International Journal of Advancements in Research & Technology, Volume 2, Issue 5, M ay-2013 490 Financial Planning Solution using * Swati Bhartiya (Author) 1 Computer Engineering (CMPN), Thakur College of Engineering & Technology, Mumbai, 400 101, INDIA Email: swati.bhartiya@gmail.com ABSTRACT Financial planners and accountants are very comfortable with the use of spread sheets for all kinds of big and small businesses calculations. But the problem with having critical financial information kept in spreadsheets on individual desktops/laptops is a big risk as they also do not automatically integrate their information which leads to data inconsistencies and possible errors during data entry or copying and ultimately leads to loss of data and poor data quality.it also poses challenges in integration of information with other critical business applications of the enterprise for business forecasting and expense planning. The current business scenario is very dynamic and it requires very accurate and timely up-to-date information that is critical for strategic decision making. It is necessary for the business decision makers to try using new technologies to have integrated information for faster decision making for strategic advantage. Success in a dynamic marketplace depends on getting the right information to and from the right people at the right time. Success requires a powerful, flexible financial performance management solution that scales across a business to drive decision-making from the storeroom to the boardroom. This document provides an insight about the gaps of the existing procedures for expense planning and introduces a new integrated financial and expense planning solution from IBM. Keywords: TM1, Business Intelligence, Expense Planning, Analytics, Financial Performance Management (FPM), Business Performance Management (BPM). 1 INTRODUCTION NEED FOR FINANCIAL PLANNING F inance is the lifeline of any business from one end to another; it also plays a vital role in the planning and controlcial impact of the same through these stand alone spread- case of a change in the policy; it is difficult to track the finan- ling expense for organizational activities in any company. sheets. Chief financial officer is in-charge of the measuring and monitoring of financial performance. He drives the planning and Data in spreadsheets is stored in two-dimensional spreadsheet budgeting function which is historically prepared on an annual basis. There are numerous problems with this traditional er definitions (metadata). For building plans, budgeting and files using unreliable links and complex macros without prop- budgeting and planning process using spreadsheets. It is time forecasting a multitude of spreadsheets designed by a handful consuming, it slows response times, it lacks of transparency, of power users, who may be scattered overvarious functional units, is used. Collaboration across the different business and it also sub-optimizes organizational results by limiting reach. The reason for it is that it is a lengthy, cumbersome units and geographies is done via numerous conflicting and and time consuming procedure in order to integrate data from scattered spreadsheets. Updating and version control of plans, various geographies each with their own definitions into a budgets, forecasts, reports and analyses is very difficult, almost impossible and may not be of any use. single module. Even with faster computing power, many find that annual budgets cannot keep up with the rapid changes in The extensive use of spreadsheets is because we are very familiar with them, have flexible personal-productivity tools. the business today. Majority of companies still prefer to use spreadsheets for budgeting and financial planning operations. But they were never designed to handle the financial performance management needs of complex, rapidly growing enterprises in dynamic, highly competitive markets, nor for creating and applying rigorous definitions, auditing, tracking and controls to business processes. Spreadsheets were never designed to be used as a data store for millions even billions of cells. Neither were they designed for simultaneous use by hundreds or thousands of users across a company. Spreadsheets are used traditionally for data storage, data management and also for performance management processes like planning, budgeting, forecasting, consolidation, analysis, and reporting. Spreadsheets are flexible, user friendly, can create charts and graphs and readily integrate with other productivity tools. But the use spreadsheets for primary data storage and performance management solution have several shortcomings and associated risks. The associated problems with spreadsheets include (1) their two-dimensional nature and limit of the number of rows (2) hard to maintain (3) do not integrate well with other systems (4) difficult to share and (5) difficult to understand. Besides, they are very subjective in nature because they allow operational managers to create their own assumptions which often do not adhere to corporate guidance and regulatory compliance. This results in attempts to coordinate parts that are operating in different spheres which ultimately give rise to a very disconnected system. In Thus various shortcomings with use of spreadsheets highlighted above make it very difficult to integrate huge databases and make mid-term forecasts. It also takes a lot of effort and time to arrive at such forecasts, usually three to four weeks and then also the focus remains on few issues and a fully integrated picture fails to emerge. There is lot of subjectivity and lack of consistency in arriving at various interpretations. It becomes almost impossible to analyze what factors are contributing to the success or failure. Even though the faults of use of spreadsheets e.g. for budgeting purposes are
International Journal of Advancements in Research & Technology, Volume 2, Issue 5, M ay-2013 491 well documented, finance professionals prefer to use traditional approaches. Decisions makers require data that is correct, up-to-date, as well as consistent in order to make critical decisions for better prospects. Thus it becomes pertinent to make them aware of the better and automated tools which are available 2 COMPANIES NEED TO CHANGE THE WAY THEY WORK All companies, both big and small, need to gear up to react to a dynamically changing business environment. For this they need their decisions to be informed, quick and effective and ability to what-if and scenario building. Moreover, they have to make correct decisions at the very first time because there may not be any second chance for beating the competition. Midsize companies lack experienced staff, budget, time, and they also cannot manage complex, dedicated toolsets data storage, planning, budgeting, forecasting, consolidations, analytics, and reporting. Hence they use spreadsheet based financial performance management techniques for their needs of financial planning. Expenses are typically a major focus of corporate profit and loss statements. At the corporate level, maximum effort is required to manage expenses and set spending guidelines, while at the divisional level; line managers make expense decisions to improve efficiency and productivity. Forward-looking collaboration must occur so that divisional decisions align with strategic and tactical corporate goals. Executives need to see how planned expenses fit with corporate goals and how they affect profit objectives. They want to see the data that is the result of expense planning. With real-time data access, they can view the scope of planning for different organizational levels and the degree of completeness from each contributing business unit. With its reports and ad-hoc analysis tools, it is possible to see the corporate financial impacts of their decision-making. Because executives seldom use the ad-hoc analysis tools, reports provide the information most relevant to them. The executive launch point is the Expense Planning and Control Dashboard, which provides a general overview of key metrics and results and implications against established targets without the need to access the Planning application. There are many solutions available that provide effective means for data storage and processing which are listed in Table 1. Vendor/Product Differentiator Highlights Advizor Solutions Advanced Visualization Interactive data visualization for discovering patterns and anomalies IBM Solid Microsoft Gemini Oracle Times Ten MicroStrategy 9 OLAP Services In-memory relational database In-memory OLAP Combination Excel add-in and Analysis Service enhancement Relational inmemory database In-memory option to BI platform Qlikteck Qlikview SAP BW Accelerator Tableau Software TIBCO Spotfire Associative in-memory analysis tool Combination in-memory, column-store database and appliance Advanced visualization Advanced visualization Speeding updates in transaction processing Budgeting and planning with flexible hierarchies and what-if analysis Excel users who want to interact with large volumes of data as personal that can be shared Speeding updates in transaction processing Existing Microstrategy deployments experiencing slow query times Departments and workgroups that want highly interactive dashboards or small businesses that wish to avoid data warehouse deployments Experiencing SAP BW deployments experiencing slow query times Interactive data visualization for discovering patterns and anomalies Interactive data visualization for discovering patterns and anomalies Table 1 High Level overview of Solutions available 3 IBM COGNOS TM1 AS THE SOLUTION integrates business planning, performance measurement and operational data to enable companies to optimize business effectiveness and customer interaction regardless of geography or structure. It provides immediate visibility into data, accountability within a collaborative process and a consistent view of information, allowing managers to
International Journal of Advancements in Research & Technology, Volume 2, Issue 5, M ay-2013 492 quickly stabilize operational fluctuations and take advantage of new opportunities. It is a multidimensional solution for budgeting, planning, forecasting, consolidations, reporting, and analytics. TM1 allows organizations to continuously monitor and manage overall business performance. It integrates with Microsoft Excel, and enables users to perform agile, selfservice analysis of large, highly complex, and rapidly changing data sets with real-time response. Web is a web-enabled front end that provides read, write, and what-if modeling capabilities and the Executive Viewer is an easy-to-use self-service reporting and analytics tool. is a patented 64-bit read-write inmemory OLAP engine that provides compact data storage and exceptionally fast performance. It has an ease of use, due to a development environment that enables users to create sophisticated applications with no need for programming or traditional IT skills. needs. Various advantages are listed in Table 2 Deploys Easier is a complete FPM (Financial Performance Management) environment supporting key financial Reacts Faster processes from planning, budgeting, and forecasting to consolidation, reporting, and analytics. Immediate feedback enhances decision-support at all levels of a business. Powered by the industry s only on-demand, in-memory, multi-dimension analytics engine, deploys easier, reacts faster, facilities. and reaches farther across an organization than any other financial performance management product. It streamlines information gathering, aggregation, and analysis so that more time can be spent on running as well as growing the business. This software can automate and manage financial performance management processes by engaging, empowering, and monitoring executives, line-of-business managers, and staff across functional areas and business units. For example, IBM Cognos TM1 helps in creating high-level plans, assign responsibility for providing information, and track progress until plans are complete. There is a cost-benefit tradeoff in reviewing expenses that is part of the bigger picture of business performance. The BI model provides information to managers and executives so that they can make informed decisions that drive stronger business performance. Viewing the details captured by planning contributors from all business units and geographic locations, delivers information for operational, tactical and strategic decisions that drive stronger business performance and a sharper competitive edge. Business Performance Management is the continuous management and monitoring of Financial, Operational, and Cus- Reaches Farther tomer and Organizational performance across the enterprise. Business Performance Management solutions have the following capabilities: Wide deployment Collaborative decision making Continuous and real-time review and refinement Monitoring of Key Performance Indicators It implements quickly and begins from wherever the need is greatest. With self-help components like wizards, workflow, prebuilt databases, sample cubes, and plans, the company s users can configure their own applications, maintain data, and generate reports quickly and easily, even across the Web. Business rules, data, and metadata are shared across applications so that the company s teams work with only one set of rules and hierarchies. It gives its users self sufficiency along with solid security to ensure data accuracy and integrity. The high-performance engine empowers users to perform analysis on frequently changing data across myriad transactions like daily or hourly sales reviews by store, brand, or representative; or perhaps day-by-day activity across hundreds of service Business problems can be tackled immediately as the company s finance executives, planners, controllers, and managers can change input values even business models and recalculate them on-the-fly. With the power of 64-bit in-memory technology to meet even the most complex needs, it is easy for rapid planning, budgeting, forecasting, reporting, and analyzing whenever need be no matter how vast the data set may be. For ready access to valuable information locked away in back-office applications, provides data orchestration user-friendly prebuilt tools such as an SAP connector and Turbo Integrator which offers integration capability that streamlines loading multi-source data. Users can easily create processes to automate data importation, metadata management, and other tasks. A company can engage hundreds of operational managers not just those from finance in a collaborative process using guided applications. With a choice of interfaces for both business users and power users, the company can leverage everyone s existing skills, which means minimal training and minimal IT assistance. Thus it is readily adaptable for rapid growth and change. A large number of companies worldwide are using IBM Cognos TM1 to meet their financial performance management Table 2: TM1 s capabilities
International Journal of Advancements in Research & Technology, Volume 2, Issue 5, M ay-2013 493 4 TM1 S ADVANTAGES OVER SPREADSHEETS: Eliminate spreadsheets errors: Spreadsheet based performance management solutions are fundamentally errorprone. Whether stemming from users ( hitting the wrong key ), from logic (choosing or creating an inappropriate formula), or from omission (leaving out a critical model component like a row or column), calculation errors are nearly guaranteed. In fact, recent research shows that some 94 percent of spreadsheet models are seriously flawed in one way or another. offers a centralized, single FPM solution that encompasses data management, planning, budgeting, forecasting, consolidation, reporting, and analysis. IBM Cognos TM1 facilitates high-participation and collaboration across a company, yet offers managed workflow that enables closely monitored data collection, rapid aggregation, clearly defined rules and hierarchies, a rigorous approval process, role-based security, and a clear audit trail that facilitates accountability and accuracy. Collaboration: Successful financial performance management requires high levels of collaboration and participation: the greater the cross-company input, the greater the resulting accuracy and insight. But due to the deployment difficulty and error frequency, spreadsheet based FPM demands a constrained, centralized process that can represent only a small part of a company s stakeholders. Offering a choice of interfaces, scalable allows involvement of more people than in a financial performance management process. Data from all across your company becomes valuable information when it can rapidly flow via the Web to and from process contributors and management decision-makers. Working documents ( Websheets ) are visible to stakeholders, and all users have read-and-write capability as required for contribution, ad hoc analyses, and what-if scenarios. The Web interface is perfect for a distributed environment where the team members, work remotely across business units and geographies. Workflow management: With a spreadsheet-based FPM solution, managing process workflow is nearly impossible. There can never be a guarantee if data contributors are progressing according to plan or if they ve begun work at all. Also with spreadsheets, greater participation does not mean greater effectiveness. Confusion can run rampant and the process can only move at the pace of its slowest participant. helps guide the FPM process by enabling finance and line-of-business managers to assign functional responsibility to individuals or groups. Contributors submit data according to schedule, and tasks are designate as not started, in progress, approved, rejected, or not delegated. Reviewers monitor progress and accept or reject contributions as needed. makes the entire FPM process highly visible and helps enhance timeliness and accountability. Multi-dimensional business data: Even in smaller companies, financial and business data is simply too complex to be Version control: With spreadsheets flying back and forth effectively stored, managed, and utilized in two-dimensional through cyberspace, there is no assurity of knowing if everyone is working with the most recent iteration of a plan, budg- row-and-column spreadsheets. When there is need to assess product-line profitability by cost-of-goods-sold, by item, by et, or forecast. The result is likely a final version that s based customer demographic, by region, by sales rep, and so on, on inaccurate or mismatched data. there is a need for a lot more firepower than a massive stack of linked spreadsheets and even the cleverest macros can give. enables planners, analysts, and managers Also when one measure changes, how is it known that to develop iterative plans, budgets, forecasts, reports, and change-effects will accurately percolate all through the analyses. For example, suppose a financial manager wants to spreadsheet model? Typically, it is not the case. revise a forecast using the assumption that revenue in five regions will increase by 15 percent next quarter. Email alerts centrally manages business hierarchies, notify analysts and contributors of the revised assumption, rules, calculations, and data using in-memory multidimensional cubes with real business identifiers. With either a remind contributors that they must submit new numbers or provide driver information to plan stakeholders. Comments user-friendly Web interface or the familiar Excel front-end, such as reasons why a contribution was approved or rejected can be stored along with each change in task status. user can read and write into the data set, and then see results almost instantly. Data can be multi-dimensionally sliced-anddiced to match the planning, forecasting, or reporting needs of the moment all in real time. Read/write access is controlled by role-based security, and model changes are instantly propagated to all users. Aggregation: Consolidating input from multiple users and spreadsheets also inhibits FPM process effectiveness. A single person or group has to collect the numerous spreadsheets and unite them in a single version. Even if individual spreadsheets are error-free, aggregation is a huge task that can drag on for weeks. Turbo Integrator streamlines data aggregation and performs fast and precise data loads. It easily connects to any ODBC-compliant database to load data. Depending on the company s resources and needs, Turbo Integrator can import data from ERP systems like SAP and Oracle, from data warehouses, from Excel workbooks, and even ASCII files from legacy systems. It can also export data into ASCII files or any ODBC compliant database to facilitate reconciliation. Real-time FPM: An error-prone, cumbersome spreadsheetbased performance management process does not allow a company s results to beanalyzed, to react to a market change, to ask and answer what-if questions, then alter plans, budgets, or forecasts rapidly and effectively. Real-time response is
International Journal of Advancements in Research & Technology, Volume 2, Issue 5, M ay-2013 494 impossible, and as a midsize business there is a competitive disadvantage against larger companies. IBM Cognos provides critical performance information when needed. At the core of is a powerful in-memory, multidimensional engine that enables lightening fast what-if calculations. is the only multidimensional FPM product that can model what-if scenarios in real time. In fact, was named the best in performance for data load/calculation times and fastest query times in a recent independent OLAP survey. Also because Turbo Integrator imports data efficiently, user can assess corporate performance in minutes, not hours or days. The second differentiating feature of is scalability. cubes have the ability to hold many dimensions, and these dimensions have the ability to hold many elements. It is common to have customer lists, organizational units or product lists containing tens of thou- sands of elements. Additionally, it is possible to hold multiple, unlimited hierarchies of these elements. comes with a built-in tool for building or updating dimensions and for loading data. This tool, (Turbo Integrator), can be used to pull data from many sources, including relational databases used by all modern ERP systems, Excel spreadsheets, and text files. It can also be used to automate processes such as adding years to a time dimension and zeroing out portions of the database. This efficient ETL tool allows for significant reduction in cycle time in the administration of a TM1 application. Large volumes of metadata and data can be loaded and calculated within minutes. Relevance and credibility: Spreadsheet-based approaches to financial performance management are so flawed and cumbersome that line-of-business managers regard the entire process as irrelevant and untrustworthy. In-the trenches staff have learned by hard experience that the numbers are likely wrong, out-of-date, and out-of-touch with reality. helps promote both relevance and credibility. Since users across the company are always working with the most current data set, results are more believable and better as it reflects daily reality. Credibility is also enhanced by advanced TM1 security functions more secure data is more reliable data. Individual access can be controlled based on the role each person plays in the FPM process. For example, a plan manager can easily administer and monitor all tasks and functions in a forecast cycle. Also a built-in audit trail along with s managed workflow further establishes data credibility and facilitates statutory compliance. TM1 s advantages over IBM Cognos Enterprise Planning: at first glance has features quite similar to it. It uses a multicube architecture and it supports complex, cross-cube calculations. TM1 applications typically involve fewer cubes and also have a cleaner design as compared to IBM Cognos Enterprise Planning. TM1 s calculations can be cross-dimensional whereas Cognos Enterprise Planning s calculations are confined to a single dimension within the cube. The primary differentiating feature of can be found in its efficient calculation engine and its method for storing data. Most, if not all, other OLAP applications store data on disk. When users enter data into other planning applications, a read/write from the hard disk is required. These applications require a calculation of the database to reflect changes in items that have calculations associated with them. In contrast, calculations and data storage happens in RAM, so data that is entered is immediately calculated and retrieved. As a result, data is available real-time, providing reports that can be generated at any time, while reflecting the current state of the database. Finally, has a very strong feature set. The feature set includes a robust Excel add-in called Perspectives, which can be utilized for development of an application, input to the database, and reporting. Security is also strong, with the ability to secure each individual cube, dimension, or process, including cell-level security. TM1 Web has slice & dice, nesting, "sandboxing" and graphing. offers a robust, centrally-managed, real-time, planning, forecast, reporting and analysis tool. 5 FUTURE SCOPE Business Intelligence is used to understand the capabilities available in the firm; the state of the art, trends, and future directions in the markets, the technologies, and the regulatory environment in which the firm competes; and the actions of competitors and the implications of these actions. IBM Cognos TM1 is an upcoming analysis tool that provides Business Intelligence. It provides faster data refreshes provides more current information. It provides more BI functionality for a wider group. It helps the performance managers with the entire decision making process and thereby eases and fastens the procedure. The entire project planning is reduced from 45 days to almost 10 days. It provides faster data refreshes provides more current information. There is seamless integration with SAP and Microsoft investments. It provides more BI functionality for a wider group. It also supports multi-dimensional analysis. It has familiar Excel & Web interfaces. Predetermined model requirements for scenarios are not required for building an application. There is an unlimited flexibility for end user scenario building. The future roadmap for IBM Cognos planning and reporting tools includes harnessing the power of TM1 with the intuitive user interface of contributor. The TM1 calculation engine is replacing analyst as the modeling tool. So, while these products will be supported going into the future, new development is going into further enhancing TM1. 6 CONCLUSION Clearly, a spreadsheet-based approach to Financial planning and performance management is inadequate to meet the challenges facing a growing midsize business. IBM Cognos TM1 supports key planning, budgeting, forecasting, consoli-
International Journal of Advancements in Research & Technology, Volume 2, Issue 5, M ay-2013 495 dation, reporting, analytics and data management processes in one integrated solution. Immediate feedback enhances decision-support at all levels of businesses, so that one can spend more time on what he/she does best running and growing businesses integrates business planning, performance measurement and operational data to enable companies to optimize business effectiveness and customer interaction regardless of geography or structure. REFERENCES [1] A Real-World Financial Performance Management Solution for Midsize Organizations, IBM Corporation, February 2008. [2] Transforming spreadsheets: planning, budgeting and forecasting for midsize companies, IBM Corporation, Canada, August 2010. [3] DevelopersGuide,http://publib.boulder.ibm.com/infocent er/cogic/v1r0m0/index.jsp [4] Migrating to TM1, QueBIT Consulting 2010.