Leverage the Cloud to Ease the Pain of 2017 Budgeting

Leverage the Cloud to Ease the Pain of 2017 Budgeting

CFOs are constantly living in the future. While 2016 isn't even half way through, CFOs and financial teams already have their sights set on the year ahead.

As you’re preparing for the 2017 budget season, this is a good time to ask yourself – is your budgeting process too time-consuming? Is it painful for finance and does it truly provide value for the organization? If the answer is yes to these questions, then your company needs to think about ways to streamline and improve upon your current budgeting process. If you’re still relying on spreadsheets and email or outdated, on-premises software, you may want to consider other alternatives, such as cloud-based budgeting for 2017. Continue reading “Leverage the Cloud to Ease the Pain of 2017 Budgeting”

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The Wisdom of Crowds Meets Enterprise Planning

Summer 2016 is in full swing and things are looking sunny for Planful. Sorry, excuse the perpetual sunny disposition of a communications professional.  But seriously, the company has performed extremely well in recent industry analyst reports from influential firms such as Nucleus Research

and Gartner.

To continue the drumbeat, today I’m pleased to share that Planful has achieved a perfect recommended score in the annual “Wisdom of Crowds Enterprise Planning Market Study” published by Dresner Advisory Services, Inc. Specifically, Planful was rated as a leader and positioned among the highest scoring vendors in the categories of “Customer Experience,” and “Vendor Credibility.”  For those unfamiliar with this firm, Dresner Advisory Services was formed by industry luminary Howard Dresner, a renowned analyst, author, lecturer, and business adviser.

The flagship Wisdom of Crowds Enterprise Planning Market Study examines user perceptions, intentions, and realities associated with enterprise planning. Results are based on Dresner Advisory Services’ research community of over 3,500 organizations, vendors’ customer communities, and a survey instrument that collects data, along with social media and crowd-sourcing techniques to recruit survey participants.

The vendor rankings of enterprise planning software vendors were based on 33 different criteria spanning sales/acquisition experience, value for price paid, quality and usefulness of product, quality of technical support, quality and value of consulting services, whether the vendor is recommended, and integrity.

Not very many people realize that direct customer feedback plays a critical role in how these reports are formulated and we could not be more humbled by the support of our wonderful customers.

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How the Cloud Is Used in the Financial Sector to Drive Efficiency

How the Cloud Is Used in the Financial Sector to Drive Efficiency

Businesses have been adopting cloud computing as a way to improve efficiency and reduce the cost of software management.

The financial services sector, however, has been more reluctant about adopting cloud technology. Financial services organizations require exceptional security to protect customer data, and the financial management process itself is fickle and prone to error. It’s due to these concerns that many financial organizations have resisted cloud-based software. Yet, many in the financial industry are proving that the cloud not only provides the needed security, but can also improve accuracy and efficiency within the financial services sector.

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Cloud-Based Software Is Supporting Growth Among Financial Startups

Many financial services startups have been leveraging cloud-based software to reduce costs and improve the scalability of their businesses. Utilizing on-premises software solutions simply isn’t practical for many startup companies, as it requires ample space, money, dedicated IT resources and time to establish. For resource-conserving startup companies, the cloud provides a viable solution, allowing small, growing companies to access a wide range of cutting-edge software applications that are highly scalable and will support business growth.

Aire, a company that provides alternative credit scores, implemented cloud-based data management software with tremendous success. Their company needs to manage the data of customers to be able to calculate their credit scores based on a complicated algorithm that relies on diverse sets of customer data. Defying many myths about the cloud, Aire has found a platform that offers the advanced security they need to keep their client’s personal data private. It has also made data management easier and more accurate, so they can provide better service to their clients.

How Ellie Mae Has Leveraged Cloud-Based EPM Software

Ellie Mae is a cloud-based services company that offers mortgage automation. According to their Vice President of Finance, Matt LaVay, their business was growing rapidly, and they soon outgrew their ability to realistically depend on spreadsheet-based forecasting. They needed a more efficient method that could better support business processes.

Since their business is cloud-based, they decided to seek out a cloud solution to support their budgeting and forecasting process. Ellie Mae made the decision to switch to cloud-based EPM software. In addition to introducing the new software, their company redesigned the way in which they approached budgeting and forecasting by decentralizing the process and expanding it to incorporate the overall business operations.

EPM software

LaVay said his core concern when implementing a new software package was that it would be adopted and utilized efficiently. He was searching for a user-friendly interface with a low learning curve so that business processes wouldn’t be interrupted by the change. It also had to be flexible. Like many businesses in the financial services sector, Ellie Mae needs an agile software that will support multidimensional modeling and won’t confine them to a single methodology. Planful’ cloud-based EPM software was the ideal solution, providing the agility and accessibility their business needed.

The Cloud Reduces Cost, While Increasing Efficiency

Cloud-based EPM software offers advanced functionality for a fraction of the cost of on-premises software. It can be implemented quickly, and eliminates the need for costly software updates while enabling businesses to manage data more easily and efficiently. It offers a multidimensional database that can improve analysis and simplify the reporting process. With attractive and organized dashboards and functions that facilitate workflow, businesses in the financial sector can fuel efficiency, improve agility, and increase the accuracy of forecasting.

To learn more about the benefits of the cloud, read the whitepaper entitled “Introduction to EPM in the Cloud.”

Download the White Paper

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The Federal Budget Challenge:  The Elephant No One is Talking About

The Federal Budget Challenge:  The Elephant No One is Talking About

The 2016 presidential campaigns have captured a lot of media and public attention over the past year. But there’s a huge elephant in the room that no one is talking about – the federal budget deficit.

Yes, remember the federal debt?  It’s currently $14 trillion dollars and growing by roughly $500B per year.  And if the raw numbers don’t scare you enough, a scarier fact is that the federal debt as a percentage of GDP is at its highest level since World War II – approaching 75%.

Federal_debt.png

This was the focus of the CFO Leadership Council’s New Jersey and New York City Chapter meetings in June.  The guest speaker was Robert L. Bixby, Executive Director of The Concord Coalition, a nationwide, non-partisan, grassroots organization advocating generationally responsible fiscal policy. The Concord Coalition was founded in 1992 by the late former Senator Paul Tsongas (D-Mass.), late former Senator Warren Rudman (R-N.H.), and former U.S. Secretary of Commerce Peter Peterson. Former Senator Sam Nunn (D-GA) serves as co-chair of the Concord Coalition.

The Concord Coalition is dedicated to educating the public about the causes and consequences of federal budget deficits, the long-term challenges facing America’s unsustainable entitlement programs, and how to build a sound economy for future generations. The Concord Coalition’s national field staff and loyal group of volunteers cover the country holding lectures, leading interactive exercises, conducting classes, giving media interviews, and briefing elected officials and their staffs.

The presentation given by Mr. Bixby was a real wake-up call that the national debt will be a major issue for the next president.  It’s an issue that we should all demand more discussion about, especially during the campaigns and debates running up to the November 2016 presidential election.  Here are some of the facts presented during the session:

The Federal Debt:  The Elephant

  • Federal debt as a % of GDP is at the highest level since WWII – 75%. And it’s projected to double by 2050.
  • The FY2015 federal budget deficit was $438B, down from prior years. Interest was $223B, based on borrowing at historically low interest rates.  That will surely change going forward as interest rates are expected to rise.
  • The FY2018 budget deficit is expected to be over $500B. Current law is expected to drive the annual deficit to over $1 trillion by 2022.
  • Federal spending averages 20% of GDP, while revenue averages 17% of GDP. Going forward, the revenue is expected to stay flat while expenditures are expected to increase.

Spending Breakdown:  What’s Fueling the Elephant

  • Mandatory spending and interest has risen to 69% of the budget, whereas discretionary spending is only 31%. Mandatory spending will continue to grow based on demographics (i.e., Social Security, Medicare, Medicaid, federal & military retirement, veterans support, etc.).
  • Social Security, Medicare, and Medicaid are 48% of the budget.
  • Discretionary defense spending has declined to record low levels – less than 3% of GDP. Non-defense discretionary spending (i.e., education, transportation, R&D, etc.) is tracking to its lowest historic level.
  • Interest costs will rise sharply under current law and interest rate expectations, from $250B in 2016 to $500B by 2020, and closer to $800B by 2026.
  • The main sources of growth in federal spending include Social Security, Medicaid, Medicare, and interest. All other spending is expected to decrease as a % of GDP.

federal_debt2.png

 The Aging Population:  Hello Baby Boomers

  • Population aging is the largest factor in growth of healthcare programs and social security because there are more beneficiaries and more costs per person.
  • From 2010 – 2030, the number of people aged 20 – 64 is expected to increase by 8%, while the number of people aged 65 and over will increase 82%.
  • The number of workers per retiree has dropped from 50:1 in 1950 to 3:1 in 2015

Entitlements: The Dreaded “Third Rail”

  • Social Security benefits are expected to exceed tax revenue by 1.6% of GDP over the long term. The Social Security Trust Fund (which is a credit owed by the Treasury) is projected to be solvent through 2034.
  • Federal spending on healthcare (Medicare and Medicaid) is projected to grow from 5% to 9% of GDP. This is mostly driven by the increase in beneficiaries.
  • Medicare and Social Security require subsidies from the general fund to remain solvent

Tax Expenditures:  The Hidden Entitlement

  • Tax expenditures are more than half of tax revenue for individuals and roughly 50% on the corporate side. Scaling back some exemptions would help increase tax revenue and simplify the tax code.
  • The largest tax expenditures include defined benefit plans, employer healthcare, cap gains and interest, home mortgage deduction, earned income credit, state & local taxes, charitable contributions, and others.

Call to Action

The Concord Coalition’s view is that the current fiscal policy is unsustainable.  There are no easy solutions, such as cutting waste, fraud, and abuse, or growing our way out of the problem.  Finding solutions will require bipartisan cooperation and a willingness to discuss all options.  Public engagement and understanding is vital in finding solutions.  This is not about numbers. It’s a moral issue.

Presidential candidates and their campaigns need to acknowledge the problem, prioritize the issues, formulate a plan, and explain how they plan to pay for policy initiatives.  The recommendations of The Concord Coalition are as follows:

  • Slow the growth of federal healthcare spending and improve delivery
  • Make Social Security sustainable and secure
  • Reform and simplify the tax code, reduce exemptions, grow the economy
  • Protect critical investments such as infrastructure

To learn more about The Concord Coalition, visit its website and join “The Lookout Campaign,” which is focused on urging voters and candidates to look out for the future and stop kicking the can down the road for our children and grandchildren to deal with.

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The role of finance is evolving quickly, and many organizations are investing heavily in the FP&A function to gain more strategic focus within finance and to extend their reach across the enterprise.

This was the focus of a recent Argyle virtual event sponsored by Planful at which the panelists discussed the role of CFOs in today’s business world, and the increased focus on financial planning and analysis (FP&A).

It started off with the results of a survey highlighting the relationship between CFOs and CEOs, and how that relationship has evolved over the years. About 44 percent responded saying the role of CEOs has evolved to be more collaborative, while 28 percent said CEOs were less focused on financial details and more focused on strategic processes.

Argyle Virtual Event: Spotlight on FP&A

Looking Toward the Future of FP&A

The event focused on the shifting roles of business executives and how those roles will most likely change in the future. About 37 percent of respondents said CFOs will be most focused on driving and adapting to change, 25 percent said CFOs will focus on efficiency, and 20 percent said CFOs will focus on growth. When asked what factors would be most critical for CFOs’ relationship with finance, 39 percent said supporting growth initiatives, 25 percent said aligning finance and operating plans, and 24 percent said leveraging data and analytics. As companies move forward, they are placing more emphasis than ever on integrating finance with operations and leveraging their data to its fullest potential.

Restructuring FP&A Models

As CFOs start assessing and restructuring their FP&A strategy, finance executives have different opinions about what’s the most important. Jeff MacKinnon, Chief Financial Officer of Jonas Software, said his business has grown considerably over the years and as a result, FP&A funding has grown a lot. However, his company has also shifted its finance framework toward being more streamlined, making it possible to free up some of the investments for finance to reallocate toward FP&A functions. The hope is that as the company becomes more focused on analytics, more can be invested into the analysis aspect of finance, rather than managing financial processes.

Ryan Neary, Head of Financial Planning and Analysis of Nicor Gas, said there is a lot of change happening around the ways his company approaches FP&A. They’ve been implementing new tools and software applications to support the process, which has led to a shift in roles for team members and a need for new skill sets. Team members need to have strong analytical skills and a deep understanding of accounting, while also being able to understand the data and key drivers of business. The company is also focused on efficiency, with the intention of conquering period-end reporting in a single day, so team members can devote more time to analytics.

The State of the Annual Budget

Budgeting.jpgMany companies are still relying on annual budgets. However, rolling forecasts can provide growing companies with greater agility and flexibility. MacKinnon said his company has moved toward rolling forecasts permanently. While it hasn’t actually proven to be more efficient in his case, it has provided much greater agility. His team uses a quarterly rolling forecast that spans five years, and they constantly tack new quarters onto the end. It allows his team to be more reactionary when it comes to responding to changes in business and relevant trends.

Streamlining the Budget and Forecasting Process

Ryan Hamlin, Head of Finance at Emerson Process Management, said his team is using mobile apps to help distribute financial information for management reporting, which is just one of the ways his company is streamlining the budget and forecasting process. For him, the cloud has been vital, because it’s provided key executives with access to the reports from their phones and tablets. The cloud has the ability to greatly improve the efficiency of the budget cycle, while also making it easier to connect finance and operations.

How Enterprise Performance Management Can Improve FP&A

The virtual event revealed some key trends among CFOs. CFOs want employees to adopt more diverse roles, they want to improve efficiency, reduce spending on reporting and forecasting, and increase their emphasis on analytics. With a cloud-based enterprise performance management (EPM) solution, financial teams can access a platform that makes reporting and financial data much more accessible. It offers a number of integrated tools to improve efficiency, while also helping to guide rolling forecasts to improve the agility of forecasting. In turn, businesses can increase the efficiency of their financial planning while improving analysis as well.

To learn more about the future of FP&A, watch the Argyle CFO Leadership Virtual Event: Spotlight on FP&A.

Argyle Virtual Event: Spotlight on FP&A

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Gartner Splits the Magic Quadrant for CPM Suites

Corporate performance management (CPM) has been an established market and an important topic at Gartner and for its clients since 2001.

The CPM (also known as enterprise performance management, or EPM) domain has always spanned multiple processes within the Finance organization, including FP&A functions such as strategy management, integrated financial planning, and profitability management – as well as accounting functions such as financial consolidation and reporting and disclosure management.

Recognizing that CPM spans multiple Finance processes, and the evolution in the way organizations are deploying these solutions, Gartner indicated in July of 2015 that it would be splitting its view of CPM solutions into two segments: Financial CPM and Strategic CPM.  And now, in May 2016, Gartner has published two separate Magic Quadrant Reports for these two areas.

Financial vs. Strategic Corporate Performance Management

Splitting of the traditional Gartner Magic Quadrants for Corporate Performance Management Suites was a bold move on the part of Gartner’s CPM analysts.  To our knowledge, it’s the first time Gartner has ever put products from different categories (e.g., Blackline, a close management system, and Planful, an FP&A platform) together on a single Magic Quadrant (MQ).  While visionary and aggressive, it is also somewhat confusing – particularly for people used to seeing a Magic Quadrant full of different types of apples (McIntosh, Golden Delicious, Honeycrisp) and not one that positions different types of fruit (oranges, apples, pears).

Gartner’s intent is clear – to demonstrate through the use of two separate MQs those systems they think are financial/tactical from those they think are strategic.  Since we agree that organizations should be focused on both operational and strategic excellence, we are on board with their intent.  Although we don’t fully agree with the approach.

Let’s see how Gartner defines each:

  • Strategic Corporate Performance Management (SCPM) Solutions – this includes Corporate Planning and Modeling, Integrated Financial Planning, Strategy Management, Profitability Management, and Performance Reporting.
  • Financial Corporate Performance Management (FCPM) Solutions – this includes Financial Consolidation, Financial Reporting, Management Reporting/Costing/Forecasting, Reconciliations/Close Management, Intercompany Transactions, and Disclosure Management (including XBRL tagging).

What This Means for Buyers

Splitting the Magic Quadrant for CPM Suites is a bold move by Gartner, designed to help Finance departments and enterprises to think more strategically about CPM solutions.  But it can also be confusing, as many organizations view all CPM processes as related and often prefer solutions that can integrate both the financial and strategic CPM processes.  They may start in one area initially, such as corporate planning, then expand into other areas such as financial consolidation and disclosure management.  So many buyers prefer vendors who can meet both their short-term and long-term needs.

decision_making.jpgIn cases where a buyer is looking strictly for a corporate planning and modeling solutions, or a financial consolidation and reporting solution, the new Strategic and Financial CPM Magic Quadrants may be helpful. But for those looking for a broader CPM solution, or one that can be expanded to meet additional needs over time, the new MQs only present a partial view of the CPM vendor landscape.  So buyers will need to identify vendors that offer solutions in both MQs.

For vendors like Planful, who offer a comprehensive, unified CPM platform that spans Financial and Strategic CPM, this new approach by Gartner downplays one of our advantages and splits our capabilities across two different Magic Quadrant reports.

Where Is Planful Positioned?

So you may be wondering where is Planful positioned in Gartner’s new Magic Quadrants for  CPM Solutions?  The good news here is that, based on the broad range of capabilities we support with our cloud-based CPM/FP&A platform – Planful is covered in both the FCPM and SCPM Magic Quadrant Reports.  We’re positioned as a highly ranked visionary in both CPM Magic Quadrants and are the only pure-play cloud vendor included in both reports.

This positions Planful as a vendor that can address a broad set of customer needs that cross the FCPM and SCPM domains.  According to Gartner, Planful was ranked as a visionary “due to its level of cloud experience, the customer satisfaction it delivers, and its products’ ability to support use cases of higher complexity.”

How to Use the Gartner Magic Quadrant Reports

According to Gartner, the Magic Quadrant Reports present a global view of the primary CPM vendors from a market perspective. Vendors tracked in the Magic Quadrants vary in their capabilities to support different CPM processes and use cases.

More specific comparative product information can be found in another report titled “Critical Capabilities for Corporate Performance Management Suites.”  This report provides a more detailed assessment of the features and functions supported by various vendors and matches them up to specific use cases based on company size.

woman-making-decision.jpgBuyers are advised to leverage both the Magic Quadrant and Critical Capabilities reports to identify potential vendors that provide solutions to meet specific company requirements.  In fact, Gartner now offers interactive editions of these reports to their clients, which allow buyers to specify their own criteria and better identify vendors who can best meet their requirements. But these reports are only a starting point to creating your short list of vendors.

As a prospective buyer, you should clearly document your requirements, contact vendors and perform a full evaluation of their solutions, and obtain a proposal on how the solution will be implemented to address your specific needs.  And you’ll want to check references before making a buying decision.

Planful is pleased to be recognized as a visionary in both of Gartner’s Magic Quadrant Reports for  FCPM and SCPM, and we will continue providing high-value, cloud-based solutions for customers looking for a vendor who can meet their needs in both categories.  And we’re also happy to provide you with complementary copies of Gartner’s latest reports.

Download the Gartner Magic Quadrant Reports

Good reading, and please contact us if you would like to learn more about Planful and how we can make your company successful in addressing your CPM/Continuous Planning requirements.

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