Hyperion Planning and Your Company: Developing an Efficient Budgeting Process Written by Timothy J. Simkiss, CPA Hyperion EPM Practice Lead
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Hyperion Planning and Your Company: Developing an Efficient Budgeting Process Contents Introduction... 2 Why Do We Budget?... 3 A Typical Budgeting Process... 5 Issues That Can Surface During Budgeting... 6 Important Features of a Budgeting Software System... 7 Improve the Budgeting and Forecasting Process with Hyperion... 9 Maximize the Power of Hyperion Planning and Budgeting in 8 Steps... 10 Conclusion.... 17 About BizTech..19 Whitepaper-Hyperion Planning and Your Company 1
Introduction Of all the critical functions a finance department fills at a company, none creates more consternation, frustration and aggravation than the budgeting process. All departments must play a key part, but the main driver for completing a timely and realistic budget falls at the feet of the finance department. They are the ones responsible for updating the templates, annualizing expenses, ensuring accuracy of the numbers, validating formulas and preparing a qualitative and quantitative summary of the budget for submission to senior management. The annual budget process in and of itself may be a complicated task, but long term or scenario planning is a borderline Herculean one--enough to make even the hardiest of finance employees want consider an alternative career. Even so, it doesn t have to be that way. The old fashioned Excel-based budgeting process, where complicated spreadsheets are updated, emailed out, completed and consolidated, has long been the source of some of the nightmares typically associated with the budget process. Difficulties performing scenario analysis and predictive planning, maintaining data integrity, and monitoring version control have proven to be among the biggest headaches associated with budgeting. By eliminating the typical Excel budgeting process and utilizing the best budgeting software available, Oracle Hyperion Planning, forward-thinking companies have alleviated many of the headaches associated with the budget process and created a living, breathing budget which best captures the state of the company in real time. Hyperion Planning is part of Oracle's Hyperion EPM software suite, and is often utilized with Hyperion Financial Reports and Web Analysis to enhance the analytic value inherent in its underlying use of Essbase. Hyperion Planning is the number-one selling budgeting and forecasting software on the market for good reason. Features that differentiate Oracle Hyperion Planning from other budgeting tools include: Smart View, an add-in with Microsoft Office which allows users to forecast or budget in Microsoft Excel, an environment comfortable to most finance users A web-driven Planning and Budgeting tool that utilizes Oracle Essbase as the data storage and calculation engine. No longer do users shave to have the software installed on hard drives Whitepaper-Hyperion Planning and Your Company 2
Calculation power to handle predictive planning, allocations, and complicated revenue recognition planning unparalleled to any other budgeting tool A budget wizard, which exists to guide planners, includes instructions and due dates, alerts and progress monitoring, and sends email reminders to users Two additional add-in modules--workforce Planning and CapEx Planning--can be used along with Oracle Hyperion Planning to increase performance drivers in budgets and emphasize operational budgeting This whitepaper seeks to highlight some typical processes and issue associated with the budgeting process, and provides examples of the 8 steps users can take to maximize the value of their data using Oracle Hyperion Planning tools to develop a more efficient budgeting process. Oracle s Hyperion Planning Suite provides quick solutions for even the smallest of companies to assist with their growth and improve their budgeting and forecasting processes. Hyperion s Planning s pre-built packages are easy to implement, easier to customize and the easiest to use. They allow even the most spreadsheet-orientated companies to unleash their data and quickly develop a faster, timelier, and less expensive annual and long term budgeting process. Why Do We Budget? As some companies have started to move away from the annual or long term budget process, it begs the question: Why do we budget, anyway? I have compiled some of the better reasons why companies of all sizes are best served by preparing, at a minimum, an annual budget. 1. Because We Have To: From an organizational perspective, because we have to does carry some validity. Maybe you have industry or government regulatory reporting requirements, and have to report back certain specific pieces of information in order to stay certified. Maybe you have certain covenants with your bank or lending institution that require you to provide future forecasts to keep lines of credit available. And maybe you have ownership or a Board of Directors that are not involved on a day-to-day basis, but need specific information to make decisions about the future of the organization. 2. For Financial Predictability: If you are a publically traded company, investors see hitting your earnings per share estimate as good, and missing your earnings per share estimate as bad. However, without some sort of planning process, financial predictability is highly Whitepaper-Hyperion Planning and Your Company 3
unlikely, and the ability to plan your future costs or revenue is impossible. 3. To Understand Business Drivers: To reach your targets each month, what needs to happen? How many employees will you need? What happens if your new labor contract increases wages by 3%? How many tons of raw materials will you need? What happens if your cost of shipping doubles? What is your overhead? And when all those come together, in the end, will you actually make a profit? 4. To Properly Allocate Resources: How do you hold people accountable for performance without something to compare it to? In most organizations you are going to compare people s actual performance to a targeted performance. Those target numbers need to come from somewhere, and most often those targets come directly from or are facilitated by the budget process 5. The Hyperion Perspective: Because it s just flat out fun! Really. Or at least, it can be. Whitepaper-Hyperion Planning and Your Company 4
A Typical Budgeting Process Excel Templates for the various types of budgets are prepared by the FP&A team (usually in October) Current year actual results are annualized and emailed out on a separate template All formulas are checked to ensure that links and calculations are working Templates and detailed nstructions are emailed out to various department heads Each department head is responsible for their own budget by expense line, capital expense and salaries/workforce In larger companies this often involves sub-departments separated by location or line of business Requested time frame for re-submission is usually three weeks Templates are submitted back to FPA by department heads For a typical company, this also involves chasing down a few stragglers, collecting all the templates, and consolidating into one master budget Excel templates by department are then consolidated onto a master budget, which will be reviewed by senior management Whitepaper-Hyperion Planning and Your Company 5
After this review, changes are requested for each department, and the whole process begins again! The final approved budget from management is then submitted to the Board of Directors for their consideration and approval. The entire process often winds up taking companies more than three months to complete, often resulting in stale, outdated budgets which no longer reflect how the business operates. Isssues That Can Surface During Budgeting There are various issues that tend to pop up during the budgeting process which can severely impact the timing and efficiency of the plan. For example, more than 80% of companies still use Microsoft Excel exclusively to prepare their budgets. There are numerous problems inherent with this approach including: Excel is an outdated tool when preparing detailed Forecasts and Budgets Larger or even mid-sized firms with multiple lines of business, products, departments, cost centers and locations can often find themselves needing hundreds or even thousands of Excel templates to prepare a consolidated budget Most summary and detail departmental templates need to be printed out and audited by someone in finance and accounting to verify data integrity One broken link among thousands will lead to an incorrect budget and time consuming fact finding Lack of dimensionality in Excel leads to difficulty drilling down into and analyzing the key drivers of the budget Emailing budgets to and from users is time consuming, can be accidentally overlooked or discarded, risks data integrity, and is prone to user errors or consolidation issues Multiple versions lead to different versions of the truth Often a company will have multiple versions of a budget, one for baseline, one for upside, one for downside, and sometimes numerous other combinations. Review of these various versions wastes valuable time and blurs the truth of what should be the most realistic budget Dated material By the time the budget process begins, and budgets are sent out, received back, sent out again, revised, approved, further revised to achieve final approval, months can often pass, leading to outdated or irrelevant budgets, depending on current conditions Whitepaper-Hyperion Planning and Your Company 6
Important Features of a Budgeting Software System Ok, so we ve established that for companies to ever really get a got hold on their budgeting process, they should strongly consider updating to budgeting software. A comprehensive enterprise planning solution should: Translate strategic objectives into operational goals and targets Seed operational plans with strategic targets Update strategic plans using the most current operational plans and forecasts Update strategic and operational plans easily and frequently Perform powerful what-if and ad-hoc analysis Integrate all planning processes into a single centralized menvironment Now comes the fun part of this whitepaper: How can companies utilize existing technologies available with Oracle s Enterprise Performance Management to help develop a more efficient budgeting process? We shall examine some of the available tools in these two platforms and ways they can be used to accomplish just that. Please note that your company does not need to be using Oracle EBS general ledger to utilize EPM technology. First, let s take a look at the basic Hyperion Enterprise performance Management (EPM) architecture below: Whitepaper-Hyperion Planning and Your Company 7
As you can see, your organization s ERP or other legacy data system (hopefully Oracle EBS!) resides on the lowest level of the structure. Data is easily integrated into the EPM/BI platform using an extraction tool like ODI, Financial Data Quality Management or Informatica. This process can be scheduled to be performed overnight, or even in real time. This integration works equally well with your investment in Lawson, SAP, Sage, Peoplesoft or JD Edwards to name a few other ERP systems. The next level up is the fusion middleware levels, or server levels, which is where much of the system configuration is performed specific to your business. This is secret sauce of any implementation or data migration project. Oracle Hyperion Foundation Services software provides a single, shared infrastructure to install the EPM system, manage users, security, metadata and the application lifecycle. By combining the technologies to install and configure all modules, centrally create and provision user security, build and manage EPM applications and to consume EPM content via the web and through Microsoft Office, Foundation Services can ease the deployment of your Hyperion implementation--large or small. And, since Foundation Services provides easy integration with BI tools, applications, and portals through an open, service-oriented architecture, it can enhance productivity and reduce total cost of ownership of the existing information technology assets in your organization. Whitepaper-Hyperion Planning and Your Company 8
Finally, on top of all of this sits the presentation layer, which is where users may now access their applications. With Oracle Shared Services, users may access any of the applications with just a single sign on. Now, let s take a closer look at the advantages offered by each of the EPM products. By leveraging existing resources, eliminating multiple products or vendors and reducing non-compliance risk, it has been noted that the ROI (return on investment) on implementation of any of these products is often less than a year. Improve the budgeting and Forecasting process with Hyperion Planning Oracle's Hyperion Planning is a web-driven Planning and Budgeting tool that utilizes Oracle Essbase as the data storage and calculation engine. It is the number-one (by far) Planning and Budgeting Tool in the world. Hyperion Planning sits on top of the Essbase On-Line Analytical Process (OLAP) server which can strore massive amounts of data and perform even the most complex calculations in seconds. By leveraging Essbase s multidimensional data model, as well as standard relational database management platforms, companies can safely remove the exclusively Excel-based budgeting model and start creating live budgets and forecasts in real time. This improved functionality, built with upside and downside capability, uses the revenue and cost drivers of the business to pinpoint what is creating or destroying value for the company, and what needs to be addressed. Some of the key features/attributes of Hyperion Planning include: Process flow management and process guidance for end users Planning has an add-in with Microsoft Office (called Smart View) which allows users to forecast or budget in Microsoft Excel, an environment comfortable to most finance users Hyperion Planning is part of Oracle's Hyperion EPM software suite and is often utilized with Hyperion Financial Reports and Web Analysis to enhance the analytic value inherent in its underlying use of Essbase Ability to prepare continuous forecasts (rolling, event based, time based) Top-down and bottom-up budgeting capability, including ability to create different scenarios and versions Makes use of consistent assumptions, allocations & calculations, which can be changed to flow with your changing business Whitepaper-Hyperion Planning and Your Company 9
Integrated Operational Planning to address in-depth revenue and margin planning Purpose-built Capital Assets and Workforce planning modules for fast deployment Powerful workflow and process management for budgeting and forecasting Out of the Box Hyperion Planning Solutions Hyperion Planning makes for a much more efficient process, controlled by Finance Budgets are ready for input immediately upon release by Finance Department Reduces time to complete, risk of stragglers, and resource misuse Reduced data entry, risk of errors and risk of key files on desktops or C drives No hidden or offline files. All supporting detail can be uploaded to the Budget Easier budget consolidation no need for manual uploads, email of files or transferring of files Fast calculation performance most calculations performed in 4 seconds or less Workflow feature ensures timeliness or user preparation and management review Email alerts to remind employees of deadlines Standard calculations and business rules maintained in database Data from your Excel or legacy planning systems is easily imported into Hyperion Planning, and implementation can be as short as a matter of weeks. The Smart View Microsoft Office feature allows users to take advantage of the comfort of their old Excel planning templates, or reconfigure them in minutes in the Planning applications. Maximize the power of Hyperion Planning & Budgeting in 8 pain free steps 1. Manage the Entire Planning Process Hyperion Planning offers a Web-Based Enterprise Solution that allows users to prepare financial and operating budgets simultaneously. Hyperion Planning features full off-line capability and improved process management and controls. Create Rolling Forecasts, Predictive Modeling and What if Scenarios, as well as Break-Back and other Driver-based plans. Whitepaper-Hyperion Planning and Your Company 10
2. Guide Users Through the Process Planning features a Budget Wizard to guide planners from start to finish. No more offline guessing or email inquires as to the status of the budget. Detailed instructions on how users should complete their forecasts are embedded in the task list. Administrators may set due dates for entry and review, and can create templates and forms for data entry or allow users to enter data in Microsoft Excel via Smart View. Hyperion Planning can automatically send email reminders on status and timing for preparation and a report on budget status can be made visible to any or all users. Whitepaper-Hyperion Planning and Your Company 11
3. Create Simplified Forms Get rid of the one-size-fits-all templates, forever. Time consuming and often complicated, detailed budget templates can confuse preparers and slow down the process. Instead, Planning allows users to work on only the forms that they need to complete their piece of the process. Thus, marketing users need only to see selling and marketing expense lines items, whereas VP of sales may want to see revenue drivers, plus selling expense. Create as many forms as necessary, and curtail them to the appropriate users. 4. Spread and Allocate Data Another extremely useful feature of Hyperion Planning is the users ability to spread and allocate their Whitepaper-Hyperion Planning and Your Company 12
data. Hyperion Planning has several simple methods to use allocation features that can be controlled by the end-users based on their level of system access. Adjust & Spread is a Hyperion Planning web form feature. It can adjust either individual or multiple data cell values up or down by a percentage or by a specific amount. Hyperion Planning s security only allows users to adjust cell that they have the right access to. Time Spreading is available on all Hyperion Planning forms that have the time dimension. It allows the user to enter data at a high level and instantly have it allocated down to the lowest level of the time dimension. Grid Spread is a powerful Hyperion Planning web form option. It goes beyond the capabilities of either the Adjust & Spread or the Time Spreading options. This feature will only work if the Hyperion Planning administrator turns on the Grid Spread property for the web form. It will allow the user to specify an amount or percentage that will increase or decrease values across multiple dimensions via a web form. The user automatically has the ability to proportional or even spreads, and the Planning Administrator can add other spreading patterns. 5. Vary your Scenarios and Calculations Once you develop a draft of the budget, your company may want to see what happens if sales of product X increase above what was forecasted and based on that Whitepaper-Hyperion Planning and Your Company 13
increase, all related revenues, costs of sales and expenses should also increase as appropriate. Or perhaps you foresee an increase in cost of sales for one particular product, with all other costs reaming the same? Or maybe BOTH of these factors can be combined in what you would envision and as total best case or worst case situation. In the Excel days, this would often require a completely new budget for each of the scenarios described above, plus a third budget to capture both of these dynamics separately. In Hyperion Planning, fortunately, this task is as simple as creating a new scenario--let s call it Upside--in which we can increase or decrease the line items notes above in any manner we can envision simply by increasing or decreasing the line items as we see fit. Calculations take seconds, and all of a sudden we have any entirely new budget! 6. Utilize Workforce Planning Salaries and benefits typically constitute the biggest line item expense amounts in a company s profit and loss sheet. Hyperion Workforce Planning is used to assist users with the budgeting for headcount, salaries, merit pay, and bonuses. It simplifies the planning of workforce and workforce related expenses, such as bonuses, fringe benefits, overtime and merit increases. It also automatically and seamlessly links your workforce expense plans into Oracle Hyperion Planning Plus to deliver accurate and real-time awareness of the business impact of your workforce decisions on your overall expense plans. Whitepaper-Hyperion Planning and Your Company 14
Thus, there is no need to manual entry into any spreadsheets to calculate budgeted salary and forecast amounts. Pertinent salary, headcount and other demographic info is imported from the source system (an HR or payroll provider system for example) into the Workforce Planning module, and from there forecasted salary data for the current and long term budget periods are adjusted as needed. Enhance security measures concerning the accessibility of the data are of course one of the stronger aspects of Workforce Planning. 7. Better Manage Your Capital Spending Capital Expense Planning is another specialized Planning module. Like Workforce Planning, Capital Expense Planning includes predefined accounts, data forms, SmartLists, menus, and calculations which can be controlled via enhanced security settings from the Administrator level with access being granted as appropriate. It has in-depth functionality for planning new assets, managing existing assets(both physical and intangible), and calculating the financial statement impact of capital expenditure activities. Utilizing CapEx planning also helps reduce the manual spreadsheets that are often such a big part of the fixed asset budgeting process (which, as I hope by now you know is clear as the real theme of this whitepaper!). From this module, users can Transfer, retire, and Whitepaper-Hyperion Planning and Your Company 15
improve assets. Additions or retirements are directly linked to the main plan. Eliminate these, and many other manual steps by using this comprehensive Hyperion Planning Solution. Oracle Hyperion Capital Asset Planning automates the planning of capital assets and capital asset-related expenses, such as depreciation, maintenance, and insurance. Pre-built functionality and best practices enable you to easily plan for all capital expenses. Immediately assess the impact of capital expenses on overall expenses and financial statements by directly linking it to Oracle Hyperion Planning. 8. Enable Hyperion Smart View As noted, Planning is also tightly integrated with Microsoft. Accounts love their Excel, and Oracle Understands this! Hyperion Smart View for Planning features Ad-Hoc Analytics via Excel through the use of reports or Drill through/back. Users may utilize MS Office to enter, analyze and report on subsidiary data, and the Excel Add-In allows access on or off-line, or to download forms to Excel and manipulate data just like the full web client. Smart View synchronizes to the server when ready to be updated, and provides a common Microsoft Office interface for other Oracle Hyperion products including Oracle Business Intelligence Enterprise Whitepaper-Hyperion Planning and Your Company 16
Edition (OBIEE). Using Smart View, you can view, import, manipulate, distribute and share data in Microsoft Excel, Word, and PowerPoint interfaces. Conclusion Once upon a time, most companies--regardless of size--used Excel almost exclusively to perform their budgeting, and that seemed to work fine. In the business environment of today, Excel is a terrific tool in many ways because of its flexibility and ease of use. However, the reality is that most Excelbased budgets tend to break down when they are being rolled forward, or when trying to model various financial statements and keep them integrated. Too many manual processes, too susceptible to error and the risk of data integrity issues and version control often leaves companies wanting more. The budget process itself has become critical--too demanding and too complex to leave it in the fate of a spreadsheet program that carries the risks noted above. If Excel leaves you wanting more, I would encourage you to look into a dedicated planning application. The best of such applications is Oracle Hyperion Planning, for good reason. Its adaptability with Excel gives users the comfort of utilizing Excel while the data itself is maintained on lone, in one version, viewable by other at the same time. Whitepaper-Hyperion Planning and Your Company 17
The ability to manage the process in real time, create simplified forms for input, upload supporting detail into the files, create various scenarios and risk-based plans in seconds, all while ensuring that the most recent versions are tracked and kept on line in a secure setting are some of the best examples why it s time for companies to switch to Hyperion Planning. Oracle is a recognized Leader in EPM suites, and the Hyperion brand is respected by finance executives worldwide. Oracle has a very broad and deep EPM product suite, which employs a multiproduct approach with different applications for each of the major EPM processes. Hyperion Planning is one of the key applications of this suite. Planning is adaptable to most ERP systems, meaning historical data can seamlessly be loaded in the applications, and likewise, budget and forecast data can easily be uploaded form Planning into the EBS suites, allowing for real time budget vs. actual comparisons. A Rapid Start implementation of Hyperion Planning, including information and requirements gathering, system configuration, risk assessment and developing a streamlined project plan can take as little as three months, depending on the setup, lessening the payback of such and implementation and maximizing a companies Return on Investment. By implementing and utilizing Hyperion Planning for your budgeting and forecasting process, your company will ensure an efficient, effective, and timely budget process which minimizes the time spent and the costs associated with budgeting, and maximizes a powerful, real-time, adaptive budget which encapsulates and highlights the latest risks, trends and issues in your business allowing for critical, proactive management. Whitepaper-Hyperion Planning and Your Company 18
About BizTech BizTech is recognized throughout the Mid-Atlantic and New York Metro regions as a leading IT Services firm. For more than a decade we've focused on Oracle applications, technology and consulting services for small, midsize and Fortune 500 companies. As an Oracle Platinum Partner with over 300 successful implementations, we are committed to Oracle solutions and the service we provide to our clients. BizTech offers a unique combination of proven industry methods, and a tailored selection of experienced Oracle experts to lead your organization through changes required to manage, build, and implement business driven solutions. We offer a flexible approach enabling you to select the scope of services that will meet your business goals. Our Rapid App implementation technique employs the best practices of Oracle Partners along with some of our own. We pride ourselves on are adaptable plans, which allow us to streamline your implementation to meet your goals while allowing for the inevitable changes that may occur in an implementation. Our value proposition for Hyperion implementations: Allows organizations to realize immediate cost savings through an accelerated implementation. Establishes a budget conscious methodology that deploys functionality to satisfy core functional requirements. Promotes the selection, inclusion, and customization of additional functionality through additional discovery after your product is implemented. Facilitates a phased approach in which knowledge transfer is conducted whereby clients assume ownership of future project phases; reducing dependency on external services and associated costs. Utilizes pre-built, customizable templates (models, forms, reports and business logic) reducing development cycles and project cost. Whitepaper-Hyperion Planning and Your Company 19
Hyperion Planning: Develop an Efficient Budgeting Process July 2013 Author: Timothy J. Simkiss Business Technology Services (BizTech) 1150 First Ave Suite 320 King of Prussia, PA 19406 Phone: 610.592.0600 1.877.BIZTECH Copyright 2013, Business Technology Services Inc, All rights reserved. Trademarks: Products mentioned herein are trademarks or registered marks of their respective owners. Whitepaper-Hyperion Planning and Your Company 20.