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Visibility issues might vary in complexity but they all mean the same thing: making decisions with inadequate or outdated information can inject serious error into every process at your organization.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.
Thanks for keeping track of our series on Business Intelligence ROI! So far we’ve evaluated the potential ROI of a new BI project and we’ve explored the top 5 BI projects that never pay off. Finally, today we’ll outline the methodology for calculating the actual ROI of your BI project. We can accomplish this by addressing specific phases in our Cost-Benefit Analysis.
- Choose a targeted return goal and state your definition of success. One of Steven Covey’s habits in his book entitled “The 7 Habits of Highly Effective People” is to begin with the end in mind. Are you trying to reduce costs, avoid costs, or enhance profitability? State your goal so that you know what you’re working towards.
- List assumptions. Clearly state the specific assumptions being made in the Cost-Benefit Analysis. Provide documentation for the rationale or logic used in making this assumption and include any implications or risks involved. Yes, it’s a way of covering your bases, but more importantly it gives the project transparency.
- Resources. In this step, we are calculating costs from specific business units. We need to examine the current process and look at the resources that are currently involved. What is the hourly cost of your external consultants and analysts and how many working hours do they accumulate per week? The hourly rate and hours worked per work week will tell you what the project is costing you in terms of human resource allocation.
- Define the benefits in timeline format. How much time do your analysts or members of the management team spend loading data from a financial system, dealing with data load issues or generating reports? How often do you require external consultants or get visits from external auditors? Additionally, we must note the periodicity of these exercises. How often are these people in place? Monthly, quarterly or twice a year? And do you have daily reconciliations? If some of these tasks can be replaced, automated or accelerated by your BI solution, then you can calculate monthly savings and even a cumulative extended benefit in the future.