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Do forecasting and budgeting tools offer more than consolidation?

I've spent some time recently looking at the implementations of a few different driver based forecasting and budgeting tools (mostly Hyperion Planning and a couple SAP BPC.) While in every case the charter included the elimination of spreadsheet models, it turned out that in the end, front line folks still built up their plans using excel and keyed results into these systems. What has been your experience?

Answers

Bob Gill
Title: Principle Architect
Company: Clear Insight
(Principle Architect, Clear Insight) |

This is indeed common and a seemingly contradictory outcome. By going a bit deeper into why Excel is the go-to-tool into each organization, we can understand what the system needs to provide. There is always a need to balance stability, reliability and quality of the data against flexibility, ad hoc and timeliness. Being able to drop data into Excel is always going to be a second option, but by understanding why users do it in the first place, we can often create higher-value tools for them.

IMHO, regardless of technology, successful implementations build a stable, reliable data infrastructure where users can trust the data quality. On top of this infrastructure, power users are given the training to build their own analysis on top of this. The idea of being able to build all possible reports or templates during an implementation is naive. Businesses change at a rapid pace. For a forecasting and budgeting tool to remain effective, the users must have the flexibility to change the tool in step with their business.

Topic Expert
Alan Hart
Title: Consultant
Company: Pacific Shine Group
(Consultant, Pacific Shine Group) |

I find that people go back to using Excel spreadsheets mainly because they are comfortable using them and not because the budgeting and forecasting solutions lack certain capabilities that Excel has. You mentioned applications such as Hyperion and SAP BPC. Both, if implemented correctly, can provide the desired output within the application itself, without having to export data to an external spreadsheet for further manipulation of data and doing presentation reporting. To me this only defeats the purpose of moving away from a spreadsheet in completing the budgeting and forecasting process.

For most smaller companies (and even mid sized organizations) you can choose a much less complex (and costly) solution that will allow you to perform all these tasks, including all budget consolidation, analysis and reporting without resorting to using spreadsheets, either during the process or as a consolidation tool for reporting.

An example of such application is Budget Maestro from Centage Corporation (www.centage.com) that will allow you to perform everything you are looking for without exporting data back to a spreadsheet for consolidations or any other reason.

Your ultimate goal is to have your accounting or ERP software general ledger data directly integrated with your budgeting and forecasting solution to pull actual data for the analysis process, while building your entire budget using drivers and other built-in tools without performing any calculations or consolidations in a spreadsheet.

Topic Expert
Henry Schumann
Title: Manager FP&A
Company: Allscripts
(Manager FP&A, Allscripts) |

Matt,
A properly implemented budgeting/planning software package can provide the following benefits:
1. Perform calculations to eliminate Excel formula corruption risk when a user adds or deletes rows in a spreadsheet.
2. Provides version control measures and user logs to help determine who changed what.
3. Allow for real time scenario analysis when decision makers face a few options.
4. Allow for easier implementation of a link between a budget, rolling forecast, and strategic plan.

I don't have a vested interest in any particular package, but would recommend you explore more options than Hyperion and SAP to see if there is an alternative package that could meet your needs.

Good luck.

Henry

Matt Shore
Title: Vice President, Product Strategy
Company: Adaptive Insights
(Vice President, Product Strategy, Adaptive Insights) |

Thanks, Henry. The benefits you outline are clear and inline with what all the vendors are preaching, so I don't believe that technology is the issue here.

Based on my handful of data points, companies embark on the path to automating and centralizing forecasting and budgeting quite late in life, when their regional and functional processes have become complex and idiosyncratic. Deploying a forecasting and budgeting app into such environments becomes a slippery slope because it will require people to rally around a unified process and model. Either that, or the implementation ends up with exceptions to accommodate everyone's "current state" models.

I believe that the former will work only by decree -- the leadership team has to commit to the new way, which means they will have to accept some differences in detail and structure of their management reports. Otherwise you end up with the latter -- a huge, complex, rigid model that sort of works for everyone but doesn't *really* work for anyone. And so it's back to excel.

Tom Hartman
Title: VP Business Development
Company: Whitebirch Software
(VP Business Development, Whitebirch Software) |

Matt, your thinking is spot-on. And to add to it: even if management *was* to consider accommodating everyone's "current state" models, they would find the cost prohibitive for the mega-systems from Oracle, IBM and SAP. In that situation, you would be better served with a mid-market package such as the one sited by Alan Hart. Additional options would include the hosted solutions from Adaptive Insights and Host analytics.

Matt Shore
Title: Vice President, Product Strategy
Company: Adaptive Insights
(Vice President, Product Strategy, Adaptive Insights) |

That's actually a really good point, Tom. One interesting thing about companies like Adaptive and Host is that they're simpler and cheaper to implement than the crusty on-prem guys. Which, among other things, means that the bar is lower for companies to shift from excel, so they can switch before they -- and their excel models -- get big and hairy.

Amarnath Kothapalli
Title: Oracle EPM Lead Consultant
Company: GENPACT LLC
(Oracle EPM Lead Consultant, GENPACT LLC) |

One thing that i can add is the gap between IT and Finance/Business. if you bridge that gap and build comprehensive models that drives the functionality in the system and could give results on the fly, you don't actually have to go back to building all your calculations in Excel

If you keep user waiting for data to calculate and then he would correct the data/change drivers and have to wait again to see the result, then he would prefer to do it in Excel.

You need to bring / bridge the gap between the IT and Business

Adaptive and host what you have mentioned gives a single version of truth by storing the data at centralized level and also the flexibility for the users to build their own models. This works well for small organizations. But, if you want to scale to enterprise level and have to maintain a huge user base, you have to look for Hyperion, SAP, Infor, Cognos TM1 for budgeting solutions

Hope this helps

Dave Hunt
Title: Corporate Controller, Senior Director
Company: Host Analytics
(Corporate Controller, Senior Director, Host Analytics) |

Matt asks a great question and one that many organizations continue to ask themselves. I think the easy default is that front-line folks do their budgets on excel and then send them to finance team to enter into whatever system they are using for budgeting. Why does this happen? (especially after an organization buys a very expensive on-prem solution) Probably because they organizations have been used to doing this and also because there has not been a strong push from management team to utilize the budget system vs. excel and then passing to finance. (Lot's of non-finance folks will say "I'm too busy to enter into that system so here's my spreadsheet you do it for me) also, a move to an on-prem solution takes a very long time and depending on the organization very costly.

We are all well aware of the shortfalls of doing budgeting in Excel and how it becomes problematic as an organization gets larger. Some of the best reasons I can think of to use a budget solution vs. excel are; (and Harry Schumann has already thoughtfully noted as well)

1. Control and Accountability.
2. One source of truth (for budgets and for using in reporting actuals)
3. Integrated financial reports (PL, Balance Sheet, Cash Flow) and being able to see
"what-if" scenario's.

As far as Om-Prem vs. Cloud solutions, I believe Cloud offers several advantages as well;

1. Flexibility (Can easily change budget templates to be more user friendly or one size
does not fit all. and any change is more easily managed)
2. Time to implement
3. Allowing focus on core business (vs. worrying about IT resources, servers, etc)
4. Total cost of ownership.

One of the keys for adoption of a solution is how fast excel templates and models can be put into the new solution as well. If all the templates have to be done from scratch then the process is more painful. Some of the cloud companies have tools that facilitate this process (Host Analytics has a product called "Airlift" which takes an excel spreadsheet and put it into Host fairly seemlessly..albeit not too hairy of a spreadsheet)

The big key is to get the executive staff aligned that there is a better solution than using excel for budget and forecasting and that having a system makes reporting much timely and accurate. (Using our system our close and reporting process is 5 days for quarterly close..including getting all managment packages out) The finance team should be able to sell the benefits and get the executive aligned behind it.

Good luck!

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