Why CFOs Must Learn to Embrace Integrated Financial Planning Now

Why CFOs Must Learn to Embrace Integrated Financial Planning Now

Integrated financial planning provides businesses with a way to plan for the future, incorporate all business variables into budgeting, and create flexible plans that adapt to business growth.

integrated financial planning

CFOs need to embrace integrated financial planning, while leveraging emerging technologies into the planning process. With the help of technology, businesses can speed up the budgeting cycle, free up resources, create up-to-date forecasts, and reduce the potential for error.

Financial planning

Keeping Up with Growing Data

Businesses need to adapt to new technologies in order to enhance efficiency.

Successful integrated financial planning relies on the use of various sources of data to generate accurate future forecasts. However, the quantity of useful data is increasing, and it’s expected to grow rapidly in the coming years. IDC’s Digital Universe predicts that data will increase tenfold by the year 2020, and businesses will have more data to analyze than ever before. Storing, utilizing, and analyzing that data will become increasingly difficult as a result.

To keep up with increasing volumes of data and to be able to analyze it effectively, companies need to utilize technology to their benefit. With the help of cloud-based EPM solutions, businesses can manage and scale their planning data easily. With cloud-based EPM software, businesses can gain added analysis potential over their data by accessing multi-dimensional modeling capabilities that increase business insights and enable users to rapidly create a variety of what-if scenarios. These technologies will be critical to integrated financial planning in the coming years, and businesses that want to remain competitive need to embrace the technological advancements that simplify financial planning.

Enhanced Reporting Abilities

Businesses can’t just rely on accurate data – they need accurate, up-to-date data. To create accurate financial forecasts, businesses need timely information based on current trends that reflect the direction of the business. Cloud-based EPM software is ideal for integrated financial planning, because it can streamline the reporting process, so management and financial reports are always current and accurate. Rather than waiting until the books are closed every month or quarter, users can get access to real-time data enabling them to create more accurate reports to rely on, and leverage in the planning process.

Utilizing Dynamic Forecasting

As a business grows and changes, the demands on that business also increase. For dynamic industries, there are innumerable variables and risk factors that impact the future of the company, and those variables make it challenging to create accurate forecasts. With the use of cloud-based EPM solutions, businesses can create adaptable rolling forecasts that are routinely updated to reflect changes in the business, economy, industry, and marketplace, allowing for more accurate forecasts, despite variables and uncertainties.

Financial planning

Determining the Technological Needs of a Company

Technology makes rolling forecasting easy, so businesses can plan for fluctuations and variables.

There is little doubt that integrated financial planning can benefit from leveraging technology, but what technology(s) does your business need most? To determine the most relevant technologies for your company, you need to consider the goals of your company as well as the best practices in the industry. If your competition is benefiting from time-saving technology that your company isn’t utilizing, it’s only a matter of time before you fall behind in the marketplace.

Integrated financial planning is a critical aspect of every business, and yet, as data continues to grow and competition increases, financial planning becomes more time-consuming and prone to inaccuracy. Businesses need to be willing to harness the potential of technology to enhance their financial planning, increase its accuracy, and simplify the planning cycle.

With the help of cloud-based EPM software, businesses can enjoy all of the benefits of the cloud, while accessing advanced modeling capabilities and streamlined reporting that will improve financial planning and advance the goals of the company.

To learn more about cloud-based EPM software, download this free white paper.

Download the White Paper

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Advice for CFOs on Managing High Growth

As the role of the CFO shifts from core accounting responsibilities to more strategic initiatives, one of the emerging areas of focus is helping organizations to drive revenue growth.

growth-528678-edited.jpg

With that in mind, the CFO Leadership Council’s NYC chapter Planfuled a panel discussion recently on the topic of “Managing High Growth.” The moderator of the panel was Gretchen Tibbits, COO of Little Things.

The panelists included several executives with experience in high-growth companies: Steve Cakebread – CFO of Yext, Michael Cohen – CFO of Birchbox, and Daniel Lang – Partner at Goodwin Proctor.  Here’s a summary of the key points raised during the panel discussion.

How to Prepare an Early Stage Company for Growth

A number of the panelists advised getting the best legal counsel and accounting advice when the company is at an early stage.  It pays to think big and plan for growth 3-5 years down the road.  In addition, getting the right legal advice at an early stage can save the company time and costs in the future.  It also helps to have outside legal counsel plugged into the business of the company at an early stage, even attending board meetings.  This makes it easier to get support for key initiatives, when needed.

Companies need a strong foundation to grow on.  The panelists advised getting standard documents in place for hiring employees, granting stock equity, and setting up other processes.  It pays to ensure consistency in basic processes.  Another panelist advised that, in early stages, CFOs shouldn’t overthink systems and processes.  They should allow for flexibility and growth – not be too rigid.

When to Start Initiating External Audits

audit.jpgOne panelist advised setting up external audits at an early stage.  This is especially true if the company is planning to raise capital, looking for loans, or considering an IPO or any exit opportunity.  Another panelist advised getting a public company auditor engaged prior to an IPO, even to help in creation of the registration statement.  Big 4 auditing firms are accessible to small companies through their fee structures, and 2nd tier firms are also viable.

On this topic, a member of the audience asked if there’s a need for an audit to support the applications for a line of credit.  The panel agreed that it definitely helps to be prepared.  A “going concern” letter is expected.  However, CFOs need to weigh the cost vs. benefit of doing a formal audit.  Going through an audit before the right formal processes are in place can help highlight weaknesses and areas to focus on.

Managing a Changing Workforce

bigstock-Business-Woman-876649.jpgThe most valuable asset at an early stage of a company is its people and culture.  The panelists advised that it’s important to maintain this as the company grows and expands.  The “best athletes” are not always the best choice in hiring, so CFOs need to ensure cultural fit as well in hiring new staff.  Companies should “inoculate” new employees with the mission and vision of the company as part of orientation.  This can be easy to maintain if the company puts in the work.

The panelists went on to comment that, as the company grows, people with experience are needed but maintaining the startup culture is vital, too.  Having a combination of people with big company, as well as startup, experience is helpful.  Organizations need people on board who have gone through a high growth phase before.

Training and development of staff and managers are also key to supporting growth.  CFOs are advised to give managers the opportunity to innovate and do new things, as well as to provide a safety net in case new initiatives fail.  It helps to put a time limit on new experiments and to closely monitor the results.

Balancing Culture with Formal Policies

Transparency and communication are important.  Panelists stressed treating people like adults, but making sure they understand the importance of key processes, such as expense policies, budgets – people need guardrails.  Companies should seek to leverage technology as much as possible to enable formal processes – for example, mobile approvals.

Company processes should limit the number of approval levels.  This ensures people aren’t over-burdened with too much “red tape.”  Reducing cycle time on approvals makes life better for employees and the company.  The more user-friendly the process is, the better it is for employees.

Transparency – How Much Is Too Much?

transparency.jpgOne panelist commented that he was a bit conservative on this initially, but is now getting more transparent.  CFOs need to share financial results with employees, provide details on performance and even cash flow.  This helps get buy-in and support from employees.  At the same time, CFOs need to trust staff to maintain confidentiality.

Other panelists agreed that being transparent is key.  It’s fine to share results and forecasts at an early stage to keep employees informed and engaged.  However, as the company gets closer to an IPO, then more care should be taken with sharing forward-looking forecasts.  And after an IPO, it’s even more critical in light of insider-trading regulations.

A question was raised about CEO resistance to transparency.  The panelists commented that many CEOs understand the need.  But if they don’t, CFOs should highlight the value of transparency from an employee-motivation standpoint.  It helps with creating visibility across functions and with highlighting the importance of key roles.  If left in a vacuum, employees will assume the worst.  It’s better to share the truth.  Another suggestion was to get the CEO to network with other CEOs to share best practices.

Employee Training & Development

Some of the topics the panelists advised focusing on from a training standpoint are negotiation skills, customer support, leadership, and management skills.  Project management skills are also important in growing companies.  Panelists advised looking for low-cost training options – such as mentoring and online training classes.

CFOs should consider both formal and informal training approaches.  But it also helps to hire the right people, monitor performance, and churn out the low performers on a regular basis.  The 20/70/10 approach of ranking and managing staff is a good best practice to adopt.

Setting Priorities and Measuring Performance

One panelist advised daily meetings with other key executives to review daily sales results and the status of key initiatives.  Others agreed that, in early stage companies, sales transactions often get a lot of focus.  But they advised that CFOs focus more on how to move forward to improve key processes and grow the business.  Let the CFO’s management team focus on day-to-day issues.  The focus needs to be less on the current quarter and more on the year and longer-term future.

One of the key roles of the CFO is to make sure the CEO is well-informed.  CFOs need to report on the right metrics, at the right cadence for the business, and help make CEOs successful.

Having the Right Tools to Support Growth

A number of the panelists leverage cloud-based applications for their high-growth companies.  This includes cloud-based CRM, T&E management, procurement, accounting, and planning and reporting.  One panelist commented that, by using a cloud-based planning solution, the annual budget process was completed in 2 weeks.

The key is to make sure the internal systems selected all work together and that information-sharing takes place.  It also helps to hire people who have experience with standard tools, such as Salesforce.com.  Also, the panelists advised CFOs to ensure the systems they choose provide scalability and growth for the future.

Leveraging EPM Solutions to Drive Growth

The CFO Leadership Council’s NYC panel discussion on “managing high growth” was a lively one that spurred a number of questions from the audience and could have gone on for hours.  During the discussion about having the right tools in place to support growth, the panel acknowledged the need for enterprise performance management (EPM) solutions for planning and reporting that can support current and future needs.

At Planful, we couldn’t agree more with this recommendation.  In fact, we covered this topic in a prior blog article.  To learn more, download this Forrester Research report entitled “The EPM Market Landscape Responds to The Growth Agenda and Digital Disruption.”

EPM Marketing Landscape White Paper

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Static Budgets vs. Rolling Forecasts: Which Is Right for You?

Static Budgets vs. Rolling Forecasts: Which Is Right for You?

Static budgets and rolling forecasts are two drastically different approaches to achieving a similar goal – predicting the future finances of a business.

While static budgets continue to be the predominant choice among businesses, rolling forecasts provide a number of advantages that make them ideal for many companies. The ideal budgeting approach largely depends on your business model. The size, growth-rate, and industry fluctuations of your business can help you determine the ideal budgeting method for your company.

Static budgets

What Is a Static Budget?

With the right budgeting approach, you can achieve greater accuracy in less time.

Static budgets are fixed budget plans that don’t change as the company grows and evolves. If the fixed annual sales budget of an organization is set at $500,000, that budget will remain the same, even if sales reach several million dollars. Static budgets also operate on a fixed timeframe. For instance, if a static budget is created for a 12-month period, that same budget plan is used for all 12 months, and after those 12 months are up, that budget is discarded and a new 12-month plan is created.

The rigidity of the static budget makes it ideal for some organizations, but hugely insufficient for others. For small businesses that experience consistent earnings throughout the year, experience little to no business growth, and are in a stable industry with few fluctuations, a static budget is an efficient means of anticipating annual budgeting needs.

What Is a Rolling Forecast?

Static budgets

Rolling forecasts will keep you ahead in the fast-paced world of business.

Unlike static budgets, rolling forecasts are updated regularly throughout the year to reflect changes in the industry or economy. It relies on an add/drop approach to forecasting that creates new forecast periods on a rolling basis. Businesses establish a set period, such as quarters or months, to update their forecast. At the end of every period, a new period is added to the forecast, so businesses can regularly adapt their financial plan to reflect recent trends.

What’s Best for Your Business?

There are pros and cons to each budgeting style, and the method chosen will largely depend on your business model. Ask yourself a few questions to gauge your basic needs.

  • Has your current budgeting approach been accurate?
  • How fast is your business growing?
  • What size is your business?
  • Does your business need to respond rapidly to industry or consumer changes?
  • Does your revenue and profits fluctuate throughout the year?
  • Can you accurately predict next year’s results?

If you’re currently relying on a static budget and you’ve noticed that the numbers are rarely accurate, there are several things that could be to blame. If your business is growing quickly or experiences a lot of fluctuations, a static budget will be unable to provide the flexibility and agility needed to accurately reflect finances.

The two approaches are actually complementary.  When implemented as an extension of the annual budget, rolling forecasts allow you to routinely reflect on your original budget and make adjustments to future periods.  In this case, your plans can continuously change and adapt to the needs of your dynamic business.  There are some organizations who have embraced the “beyond budgeting” concept and were able to eliminate the annual budget after rolling forecasts were in place.

Rolling forecasts make it easier to create more accurate plans, particularly for fast-growing and dynamic businesses that have difficulty pinning down future finances. While static budgets are often sufficient for small businesses that experience little growth or fluctuation, they are rarely sufficient for fast-growing, more dynamic companies. Yet, despite the advantages, many businesses avoid rolling forecasts, due to the increased workload it entails in terms of collecting and rolling up data.  This is especially hard if your company is relying on spreadsheets and email to manage the budgeting and forecasting process.

With cloud-based EPM software, you can streamline budgeting and create rolling forecasts more accurately and efficiently, allowing your business to leverage the benefits, without prolonging each planning cycle. This white paper, Best Practices in Rolling Forecasts, provides additional insights on the use of rolling forecasts.

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Make Your Company More Effective with Finance and Operations Alignment

Make Your Company More Effective with Finance and Operations Alignment

How well aligned are Finance and Operations in your organization?  If your company is like many others, the answer is probably – “not so much.”

finance and operations alignment
A recent podcast called, “The Rise of the Ops Executive,” delved into the link between finance and operations.  In an interview with Ian Charles, CFO of Planful, Charles explained why aligning finance and operations is essential for business success.

Integrating finance and operations

Looking Toward the Future

Integrating finance and operations will
provide a clearer view of a company’s future.

Anticipating and predicting future trends is imperative for all successful businesses. According to Ian Charles, cloud-based enterprise performance management (EPM) software makes it easier to pin down future trends, resulting in greater accuracy in forecasting. It has a single platform for consolidating all company data, offering a single source of truth that will bolster company insights. It can improve the accuracy and reliability of business data, so forecasts are more reliable and inform smarter business decisions. In addition, it provides tools for advanced data analysis, so companies can gain greater insights from their data than before.

How to Deploy Talent Effectively

The deployment methodology for talent will vary among businesses and CFOs. However, Charles says he prefers to start with the hiring process. Businesses need to source the best talent and employ people who possess the critical skill sets that will advance the goals of the organization. Furthermore, it’s important to hire versatile staff members that are capable of taking on tasks from other departments, while managing financial tasks as well. This will allow finance and other departments to integrate, resulting in more synchronicity between finance and operations.

It will also create a closer partnership between finance and other facets of the organization, helping to bridge the gap and create a more unified vision for the company as a whole. By increasing the collaboration of departments, businesses can gain a clearer view of the organization, including the primary drivers of business, the revenue sources, the product lines, the customer base, and more. The biggest piece of advice Charles has for other CFOs is to begin with baby steps and bring about change incrementally, moving on to larger pieces as the integration process progresses.

Driving the Success of CFOs

When asked what has driven his personal career success, Charles casually remarked, “I’m a triathlete,” going on to explain that his Type A personality gave him the ambition and drive needed to tackle the multiple facets of his job title. He uses his morning exercise routine as an opportunity to reflect on his workday ahead and consider what’s working for the company and what isn’t.

Other Productivity Tools

Financial and Integrating finance and operationsoperational integration provides
the insights needed to make smarter financial decisions.

Businesses shouldn’t only be looking at improving the efficiency and performance of finance. Other tools can enhance the efficiency of their business model as well. In the podcast, Charles says that, aside from cloud EPM software, his favorite productivity tool is teleconferencing. Its ability to connect people from all over the world, make it easier to share information, and encourage communication and collaboration among colleagues, makes it incredibly useful in the business world.

Priorities for CFOs

Prioritizing and goal setting are integral aspects of strategically steering businesses in a positive direction. Charles, being Type A by nature, has already planned his business goals for the next 12 months. His main goal is to continually add value to all of his CEOs decisions and provide his CEO with the best information that will aid business growth.

He’s also focused on expansion, and eagerly planning when and where to open a new office. With the help of his Cloud EPM Suite, he can accurately model the financial impact of expansion to help determine future locations, the future client base, future investment capital, and other key factors that will reduce the risks involved with expansion.

According to Charles, the primary role of a CFO is to serve as a co-pilot to the CEO. By uniting the goals of finance with the overall organization, CFOs can make smarter decisions and provide better information to CEOs, allowing the CEO to steer the business toward success.

Cloud-based EPM software offers a unified and centralized solution that makes it easy to integrate finance and organization. With a single dashboard that consolidates all business data, companies can find that single source of truth that will establish the current state of their business, allowing them to alter their business strategy as needed and lead their business more effectively.

To learn more, listen to “The Rise of the Ops Executive” podcast.

Podcast Replay – Rise of the Ops Executive

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Fake vs. Real Cloud:  Why it Matters

Fake vs. Real Cloud:  Why it Matters

Have we reached the tipping point for cloud-based applications in Finance?  It sure feels like it.

Following years of rapid cloud-based application adoption in CRM, HCM, Expense Management, and other areas – Finance has gotten on board.  We saw this in the rapid adoption of cloud-based ERP and EPM applications in 2015, and we expect to see this trend continue into 2020.

Just about every financial software vendor is now claiming they have “cloud” applications, but not all cloud solutions are created equal.  Make sure you understand the different flavors of cloud that are available and especially what the cost implications are of the various deployment models.

Software Vendors Jumping on the Bandwagon

With customer preference now trending toward cloud-based applications, a number of EPM software vendors jumped on the cloud bandwagon in 2015.  The mega-vendors (Oracle, SAP, and IBM) all made announcements or delivered cloud-based applications.  We also saw other traditional on-premises EPM vendors announce cloud-based versions of their products.

However, industry watchers have been cautioning buyers to be aware of “false clouds” and to ensure they understand the architecture of the cloud solutions they’re considering.  While everyone is using the term “cloud,” not all clouds are created equal. A variety of deployment models fit under this moniker – each with different value propositions for customers.

Not All Clouds Are Created Equal

We’ve covered this in other blog posts, but here’s a quick recap of the different flavors of “cloud” applications available in the market.

  • Hosted Applications – This is where the legacy software vendor, or a third party, installs the on-premises application in its own hardware infrastructure and Planfuls the application on behalf of the customer. Customers still have their own instance of the software, but it relieves them of the need to set up infrastructure and install the software themselves. Everything else is the same as in the on-premises environment – licensing, configuration, maintenance, upgrades, support, etc.  Of all three models, Planfuled applications have the highest costs.

 

  • Single-Tenant Cloud – This is where the legacy software vendor sets up a cloud infrastructure and makes the application available to a number of customers, typically on a subscription basis. Customers are relieved of the infrastructure requirement, and they avoid the high up-front licensing associated with on-premises or Planfuled applications.  But since customers have their own “instance” set up in the cloud, the upgrade process is still painful and costly, and new releases aren’t rolled out automatically, or frequently.  Also, in many cases, the features offered in the cloud version of the software are more limited than those available in the on-premises version.
  • Multi-Tenant Cloud – These applications are built from the start to be deployed on a shared infrastructure, with a single application code base being shared by a large number of customers. Because the infrastructure and software installation process is eliminated, applications can be provisioned and configured rapidly for new customers.  The software is sold on a subscription basis, so it removes the up-front licensing costs of on-premises or Planfuled applications.  And since there’s a single code base, all customers are using the same version of the software, which is upgraded automatically, on a frequent basis, at no cost.

The chart below summarizes the 3 “flavors” of cloud applications and the trade-offs between them.

Cloud_flavors.png

The industry has recognized the advantage of true, multi-tenant cloud applications over the single-tenant and Planfuled models:

  • Speed – New applications can be deployed and configured within weeks.
  • Autonomy – No need for IT support. Departments can control their own destiny.
  • Innovation – Application updates are released rapidly, typically quarterly.
  • Total Costs of Ownership (TCO) – Costs are lower since configuration is easier and software updates are automated.

This last factor, costs, is really what makes a difference to customers in adopting multi-tenant vs. single-tenant or Planfuled software.  In the next section, let’s take a closer look at this issue.

Why It Really Matters – Costs

In examining the cost advantages of multi-tenant vs. single-tenant or Planfuled applications, customers will see differences in a number of areas:

  • Provisioning the software – Customers will incur the most costs under the Planfuled model with up-front license fees and set-up fees for the hardware and software infrastructure. These are reduced under the single- and multi-tenant deployment models as the vendor already has the infrastructure and software in place.
  • Configuring the system – The steps required to configure the application for a specific company are mostly the same across models. Examples include defining the chart of accounts, setting up hierarchies, creating business rules, setting up user security, and writing reports.  However, applications that were built natively for the cloud are typically easier to configure vs. on-premises applications that were moved to the cloud.  These may require more IT support to set up vs. multi-tenant applications, which are more end-user oriented when it comes to administration.
  • Data Integration – Another important step often lacking in Planfuled or single-tenant applications is data integration.  This is often achieved via flat files and requires manual setup and ongoing hand-holding.  True multi-tenant cloud vendors typically provide cloud-based data integration tools that can access data directly from both on-premises and cloud-based applications.
  • Running the system day to day, week to week – The end-user interaction with the application is likely going to be similar across the three deployment models. One thing to be aware of is who is responsible for database maintenance and back-ups under the Planfuled model.  That may still be the responsibility of the customer, which will add costs to the equation.
  • Updates and upgrades – This is a big area of differentiation across the three deployment models. Updates to the operating system, database, and application software will be the most time-consuming and expensive under the Planfuled model.  They will be less costly under the single- and multi-tenant models since the vendor is taking responsibility for the updates and upgrades to all of the software layers.  However, under the single-tenant model, the updates will typically come less frequently, but require more planning and downtime by the customer.  In the multi-tenant model, software feature updates are more frequent, automatic, and seamless, occurring in a shorter maintenance window.

One additional thing to be aware of is what happens when a legacy, on-premises EPM vendor moves its applications to the cloud.  If the on-premises EPM solution is based on a non-integrated set of standalone applications (as many are), this won’t change as these applications are moved to the cloud.

There will still be multiple points of maintenance and administration for the various modules. There will still be the need to somehow share data across the modules to perform actual vs. budget reporting, run complex allocations, or conduct multi-dimensional analysis.  So the costs of using and running the system will remain the same as the costs for the on-premises deployment.

Achieving the Lowest Possible TCO

So what’s the best option for companies interested in gaining the maximum cost advantages from a move to the cloud?  Integrated EPM applications that were designed from inception to be deployed as a multi-tenant cloud solution will offer the lowest TCO of all three models.

To learn more about the Planful Cloud EPM Suite and its multi-tenant cloud architecture, download this recent white paper:  “Introduction to EPM in the Cloud.”

Download the White Paper

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Expert Interview: Gary Cokins on the Problems Solved by Effective EPM

Expert Interview: Gary Cokins on the Problems Solved by Effective EPM

Gary Cokins, founder and president of Analytics-Based Performance Management LLC, has 40 years of experience with enterprise performance management (EPM).

His career started in 1971 after graduating with a degree in industrial engineering and operations research from Cornell University and with an MBA in finance and accounting from Northwestern University Kellogg School of Management.

This quantitative foundation led Gary to a first-line management job in accounting and operations management with a blue-chip conglomerate. During the next 30 years in management consulting, he leveraged skills in problem solving, including authoring several books and articles, and also educating and helping organizations successfully implement EPM methods embedded with analytics.

Here, he offers an overview on how EPM can improve an organization’s bottom line. Read on:

What is analytics-based enterprise performance management?

There is some confusion and lack of consensus about the term enterprise performance management. Many narrowly perceive it as a CFO initiative with a bunch of measurement dashboards for feedback. It is much broader.

The good news is EPM is not a new process or single improvement method that everyone now has to learn. Rather, EPM tightly integrates existing business improvement and analytical techniques that executives and employee teams are already familiar with. Think of EPM as an umbrella concept. EPM integrates operational and financial information into a single-decision support and planning framework, including strategy mapping; balanced scorecards with KPIs; costing (including activity-based costing principles); budgeting; forecasting; lean and six-sigma quality process management; and resource capacity requirements planning.

These methods fuel other core solutions such as customer relationship management (CRM), supply chain management (SCM), risk management, and human capital management systems, as well as lean management and Six Sigma quality initiatives.

They are many moving parts. Together, they are like gears in a machine that EPM software seamlessly meshes. Analytics-based performance management selectively embeds analytics of all flavors into each method. Examples are regression, correlation, segmentation and clustering analytics.

How can analytics-based enterprise performance management help improve an organization’s performance?

Performance improvement comes from addressing challenges related to each of EPM’s methods. These include:

  • Strategy execution with a strategy map along with its companion balanced scorecard and dashboards displaying key performance indicators (KPI). Metrics align the priorities and behavior of a workforce with the executive team’s strategic objectives. The common phrase is “You get what you measure.” Measurements bolster holding employees and teams accountable for results.
  • Measuring and managing product, standard service-line, channel, and customer profitability. Many managerial accounting systems miss-allocate expenses into costs and rarely calculate costs below the product gross profit margin line. Customers are the primary source of shareholder value creation, and they can range from high-to-low, demanding expenses independent of the sales volume and mix they purchase.
  • Driver-based rolling financial forecasts. The annual budget is typically out of date soon after it is published. Creating the budget requires months of preparation. With increasing volatility and uncertainty, updates at frequent intervals need to be refreshed to determine future headcount and spending levels. Driver-based cost information facilitates better “what-if” scenario planning and decision-making, including incremental and marginal expense analysis that separates variable from sunk and fixed costs.
  • Supply chain management. Increasingly, customers need to view suppliers as allies, not as enemies, to pressure for lower prices. EPM helps trading partners in a supply chain identify and implement mutually beneficial projects to lower costs and accelerate cycle times. Supply chains now compete with other supply chains for their share of consumer wallets and purses.
  • Process improvement. Organizations must continuously reduce costs, increase quality, and improve service levels. Fact-based information is needed to determine what to change.

What are the most common problems or frustrations the organizations you help are facing today?

The more easily surmountable problems that companies face are IT-related, such as low-quality, “dirty” source data and disparate hardware systems from multiple vendors. With EPM, software is no longer an obstacle. EPM software is proven.

The major obstacle involves people. Examples include natural resistance to change, fear of being measured or held accountable, fear of others knowing the truth, and weak leadership. My frustration is with the slow adoption rate by companies of the various EPM methods, some of which have now been around for decades.

What advice do you find yourself repeating to these organizations over and over?

I have two types of advice.

  • First, related to my prior answer, do not underestimate the magnitude of people’s resistance to change. People prefer the status quo. Managers need to improve their skills with behavioral change management techniques.
  • Second is to start small, but think big. This includes using quick implementation techniques like rapid prototyping, pilots, and proof-of-concepts. These help accelerate learning and achieve organizational buy-in to the benefits from the EPM methods.

What do you think would surprise most organizations about the efficacy of their current management strategies?

A major surprise to executives recognizing that the commonly accepted strategies (e.g., low-cost provider, product and service differentiation, a focused narrow customer segment) are all no longer sustainable in the long term. They are all vulnerable to competitors invading a company’s market space.

Amazon is good example, starting with selling books, then retail goods and now television shows. Given this vulnerability of any strategy, the best offense to achieve a competitive edge is to create a culture for analytics for better investigation and discovery to support better decisions.

In the past, the best leaders and executives had the best answers. That is no longer the case. Today, the best leaders and executives ask the best questions. There is too much volatility and uncertainty for executives to rely on their intuition, sixth sense, or past experiences they previously relied on to get them promoted to their leadership positions. They need to promote having analytical skills and capabilities in their organization.

To  learn more about EPM, and how cloud-based EPM is becoming the preferred way to deploy these solutions, check out our free white paper entitled “EPM in the Cloud.”

Download the White Paper

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The Limitations of Excel for Corporate Planning and Budgeting

The Limitations of Excel for Corporate Planning and Budgeting

Microsoft Excel is pervasive in the business world, and it has always been particularly popular among financial planners.

Excel is cheap, widely available, and contains innumerable calculations that make it useful for budgeting and planning. Yet, while Excel is certainly easier than performing calculations manually, it provides a number of limitations that make it inefficient, inaccurate, and altogether challenging to use for critical corporate processes.

Limited Visibility

Excel is unfortunately limited to a two-dimensional framework that stifles visibility. When businesses attempt to generate financial models and create a variety of “what-if” scenarios, not only is the process time-consuming, but the multi-dimensional model is difficult to envision, resulting in more oversights and errors. As most people have encountered, when you stare at a set of numbers for long enough, they eventually become jumbled, and tackling financial modeling on a spreadsheet makes it difficult to envision the end result.

Prone to Error

Problems with spreadsheets

 

Due to the exhausting manual data entry, Excel is very prone to error.

In addition to improving efficiency, another core aim of technology is to reduce human error. Excel is unfortunately particularly vulnerable to human error, as it relies on manual data entry to create budgets and plans. If any part of the data is entered incorrectly, it may throw off the entire plan, which could have a devastating impact on the company. Just ask J.P. Morgan. After a single miscalculation in Excel, the bank lost several billion dollars, all of which could have been avoided with a more accurate system.

Tedious and Inefficient

Excel is tedious and disorganized, resulting in more work for financial planners.
Corporate budgets

As technology advances, humans find faster and easier ways of accomplishing the same task. There was a time when budgets were prepared manually, and Excel had yet to be invented. Excel revolutionized budgeting and planning, as well as countless other tasks, providing a new technology to streamline the work of finance departments. Yet, the world is more reliant on efficiency than ever before, and nowadays, Excel is proving to be needlessly exhausting for corporate planning. Now, the marketplace is dominated with fast-growing companies that are in a constant state of change, and using Excel spreadsheets and email to manage budget cycles takes more time than many fast-paced businesses can spare.

What’s the Solution?

While Excel may be sufficient for smaller companies, large or rapidly growing companies need a more efficient and accurate way of planning corporate budgets. Cloud-based enterprise performance management (EPM) software provides an integrated budgeting solution that can eliminate a lot of the shortcomings of Excel. By automating a number of financial tasks, it can significantly reduce the potential for human error.

It’s also equipped with advanced modeling capabilities that can provide a multi-dimensional view of financial models, providing businesses with the enhanced visibility they need. With all aspects of the budget cycle integrated into the software, businesses can drastically speed up their modeling approach, while generating more accurate forecasts.

There was a time when Excel was the latest and greatest budgeting and planning technology. However, as the marketplace continues to evolve, modern businesses need to adapt to emerging technologies in order to provide their company with the greatest possible advantage. Cloud-based EPM software is equipped with all of the budgeting and forecasting tools that modern businesses need to conquer their budget cycle swiftly, while enhancing the accuracy of their numbers.

Read this white paper to learn more about the ways Excel is hindering your budget cycle.

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Oracle Audits? The Real Story Is Oracle’s Fake Cloud!

Oracle’s use of software audits to drive revenue are well-documented. These audits are, after all, an important way to ensure customers comply with your software agreement.

There’s a problem with this in Oracle’s case. Oracle’s agreements are notoriously vague, yet it’s consistently in the top five companies most likely to audit their customers. A little dubious.

Beware of Strong-Arm Tactics

Oracle has been getting more press lately because it’s using these audits to force customers to adopt Oracle’s “cloud” products in lieu of payment to fulfill audit requirements. This tactic allows Oracle to talk cloud adoption and take attention away from consistent quarter-to-quarter misses.

Oracle’s strong-arm tactics to drive adoption of its “cloud” products has many up in arms – for good reason. The real story in the enterprise performance management (EPM) space, however, is that Oracle’s “cloud” products are not true cloud applications. This is significant. Why? It has the potential to confuse the market and create a larger issue for Finance teams.

If you’re confronted with an Oracle software audit, there are lots of resources to help. From TechTarget, there’s “The seven deadly sins that lead to an Oracle audit” if you want to learn how to prevent an audit. From Gartner, there’s “How to Survive an Oracle Software Audit” if you want to learn how to prepare and manage an audit. See? Lots of resources. (Or at least a few to get you started. You’ll likely need many more.)

And Watch Out for Fake Clouds

Let’s start by taking a look at Oracle’s EPM “cloud.” These products are simply its legacy on-premises Hyperion products—you know the ones it launched roughly 15 years ago — Planfuled on an Oracle server. These “cloud-hosted” products cannot deliver the benefits of true cloud-based solutions.

True cloud-based solutions are cheaper to implement and maintain. They’re better at driving adoption and ownership. And they’re faster to implement and adjust as business changes. Oracle’s “cloud-hosted” Hyperion products fail at all of these, other than removing the burden of provisioning the servers.

Oracle’s misdirection and misinformation, not to mention bad behavior, may create too many opportunities for poor decisions. Finance is at the point where there’s a chance to move the organization forward with the help of efficient cloud-based applications. Instead, with Oracle “cloud”, Finance teams will be stuck with antiquated software that’s “cloud-hosted,” costly, resource intensive, and slow.  Learn more in this white paper.

Software buyers in Finance will really need help now. Here’s a little:

  • The limitations of Planfuling legacy products like Hyperion Planning and Oracle Essbase have been well-documented since 2010 in posts such as “SaaS-querade” by Brian Sommer from ZDNet and in 2014 research by Forrester, “Beware Of The ‘SaaS’ Trap.”
  • If you’re evaluating cloud solutions, “Don’t be Fooled by ‘Fake’ Cloud” is a post from one of our partners that details the benefits of the true cloud. There’s also information to help you make a case for true cloud solutions in your company based on an interview with a CIO and CFO.

The saddest part of all this for Finance and the other departments within the enterprise is it increases the potential that many companies will not experience the many benefits of true cloud-based solutions anytime soon. And that really is too bad.

To learn more about the advantages of cloud-based EPM vs. on-premises solution, download our free white paper “Is it Time to Move from Oracle Hyperion to the Cloud?“.

Download this White Paper

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Expert Interview: Seth Fineberg on Simplifying Accounting and Finance

Expert Interview: Seth Fineberg on Simplifying Accounting and Finance

Professional accountants or CPAs looking for practical information and tools for streamlining their tax and accounting functions should probably bookmark AccountingWEB, where they’ll find news and advice from top industry professionals.

We recently checked in with Seth Fineberg, the site’s managing editor, to pick his brain on accounting trends and get advice on simplifying tax and accounting functions. Here’s what he had to say:

Can you tell us a little about your professional background? What’s your experience/interest in accounting?

My career spans the world of business and financial journalism. I have held junior and senior positions at a variety of business trade publications and information services for the past 25 years. For 13 of those years, I covered news and trends around accounting-related technology as well as its impact on the profession as a whole. I currently oversee the editorial direction of a community site with content coming predominantly from the accounting profession and those looking to influence it and move it forward. Our goal is to help provide useful information to practicing accountants looking to grow their practices and better serve their clients.

Why is it important that businesses simplify their tax and accounting functions?

It should come as little surprise that the accounting profession is undergoing a massive shift from rear-facing compliance work, to a more advisory role. The current business environment demands it, both directly and indirectly so simplifying core functions becomes essential to allowing accountants and CPAs to look deeper into the financials and spend more of their time on business growth; being a true partner to the businesses they serve.

What are some tried-and-true strategies for simplifying these functions?

While nothing is 100 percent, these days regular use of anything that is designed to automate the most basic back office functions and has been doing so with proven success is the first key strategy to have.

What doesn’t seem to work as well?

I will say this. There’s a lot of talk about integration and most of it is just that: talk. True integration is not completely there for everything. There’s usually a work-around or some API or add-on needed to make a truly seamless integration work. And as more apps, cloud and mobile, come on to the market, the need to integrate them with core functions becomes ever more crucial. Unfortunately, the reality of these so-called integrations is not all they present themselves to be, or all that product marketing presents them to be.

What innovations are you most excited about for how they will help businesses manage tax and accounting functions?

Well cloud and mobile in general have come to the forefront of all business automation decisions, now it’s about what to use and where it’s going next. Wearables and voice-activated functions could be interesting but it’s still a bit early to say. In the accounting profession, aside from the early adopters we’re just getting into accepting automation of tax and accounting tasks.

What are the biggest finance trends you’re observing as we enter the new year?

I guess automating more things like expense management and also being able to look deeper into the data companies already have.

Connect with AccountingWEB on Facebook, Twitter and LinkedIn.

Get started streamlining your finance functions this year. Check out our Whitepaper: Achieving Superior Financial Flexibility Through Driver-Based Budgeting and Planning

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To thrive as a business, you need to be able to predict your future earnings and expenses, so you can make smarter business decisions.

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Yet, while financial forecasting is imperative to the success of businesses, accurate financial forecasts are difficult to create. So, how does a high-growth, dynamic business create accurate forecasts for their company, without exhausting their time and resources in the process? A whitepaper entitled, “Best Practices in Rolling Forecasts,” sets out to answer these very questions.

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EPM in the Cloud – Simply the Best

Remember Tina Turner’s comeback in the 1980s?  She looked great, she sounded great, she was great – and she charted a number of big hits in her comeback album Private Dancer

Later she scored another hit with the song “Simply the Best.”  That was also the theme of Planful’ recent 2016 sales kickoff meeting, held in late January.  This theme is reflective of the great success we achieved in 2015 in acquiring new customers, hiring the best talent, garnering a number of awards for our products, as well as recognition from Gartner that we are the top-rated cloud EPM solution for medium to large enterprises. 

With that theme in mind, I was wondering how Tina Turner would have sung her song, “Simply the Best” if she were a Planful customer.  Here’s what I came up with;

 1st Verse

I called you when I needed you, I was fed up with ExcelTina_fed_up.jpg

You came to my rescue when I was frustrated as hell

When I moved to the cloud

You gave me everything I needed

 2nd Verse         

Oracle gave me promises and a world of dreams

But when I started deploying, I really got reamed

ohh, it’s oh so wrong

Planful made it better baby

 Chorus  

You’re simply the best – better than all the resttina_turner.jpg

Better than anyone, anyone in EPM

I’m a customer for life, you’re committed to my success

With your EPM cloud suite – you can meet any test

 3rd Verse

When I was working overtime – every night and every day

When my eyes were getting weary, and I wanted to run away  

You were there with open arms

There could be no better place

 Chorus

You’re simply the best – better than all the rest

Better than anyone, anyone in EPM

I’m a customer for life, you’re committed to my successTina_Turner_simply_the_best.jpg

With your EPM cloud suite – you can meet any test

 Bridge

When my budgeting process was out of control

And I was working on weekends, with all my heart and soul

When I was feeling down – and oh so alone  

I sent you an email – and you called me on the phone……

 Chorus

You’re simply the best, better than all the rest

Better than anyone, anyone in EPM

I’m a customer for life – you’re committed to my success

With your EPM cloud suite – you can meet any test

Oh, you’re simply the best!

END

To learn more about how Planful can help your organization become the best you can be, download our free white paper “EPM in the Cloud”.  

Download the White Paper  

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