For most banks, producing the budget is a challenging and painful process. A good portion of this pain is caused by the tools that are used to pull and manage data – namely spreadsheets. To be sure, spreadsheets have many advantages. They provide an environment that every finance professional understands and the familiarity, syntax and modeling that are not possible with most packaged applications. As a result, spreadsheets have remained the de facto choice of finance for planning, modeling and reporting since the days of VisiCalc and Lotus. 1-2-3.
Background on Data Challenges for Regional and Community Banks
Over the past decade, Super Regional and Global Banks have had access to tools that allow them to aggregate data in integrated cloud solutions and then give financial professionals the ability to work with that data in spreadsheets. More importantly, your largest competitors have had the ability to integrate risk data and finance data to develop tools and methodologies for smarter and faster decision making. This creates sizeable advantages in creating both a budget and allowing for faster product roll out to better impact customers.
The power of cloud-based, integrated data management is now available to community banks and regional banks for the first time with the methodologies and tools that companies like SOLA Analytics and OnPoint Advisors provide in their collaboration Finance. Risk. Unified.
By helping banks aggregate their data across both risk and finance using Microsoft’s secure Azure Cloud, Finance. Risk. Unified provides regional banks with the same data, in SQL and integrated with Excel, that larger competitors have enjoyed for years.
Cloud-based integrated data removes the need to manage data from core systems. Additionally, your finance team now has access to the tools and data to transform your budgeting process – removing months and many iterations before completion. As the year unfolds and operating environments change, your projections, reports and dashboards can be automatically updated with real-time data, allowing your CFO to properly strategize a course for the bank.
According to KPMG, the majority of banking professionals spend over 25% of their time tracking down accurate data. Integrated finance and risk data removes that burden and allows your team to focus on what truly matters – serving your customers and the community.
The rest of this article will address the power and critical features a bank will have access to once tools and methods of Finance. Risk. Unified. are in place.
Competitive Tools for Budgeting Process with Modern Data Tools and Methods
Loan Deposit Models
Successful banks need sophisticated loan and deposit models. These models should begin with each branch’s unique product mix and adjust for projected runoff and originations. Changes in yield should be tied to the forecasted change in market rates and these assumptions should be easily updated throughout the budgeting process.
Employee Level Models
Employee level models for projecting compensation are a necessary part of any budgeting process. These models should incorporate new hires, terminations and transfers. They should accurately calculate benefits and employment taxes. And they should keep employment data confidential and secure.
A great way to gain efficiencies is by automating many of the entries that need to be made. As the budget is developed, our tools automatically balance the balance sheet, calculate taxes and retained earnings and update intra-company eliminations. This saves hours of work each time the budget it is revised.
Real Time Data
Budgeting isn’t just an exercise to look forward – it’s critical for bank executives to be able to compare a working budget with current results. This allows them to identify outliers and variances to ensure accuracy, trends and opportunities to chart future strategy. Traditional, manual modeling costs valuable time to put this information in front of executives. In order to quickly see the impact that assumptions or potential changes can have, it’s important to work with real-time data and have reports that update automatically.
Actual vs. Projected Budget Visibility
Setting a budget is a standard and necessary step – but it’s useless if there’s no visibility into actual budget usage. Incorporating branch level information into board level reporting allows performance tracking across the organization. Executives and managers need the ability to quickly and easily access financial information without placing undue burden on the finance department.
In summary, the five critical tools for a budgeting process are loan and deposit models, compensation models, automated balancing, working budget analytics and actual versus budget reporting. Ensuring these critical tools are integrated and easy to use provides a competitive advantage to your organization.
About Finance. Risk. Unified.
Finance Risk Unified is a single, modern software solution that provides strategic visibility and combines financial and risk analytics in a highly automated and intuitive technology platform. It provides institutions with the tools to compete effectively against the largest and most sophisticated banks in the country.
Sola Analytics and OnPoint Risk Advisors have collaborated to provide banks with best practices for Financial and Risk Management delivered inside a cutting-edge technology solution.
We are bankers helping bankers. Key delivery components include Financial Reporting, Budgeting & Forecasting, CECL Allowance Models, and Enterprise Wide Stress Testing and Best Practice Credit Risk and Enterprise Risk Management Methods.