Ask a sales manager what ABC means and the response, often with a smile, will be “Always Be Closing.” This concept makes sense for the sales manager but unfortunately, many finance managers are “always closing” too – and they’re not smiling about it. The budgeting, planning and forecasting (BP&F) cycle is too often the most dreaded time of the year. A recent report from Ventana Research revealed that the BP&F process “typically eats up 10 – 15% of the finance team’s time, and it takes 5 – 10 months to complete the full cycle in large organizations.” So how does the finance team get anything else done if we’re talking about a 10-month process?
Few organizations are insulated from the challenges of financial reporting and planning. The process continues to cause pain because there are many moving parts that finance managers and planners need to balance and many individuals who contribute to them. We’ve found that many of the finance team’s concerns boil down to the following 2 issues, both of which can be addressed with a dedicated, comprehensive BP&F tool.
1) You’ve outgrown your current process. For some, planning consists of Excel spreadsheets and a notepad. We recently spoke to one $3 billion company that is still managing their planning this way! In a previous post, we looked at some of the indicators for when you need to move on from your current BP&F process: multiple versions of the same spreadsheets used by different people, time wasted consolidating spreadsheets rather than analyzing data, and limited visibility. These are all signs that it’s time to graduate to a corporate performance management solution or dedicated BP&F software (like arcplan Edge), investing in a tool that is centralized, adaptive, and allows you to deliver the value that your business needs. Inefficient data collection and multiple versions of spreadsheets lengthen the BP&F cycle unnecessarily, reducing the value of the entire process.
What’s the most popular reporting and planning tool out there? As much as I’d like the answer to be “arcplan” – it’s not. Even in 2011, it’s “Excel.” Excel has been around for 25 years and believe it or not, it’s still the most often used technology in 60% of the organizations surveyed by Ventana Research in August 2011.
There are so many reasons analysts and planners love Excel: it’s easy to use, adjusting reports takes seconds, it’s the perfect tool for local ad-hoc analysis, and it has an extensive formula and function library to address complex calculations. On the other hand, there are times when Excel falls short. After the manual process of collecting, consolidating and reconciling data, Excel leaves little to no time for actual analysis. And worst of all, you may find that your data is outdated or fraught with errors, which compromises your ability to make business-critical decisions. Unfortunately, Excel also lacks data security, which is a paramount concern for IT professionals.
Truly, I’m not bashing Excel here. I’m a data analyst myself and I help our clients develop Excel-like BI applications, so I understand that Excel has its benefits. Power users are going to want to use Excel, at least for the foreseeable future. So consider this how you can reconcile the use of Excel at your organization. The answer may be as simple as your BI system’s Excel add-in!
For many financial planners out there, budgeting, planning and forecasting equals spreadsheets. Dozens or hundreds of them – that’s just the reality. You’ve accepted the fact that come the end of the fiscal year, you and your cohorts will be chained to your desk piecing together various versions of spreadsheets from each department and hoping that after several weeks of this, you’re able to consolidate the numbers into a workable budget for the next year. And then you hit a sales roadblock halfway through the year and have to forecast the impact…and go through all of this again.
The sheer amount of work this process takes is not the only challenge you face, and you’re not alone. Let’s take a closer look at 4 of the common challenges that are undermining your ability to be truly productive and add value when it comes to budgeting, planning, and forecasting.
Have you ever tried driving at night without headlights? I haven’t, but I can tell it’s a bad idea. In the same vein, your visibility issues when it comes to budgeting and planning mean you might be driving blind and that’s a bad idea for organizations that want accurate budgets and forecasts for the year/6 months/quarter ahead. Can you relate to these complaints?
- I’m unable to get real-time data from IT.
- The data I do get is siloed.
- We need to cut our sales plan back 10% and I have no way to see the financial impact, let alone quickly notify budget managers of the change.
Visibility issues might vary in complexity but they all mean the same thing: making decisions with inadequate or outdated information can inject serious error into every process at your organization. If you have old data to plan with, your budgets may be unrealistic. If you can’t provide timely insight to your budget managers, they can’t make good decisions (as would be the case with #3 above).
And if you’re not providing value-added contributions to the budgeting and planning process, your role as a planner will be undermined.
Is your budgeting, planning, and forecasting process no longer useful to your organization? Does it take too long, involve cumbersome spreadsheets, and result in obsolete information? You’re not alone. Many of our clients came to us with these same complaints. In fact, we work with a hospital in New Jersey that used to collect 200 spreadsheets at the beginning of every budget cycle, then ended up with multiple versions of each spreadsheet by the end of the process…though now that I think about it, I’m not sure their budget cycle ever actually ended. It just merged into next year’s!
That is an obvious example of a company that had outgrown its budgeting and planning process. But some situations aren’t so obvious. You know you and your planners suffer at the end of every fiscal year, but is it so much that you should consider graduating to the next level of planning?
Here’s 5 ways to know if you’re ready to move on to a more sophisticated method of budgeting and planning:
1) You’re beyond the 6/6 spreadsheet rule.
Spreadsheets are excellent tools for individual tasks and ad-hoc reporting, but are poorly suited to repetitive, collaborative, enterprise-wide functions such as budgeting and planning. One rule of thumb that says, “If more than 6 people will use it more than 6 times, you should consider an alternative.”
2) Time constraints are limiting the amount of re-planning you can accomplish.
The best time to gain an advantage in the market is during a downturn. While your competitors may have been cutting costs during the recent economic crisis, if you had more agile planning processes in place, you would have anticipated change better and been more nimble in adjusting your business.