FSN Executive Briefing

"Integration across enterprise functions... the way forward for budgeting, planning and forecasting?

FSN Publishing Limited 2013. All rights reserved.

Integration across enterprise functions... the way forward for budgeting, planning and forecasting?
by Gary Simon
Gary Simon is Group Publisher of FSN Publishing Limited and Managing Editor of FSN Newswire. He is a graduate of London University, a Fellow of the Institute of Chartered Accountants in England and Wales and a Fellow of the British Computer Society with more than 27 years experience of implementing management and financial reporting systems. He is the author of four books, many product reviews and whitepapers and as a leading authority on the financial systems market is a popular and independent speaker on market developments. Formerly a partner in Deloitte for more than 16 years, he has led some of the most complex information management assignments for global enterprises in the private and public sector.

Summary
Organisations are increasingly looking to move to collaborative budgeting, planning and forecasting. By doing so, they hope to leverage the skills and knowhow of all their personnel. However, spreadsheet-based processes tend towards fragmentation. Cloud-based solutions - like those offered by Adaptive Planning - facilitate the collaborative approach with their ease of use, 24/7 access from anywhere in the world and infinite scalability to meet changing needs.

Getting the best from collaborative budgeting, planning and forecasting Historically, budgeting, planning and forecasting have been driven by the finance function, but enlightened organizations are realizing that these are collaborative processes spanning every functional area of the enterprise. So how should an organization leverage the skills and knowledge of all of its personnel and what sort of technology is required to support a more collaborative approach? Traditionally, organizations have built up their budgets, plans and forecasts along functional lines - simply because that is the way that people are usually organized. But business processes do not respect functional boundaries. For example, the 'Quote to Cash' cycle embraces Inventory Management, Sales Department, Logistics and Finance. The true costs of sourcing a product, delivering it to a customer and getting paid are driven by the process - not by functions. Leveraging different perspectives, ideas and know-how

To achieve cross-functional collaboration, plans in one area need to be consistent with projections in another if resources are to be allocated efficiently and if satisfying a performance objective in one place is not to have unforeseen consequences in another. For example, a sales demand plan can only be executed efficiently if matched to supply and finance. An over-ambitious sales plan which exceeds the ability of an organization to supply or manufacture finished goods may lead to excessive costs as the organization seeks to replenish stock from alternative suppliers or unplanned production runs. This in turn may deny other projects the working capital they need.

Similarly a revenue plan in a professional services organization, such as a law firm, has to be consistent with an HR plan and financial plan in order to ensure that there are sufficient fee earners available to produce the projected billable hours. Integrated business planning recognizes the vital importance of these inter-relationships and provides the enabling technologies which allow different functional areas to collaborate during the planning cycle. But collaboration in budgeting, planning and forecasting is far more than the mathematical combination of budgets, plans and forecasts produced by different functional areas. The true value of collaboration comes from harvesting the different perspectives, ideas, experience and know-how of functional experts from across the business. It's a process of challenge and negotiation that adds considerably to the quality of the forecast, since it represents the combined wisdom of all of the participants. So the number of participants in a forecast can be just as important as functional diversity. In other words the 'richness' of plans and forecasts is enhanced by having more people involved and greater functional diversity. Cloud-based solutions the way forward Although conceptually the idea of integrated business planning is relatively straightforward, it has proved to be illusive, because of over-reliance on spreadsheet-bound processes, a lack of control over data quality/management, limited use of advanced planning tools and the cultural impediments that afflict many planning processes. The scale of the problem is highlighted by a 2011 study1, which found that 87% of businesses managers criticize data sharing and communication between departments, with 71% describing the links between strategic goals, operational plans and budgets as "fragmented". However new Cloud-based budgeting and forecasting solutions such as Adaptive Plannings are reversing the trend. The infinite scalability of the Cloud model means that adding another batch of users does not require additional investment in infrastructure in advance since this is borne by the supplier. Furthermore, the cost of distributing the application more widely (an important consideration in business analytics, budgeting, planning and forecasting) can be quantified with a high degree of certainty and extra capacity purchased and brought on stream only when needed. Added to which, Cloud -based applications actively encourage higher levels of participation from budget holders and cost centre managers since the applications are available on-tap 24/7 from anywhere in the world using nothing more than a web browser on a low specification computer, laptop, mobile device or smart phone. Furthermore, applications such as Adaptive Planning, which have been designed from the outset to be deployed via the web are more intuitive and less consultant-intensive than the old 'on-premise' solutions that they replace. Added to which, tools such as Adaptive Planning's "myDIALS" allow business managers and decision makers of any discipline to jump in and start analyzing data for themselves. The case for a collaborative approach The case for a more collaborative approach to budgeting, planning and forecasting could not be stronger. 37% of managers think the Board of Directors in their company does not capitalise as much as it could on the insight and knowledge of its managers. 37% of non-finance managers would

like to be better informed about the strategic and financial targets of the company, while 20% feel their personal knowledge and experience is rarely reflected in the decisions made by the Board1. Harnessing the benefits of extending budgeting, planning and forecasting beyond the finance department is going to require a move away from a heavy reliance on spreadsheets and email2 to web-enabled solutions built with collaboration and ease of use in mind. Encouragingly, there is a now a perceptible shift. For example, Adaptive Planning has grown rapidly to a client-base of 1,500 companies and is experiencing annual growth of around 77 percent. Organizations with more than $500 million in annual revenues now account for approximately 25% of Adaptive Planning's business. However, organizations that do not 'grasp the nettle' are in danger of being left behind. Gartner warns that CIOs and business managers will fail in their efforts to improve business performance outcomes if they cannot overcome major barriers to cross-functional communication and collaboration3. The writing is on the wall. If you would like to learn more about Adaptive Planning's Financial Reporting Software Solutions please contact us today.

Bibliography Note1 "Management Performance: An Incomplete Picture," Dynamic Markets, April 2011 Note2 "The Challenges of Corporate Financial Reporting" Accenture & Oracle study May 2012 Note3 "Six Best Practices for Moving to a Culture of Extreme Collaboration." The report is available on Gartner's web site

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