I love my local supermarket. Honestly, I’m probably there three to four times a week and it’s almost always a pleasant experience. That is, until I have to pick my checkout lane. Anxiety sets in. Which one is moving faster? Which one has the shortest queue? I make my best guess and act on it. Wrong again. So I’m stuck in a line that’s not moving while I watch others fly by. And I say to myself the inevitable (much like all of you have thought at one time or another): “Well I’ve spent this much time in this line, I might as well stay here.”
That time in line is a sunk cost. You’ll never get it back, whether you stay in the same line or move to another. Sunk costs aren't just found in grocery store lines. Life would be a lot less stressful and simpler if they were. Unfortunately, sunk costs are something I find far too often when it comes to budgeting and business planning. These two business functions seem to be stricken with sunk costs that are often justified by less than rational reasoning.
Over my 20 years of experience, there have been two extremely popular scenarios contributing to sunk costs. Both are backed by equally pitiful excuses.
- “We’ve been using this worksheet budget package for years, and it mostly works.”
Those years are exactly what you will never get back. All the hours it took to build that worksheet package, all the blood, sweat and tears to keep it functioning? That time is gone. In return, you have managed to get by with an error-prone tool. Lack of visibility into real-time information and version control issues are doing nothing but holding the business back. The only way out and onward is to find a financial performance management solution that easily aggregates your data, provides real-time information and is immune to user-prone errors.
- “We’ve invested so much in our data warehouse solution.”
This is an unfortunate issue that I’ve witnessed way more often than I’d like to admit. It’s saddening that so much time and resources went in to installing, building and configuring a data warehouse. Bet you didn’t know it was going to take an army of consultants and several months to put it all together, did you? But you also don’t have to live with the lack of visibility and inflexible design anymore because of it. You’re probably paying more in annual maintenance, consulting and upgrades, than an entirely new system would cost to install and implement. And with the newer option, you'll have full transparency into all your actuals, and be able to plan for more than just your financials. Imagine that.
Change is hard but recognizing that it is necessary is the first step. The sooner you can get past these types of excuses, the sooner you can add value to your business. As I’ve said in earlier posts, the right solution should be easy to implement and manage yourself, should keep your data in your ERP system and should easily aggregate your business planning information side by side with real-time actuals. Don’t settle for anything less. For more information on how to overcome the pressures on finance, read our Ebook and take your team to the next level with higher performance.