The holy trinity of modern Analysis and Planning tools…Integration, Collaboration and Visibility

At bi5 we have been working with organisations for over a decade implementing modern Analysis, Planning, Budgeting, Forecasting and Reporting tools and most agree it is the best investment they have made.

For as long as most finance professionals can remember, Excel has been the gold standard. But in this day and age, is it still enough? Although Excel is a great tool which offers numerous features that provide a lot of functionality, it still has limitations that deny users the growth now available to finance professionals.

Technology is rapidly changing the face of finance, industry standard practices, and the tools available to support this change.

FP&A is a term gaining more and more acceptance globally as the standard for modern business analysis and planning.

In this first article in a series we will look at why you need to change from old style practices to a new modern FP&A (Financial Planning and Analysis) Tool, we discuss the importance of improving the way these functions work.

From Data discrepancy to data integrity

In most companies we work with it starts with looking at their Excel based models.  What we generally see is a process which starts by getting data into the spreadsheet, either through manual input, or manually pulling from a data source. The data frequently comes from different systems within the organization, and most likely more than one, and more often than not there is also some manually input amounts which are too difficult to extract. The systems which contain the data are generally more suited to transaction processing and data capturing system. This means they are not suitable for, or capable of, planning and budgeting, which is why it is done within Excel. The one thing we see time and again is the amount of time finance professionals spend on generating reports and budgets, something that we believe is an in-efficient use of these resources.  In-efficient not only in terms of the time to integrate the data, but also in the time spent checking and reconciling back to all the individual systems.

 

Modern analysis and planning tools provide automatic loading and validation processes from any, or many, system(s).

 

Flexibility that may end up hurting your results

With countless formula and unlimited manual changes in Excel models and workbook there isn‘t always a solid path to validate the numbers, calculations, and resulting data integrity within Excel. It happens to every Excel user. You validate your model, check formula but the numbers are incorrect. The sum formula did not include the full range and the “vlookup” (or newly released Xlookup) function returned the wrong results. A random overwrite of a formula, or a “one-time” manual change that isn’t removed in subsequent periods, can create a repetitive error that persists throughout multiple generations of spreadsheets.

 

All business structures should always be governed and managed at a centralized location. No more duplication or missing data points. The same goes with formulas, they should be kept consistent and any updates that are made should immediately appear for all users simultaneously. No more cutting and pasting of numbers or formula, and the inevitable ‘fudging’. It’s should be a systemised process rather than a mish-mash of disconnected spreadsheets and DB’s. 

 

Ease of collaboration and version control in a modern planning tool

With the increasing complexity of the market environment and increasing competition, a decentralized planning system is becoming an ever-increasing problem. A coordinated approach by all parties involved is one of the greatest challenges facing controlling today.

In most companies today, finance teams manually create budgets – and then they send spreadsheets across the organisation to collect the necessary data. Each person/division/department in the chain has to remember to send and receive the data on time or the process will fail.

Undertaking this collaboration off-line is an extremely time-consuming and frustrating task. Different insights and feedback about the data in the spreadsheets rarely ever gets consolidated and analysed in final reports simply because the process is too hard.

In a modern analysis and planning tools all users work on-line. They are advised via a workflow process when their ‘slice’ of the budget is available. They can then work on building their budget. This is made even easier with the use of customized drivers relevant to your business, and in-built top-down, bottom-up apportionment or even zero-based budgeting.  Whatever method they prefer.  Users can work on different versions while keeping audit trails and adding commentary.  When they are finished, they simply press a button to submit their part of the budget for approval/rejection.

 

Simulations – business planning, modelling and what-if analysis

Simple Excel models are easy to build, yet they are often exposed to discrepancies, and the accuracy of the data regularly becomes a problem.

Simulating, evaluating and comparing different plans or scenarios is an essential step in the budget approval process. Using only Excel you would most likely need to duplicate spreadsheets just to create one scenario. To then create comparisons between different scenarios requires an inordinate amount of time and skill. In most cases it all become just too hard as time pressures and business as usual tasks get in the way and so it doesn’t get done.

In many companies we have worked with, we see important information often stored in silos, with different business units operating independently of each other. With the challenges to offline collaboration discussed above it is difficult to reduce the impact of these silos. This can lead to situations where the budget for different divisions don’t align, where the expected Revenue from consulting doesn’t align with the expected output of the consultants. As a result, you can end up with set growth targets that can only be tackled vaguely, and cause new opportunities to remain untapped and possible risks unrecognised.

 

With a modern FP&A/business analysis and planning tool business logic is centralised, key drivers are identified and the data is integrated in a way that this type of scenario planning and what-if analysis becomes a simple process.

 

What we have just focused on is the data side of modern business analysis and planning tools. We have highlighted how, through reducing the need for manual data integration and entry, a robust yet flexible system will enable you to free up time for the more important tasks of analysis and scenario planning and what-if analysis.

In the next installment we will look at some of the end-user facing aspects of an FP&A system, work-flow, permissions and security, and dashboards and reporting