FSN Executive Briefing

Slash your budget timescales by up to 50 percent. 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 Up to 30% of top management time is spent on traditional budget processes. Spreadsheet dependence leads to high levels of error, omissions and delays. The move to Cloud-based solutions like those offered by Adaptive Planning allows organisations to escape the burdens of on-premise technology and streamline their processes. Precious management time is freed up, while budget dependability, transparency and control are simultaneously improved. The case for a move to the Cloud is compelling, with cuts of 50% to budget timescales a very real possibility. What is wrong with current budget processes Budgeting is a financially draining, laborious and tedious process. Often spreadsheet-bound, one survey suggests that as much as 20% to 30% of senior management time is locked up in the budget process, equating to 25,000 man-days a year in a billion dollar company. 1 To add insult to injury, the typical budget is already out of date by the time it has been finalized 2. So what is wrong with the current budget process? And is it really feasible to cut budget timescales in half? High error, omission and delay levels For many organisations the budget cycle commences with the preparation of a series of spreadsheet templates at the corporate centre which are distributed via email to budget holders across the enterprise to complete and return. But the approach has formidable shortcomings, not least of which are the high incidence of errors, the lack of process visibility and the time it takes to complete the cycle. Errors are almost inevitable as users grapple with large and unfamiliar templates which are difficult to navigate and master - not helped by

time constraints at the centre which sometimes lead to errors and omission in prior period comparatives intended to be a guide to data entry. Added to which, late changes to budget requirements are almost impossible to implement once the templates are despatched, giving rise to re-issued templates coupled with the added complexity of version control in an already cumbersome process. But the pitfalls of the process do not stop there. Once the templates are issued, matters are out of the hands of the budget administrator who loses visibility of the process, effectively relinquishing control of the timeline to budget holders. Unbeknown to the budget administrator the template may languish unopened in the recipient s inbox for several days, potentially jeopardising budget deadlines and squeezing the time available at the centre for consolidation, analysis, interpretation and commentary. These pressures reinforce the perception of the budget process as a necessary evil ; an inconvenient number crunching exercise, with little time left for cross-functional collaboration and professional challenge. As a result, stakeholders can feel disengaged and frustrated, doubting the value of the budget and the basis on which their performance is measured. Deploying Cloud-based solutions No wonder that organizations are turning in their droves to the transformational qualities of Cloud-based budgeting, planning and forecasting applications such as Adaptive Planning. A relatively young company, it has already accumulated 1500 customers and is growing by 77 percent a year. The business benefits of the cloud are well established and contemporary research frequently points to the rising popularity of the cloud as a computing platform. It is not difficult to understand why.

Off-loaded technology burden, access on demand, near-infinite scalability The notion that somebody else can do the heavy lifting when it comes to provisioning applications and infrastructure is appealing for organisations that wish to focus on their core business and avoid the distractions of information technology. It also confers a number of advantages over traditional spreadsheet-bound approaches. For a start, users can access the Cloud-based applications using nothing more than a web browser on a low specification computer, laptop, mobile device or smart phone and the applications are available on-tap 24/7 from anywhere in the world. This freedom to access applications on demand is not only hugely convenient but also confers special advantages for organisations with mobile workforces. It also benefits organisations with unpredictable or lumpy growth. The seemingly infinite scalability of the Cloud-based model means that adding another batch of users does not require additional up-front investment in infrastructure advance since the economic risk is borne by the supplier. Furthermore, the cost of distributing the application more widely (an important consideration in budgeting) can be quantified with a high degree of certainty and extra capacity purchased and brought on stream only when needed. 50 percent off budget timescales? Despite the advantages of a Cloud-based approach, is it truly realistic to expect a 50 percent reduction in budget timescales over the traditional spreadsheet approach? The answer is emphatically yes, and in the first instance derives from the obvious benefit of being able to eliminate the trafficking of spreadsheet templates backwards and forwards between budget holders and the centre. In fact the author s own research, when running the Deloitte UK performance management practice in around 2001 of the first 15 implementations of centralised web-based budgeting, showed that there was a virtually instantaneous saving of around 30 to 50 percent of time simply by displacing spreadsheet in the data collection phase. (The experience was the same for consolidation systems some 10 years earlier).

But there are more subtle benefits as well. For example, the ability to collaborate around a centralized business model allows the budget holder and other participants to simultaneously view budget assumptions and outcomes without the need to resort to impromptu meetings, emails and conference calls as would usually be the case with spreadsheets. Workflow expedites the submission and approval process. The net effect of a high level of cross-functional participation is a marked improvement in the richness (quality) of the budget, better adherence to strategic objectives and a reduction in the number of budget iterations which dramatically reduces the time taken to arrive at an agreed budget. So it s not surprising that the best performers have 45% lower business analysis process costs as a percentage of revenue. 3 Also, in a Cloud-based paradigm, organisational and geographic barriers are broken down, allowing structured and unstructured information to flow unimpeded along the entire length of the budget process, giving authorised users visibility of the information and potential processing bottle necks before they become a problem. Added to which the Cloud allows changes to, say, a budget line, accounting policy, or submission deadline to be instantly reflected and available to every budget holder that needs to know enterprisewide, saving yet more time. So, Cloud-based solutions such as Adaptive Planning provide a compelling business case for change. By leveraging this technology as well as implementing best practice organisations have the power to transform the budgeting process, cutting the traditional spreadsheetbased approach by up to 50 percent and liberating precious management time while simultaneously improving budget dependability, transparency and control. With average finance function costs in leading organizations rising by 10 percent in the last year alone the potential prize is very great 4.

Bibliography Note 1 Beyond Budgeting Round Table, Jeremy Hope and Robin Fraser October 2011 Note 2 New Era Budgeting, Nick Jarman and Sanjay Bibeker, PWC, 2009 Note 3 Rethinking planning, budgeting and forecasting, Deloitte Consulting November 2011 Note 4 Putting your business on the front foot! PwC Finance effectiveness benchmark study 2012 Disclaimer of Warranty/Limit of Liability Whilst every attempt has been made to ensure that the information in this document is accurate and complete some typographical errors or technical inaccuracies may exist. This report is of a general nature and not intended to be specific to a particular set of circumstances. The publisher and author make no representations or warranties with respect to the accuracy or completeness of the contents of this white paper and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives, or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. FSN Publishing Limited and the author shall not be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.