I wrote a blog earlier this year on the top five things never said by a CFO during the financial close process. I want to pick up on that train of thought and review the top five things never said by a CFO during the planning and forecasting process. As we move into the second half of the year, forecasts and plans will be on everyone’s minds. Let’s take a look at what you won’t be hearing.
#5 – Who knows where the team is in the planning process, but I’m sure they will get it done eventually.
Some of the other delivered capabilities of a system-wide planning tool include Work Status and Business Process Flows (BPF). Work Status can be used in the planning process to lock data when users have submitted their final version of the plan to prevent further changes. This can be used separately or in conjunction with BPF’s, which help guide the users through the plan process and also provide central reporting to determine where each business unit is in the process. No more having to guess if somebody is complete or dealing with last minute changes to the plan since it was approved.
#4 – I’d recommend we use more offline Excel files, that way it takes longer to consolidate the data.
Once the plan is completed by all the various business units, the data still has to be compiled and consolidated to create the final version for the whole company. This is where the fun begins! Typically this is handled through emailing of various templates across the organization, which then means the FP&A team at corporate now has to make sure they select the correct cells of data to compile in to their files. Linking of Excel files is another option, but also prone to errors and inconsistent data if rows/columns are shifted around at any point. All of this leads to a very manual process of plan consolidation and hard to verify and trust the output.
With a standardized process in a system-wide planning tool and set of Excel templates to input the plan/forecast, as soon as data is entered in to the system, it is available for reporting. As individual business units submit the plan, corporate can immediately start analyzing that data to make sure it lines up with expectations. This allows for a quicker turnaround time to accept the plan as submitted or send it back for further refinement.
#3 – The more static and less flexible the reporting, the better!
Excel is a great tool when it comes to working with data easily and efficiently. However, what if you have hundreds of thousands of rows that need analysis? What if you want to roll that data up in to groupings? What happens when it’s not just a single field of data, but multiple slices and dices of various fields? Things get complicated quickly, which is where the power of a system-wide planning tool comes in, giving you the ability to handle multi-dimensional data easily for analysis. It also gives users the ability to create hierarchies on top of the master data, which allows you to drill down from the top of your organization, all the way to a single entity. Dynamic analysis, without the need to recompile and create yet another static Excel file.
#2 – Why do I need to do any variance analysis?
Every company hits their plan every time, right? Ok, so maybe not, which is where the whole concept of variance analysis comes in to play. It’s helpful for organizations to track actuals against the plan and forecast to determine how accurate they are, but also to see trends in the data. Perhaps expenses are trending higher or revenues trending lower, both impacting the bottom line. This helps them make course corrections as they move forward through the year. As analysis is performed, more questions are asked and more detail needed. In a static, spreadsheet driven process, this task generates even more versions of spreadsheets. Management wants to compare actual to plan, forecast to plan, actual to Larry’s forecast he saved in that other file…you see where this is going. Then that same analysis is needed at various levels of the organization, which in turn means manually compiling more data in to more spreadsheets.
A system-wide planning tool helps to alleviate some of this pain with one version of actuals and the ability to save various versions of the forecast utilizing the category dimension. These can be pulled in various combinations in to Excel for analysis, while at the same time using the power of multi-dimensional reporting and hierarchies to help with drilling down in to the details.
And the #1 thing never said by a CFO…
#1 – I don’t need any commentary concerning the forecast, I’m psychic.
In most plan and forecast cycles, comments are needed on various items or to help explain variances. These are typically compiled from meetings, emails and text stored in many of the spreadsheets across the network. A good system-wide planning tool gives users the ability to enter and store comments directly in to the system to be retrieved later for reporting, eliminating the need to manually compile input from users across the company.