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Unwrap a new Planning, Budgeting, and Forecasting Application?

On Christmas morning, I sat with my family excitedly unwrapping presents. I must admit that I got everything I wanted and more. My son gave me a handlebar/ski-pole mount for my Drift HD video camera. Getting it made me start thinking about doing more with the camera than the typical user does – here is me going downhill – here is me crashing (take a look) – here is me trying to keep up with my family – etc. That led me too why do companies not do more with their Planning, Budgeting, and Forecasting (PBF) applications? I imagined you unwrapping your brand new Oracle Hyperion, IBM Cognos TM1, or SAP BPC software and saying “Now what?” All too often, the answer is more of the same, more manual processes to get the data, more ad hoc reporting, more unneeded detail in the budget, and more off-line spreadsheets to get the data in shape for the PBF application. Like me with my video camera, you need to start thinking about doing something different. Do not do it for the sake of being different; do it for the sake of doing things better. Here are some ideas to get you away from the incessant hunt for data, the everlasting close process, and endless reconciliation.

  1. Make sure you are using the system for the right purposes. Ultimately, you should be improving the goods and services you provide to your customers. Along the way, can you do it more efficiently?
  2. Get your priorities right. As much as software vendors do not want to hear this, it probably does not matter which tool you chose it is how you use it that counts. Do not spend inordinate effort on picking just the right tool. Spend your time on understanding just how you are going to implement it and gain value.
  3. Do not just automate what you are doing today. I guarantee that there are processes that you do today that you can do better. Look at where you get the data and see if you can capture it closer to the source. Look at the steps you take and ask if they are all necessary? Can you push them back up stream?
  4. Build something that users need, want, and will and can use. Implementing a system with all the bells and whistles in the world is no good if the users still do all their planning in a spreadsheet.
  5. Focus on the decisions that your business makes, your users, and your situation. Industry benchmarks and best practices are great but they are not a panacea. Choose your performance measures with respect to your company’s goals and objectives. Present the information you glean in a manner that suits your users.
  6. Do not just settle for the data you have; get the data you need. Too many organizations settle for incomplete management reports because that is all that they can produce with the data they have available. Often, they end up stuffing the General Ledger with additional accounts and segments to get better reporting; ultimately, they extend the close process and have mediocre reporting.
  7. Start to measure forecast accuracy over time. Everyone should have a brilliant and highly accurate forecast by the end of the month and end of the year. The most useful forecasts are accurate 12, 24, and 36 months out. Stop letting sandbaggers hold the organization hostage, reward those who forecast well, give the organization visibility, and produce results – do not reward someone for forecasting poor results and meeting them.
  8. Move to a continuous rolling forecast to allow your organization to understand where it is going over time, allowing it to react appropriately to changing conditions in real-time rather than after the fact. Do not just forecast to the end of the next fiscal period look out into the future. As the process becomes mature, you will feel comfortable reaching the end of your fiscal year and snapping your current forecast into the upcoming budget.
  9. Use your PBF application to communicate your goals and objectives and understand what operational levers to push or pull in order to meet those goal and objectives. Align everything in your PBF application with something that is actionable. Make sure that someone is responsible for the action.
  10. Push use of the tool down to those who are responsible for the input and action but do not make them plan what they cannot control and do not make them plan in too much detail. If a department manager is only responsible for providing resources, do not make them plan capital expenditure. It is probably okay to let them plan travel and expense by average trip cost rather than down to the penny on taxi costs.

Remember that as you play with your brand new PBF application the application is not the end goal. In IBM’s recent CFO study [1], there are two capabilities that are associated with companies that outperform – Finance Efficiency and Business Insight. Use them to become a “Value Integrator”.


I wish you Happy Planning and a Prosperous Budgeting and Forecasting Season.

[1] The 2010 IBM Global CFO Study – IBM Corporation – http://www-935.ibm.com/services/us/cfo/cfostudy2010/

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