an excel template submitted via email is much simpler for submitters and accomplishes the same end. Similarly, there a number of budget platforms out there that allow us to build unique revenue scenarios; instead we build a simplified modelling template in Excel that everyone can understand and play with themselves. One key piece of advice: if you want someone to meaningfully engage with your process, it’s incumbent on you to make it easy for them to do it. If they have to figure out the system to get to the content, you’ll lose people.

The budget oversight side doesn’t get as much attention but is just as critical. The key to oversight is being able to analyze data effectively then leverage that analysis to make decisions. Our ERP system has some very helpful features to keep departments within their overall allotted budgets (notifications at 85% of total budget and settings that don’t allow departments to exceed budget) but falls short on analysis. If we are waiting until an account is almost over budget to fix the underlying issue, it’s already too late. Like most financial systems, canned reports are very good at providing a snapshot in time but don’t provide the trend data that we need.

The most powerful analysis tool we have actually comes from back-end of the system; a SQL Analysis Service we connect to through Excel, called Business Analytics. It’s essentially a gigantic PivotTable that has all our financial data in it. With the right combination of filters, we are able to generate any number of reports and charts. We share a Monthly Variance Report with Council, which leverages historical data in Business Analytics to create a YTD projection then compare that to the YTD actual. This is a ton of analysis which used to take a week to generate; now it takes an hour. The end result is great if you want a static report with analysis from the Budget Office (which is great and necessary but not enough).

The challenge with Business Analytics is similar to the challenge we had with our legacy ERP system; only a handful of people know how to use it. The next critical step in our evolution is to provide a tool for stakeholders to interact with the data. To accomplish this goal, we are in the early stages of partnering with Forecast5 Analytics to use their 5Cast Plus module to generate monthly reports and dashboards to help guide our decision making throughout the year. Our hope is to build on our static reports to give departments, management, City Council and other stakeholders tools to explore revenue/spend patterns on their own within a structured system.

The City has substantially improved budget processes over the last few years. Some of the tools that have allowed us to move forward have been software-based but the value of that technology came from how it fits into our framework; not the other way around. More often than not, true insights have come connecting people and giving Subject Matter Experts a seat at the table when decisions are being made. Technology has been just part of the equation; not the solution. 

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