A cross-functional approach in budgeting and forecasting

Planning Beyond Finance A cross-functional approach in budgeting and forecasting Edilio E. Rossi, EPM Sales Development Director, Italy & Iberia ABIC Executive Event Milan, Palazzo delle Stelline, April 23, 2015 Copyright 2014 Oracle and/or its affiliates. All rights reserved. Oracle Confidential - Restricted

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The effect of out-of-date sales forecasts A direct relation between expected revenue growth vs. actuals and corporate value in the U.S., iphone sales were not as robust because of changes in the upgrade policies at wireless carriers, which are no longer allowing customers to trade up to new models before their two-year contracts expired, Cook said. For those reasons, Oppenheimer said revenue growth going forward might be higher than the March forecast suggests. It wasn t enough for investors. The shares were down 8.3 percent, or $45.85, to $504.65 at 3 p.m. California time. http://www.forbes.com/sites/connieguglielmo/2014/01/27/apple-counting-on-an-ipad-christmas-iphone-holiday-surge-to-report-results-today-live/ Copyright 2014 Oracle and/or its affiliates. All rights reserved. Oracle Confidential - Restricted 5

Other Examples of Sales Forecasting Challenges Revenue predictions depend upon a complex, changing dynamic environment Copyright 2014 Oracle and/or its affiliates. All rights reserved. Oracle Confidential - Restricted 6

Workforce budgeting & forecasting plays a key role too... A direct relation between headcount, profits and corporate value Copyright 2014 Oracle and/or its affiliates. All rights reserved. Oracle Confidential - Restricted 7

Revenue is Top of Mind Duke/CFO Magazine Q1 2014 Survey Results 1,14 Top External Concerns 0,97 0,83 1,6 Top Internal Concerns 0,8 0,8 Consumer demand Price Pressure Fed Govt Policies Maintaining margins Attract & Retain Employees Cost of Healthcare Copyright 2014 Oracle and/or its affiliates. All rights reserved. Oracle Confidential Internal/Restricted/Highly Restricted 8

What we have heard from the Market Budgeting & Forecasting performance ranks top for CFOs importance PLANNING EFFICIENCY & EFFECTIVENESS INTEGRATION BETWEEN FINANCE & FUNCTIONAL PROCESSES Copyright 2014 Oracle and/or its affiliates. All rights reserved. Oracle Confidential Internal/Restricted/Highly Restricted 9

Do More Inputs Result In More Accurate Forecasts? It s Efficiency that Counts TIME 60 days to create forecast QUALITY 80% data collection COST 3% annual revenue Source: Hackett Group, Financial Executives International, Buttonwood Group Copyright 2014 Oracle and/or its affiliates. All rights reserved.

The Planning Beyond Finance Challenge INTEGRATE Financial Planning with... HR Planning Sales Planning Production Planning Procurement Planning... Copyright 2014 Oracle and/or its affiliates. All rights reserved. 13

HR Planning Workforce is the 1st or 2nd largest cost item in (almost) every organization Difficult and time consuming process due to multiple variables to be considered In growing enterprises recruiting cycles are faster that budget cycles In shrinking organizations, lay-offs and transfers are a challenge Consider both domestic and international Regulatory requirements and collective / individual labour agreements Simulate headcount and cost of labour impact in different scenarios (M&A, re-orgs,...) Copyright 2014 Oracle and/or its affiliates. All rights reserved. 14

HR Planning VIDEO Headcount Status & Transfers Variations, cost centers https://vimeo.com/114863743 Password: oracle To-Be-Hired Fixed Compensation Variable Compensation Workforce expenses Hiring & lay-offs M&A / Re-orgs scenarios Wages, labour agreements Social Security costs Bonuses Performance drivers Corporate assets assignment T&L allocation Copyright 2014 Oracle and/or its affiliates. All rights reserved. 15

Sales Planning Integrate Sales and Financial Planning into the same process / system Integrate (relevant) data flows from/to Sales processes/systems to re-set business objectives (e.g. Demand Planning, CRM/SFA,...) Both Sales Budgeting & Forecasting processes can be managed end-to-end (bi-directional, collaborative workflow) Enabling real-time Revenue & COGS adjustments for maintaining margin through consensus between Finance & Sales Extend process to operations & production to achieve further value chain efficiency Copyright 2014 Oracle and/or its affiliates. All rights reserved. 16

Sales Budget Workflow It s a complex, iterative and collaborative process across the organization CEO set corporate targets and CFO define P&L budget accordingly, including top level Revenue and Margin objectives Revenue (Price*Volume) Revenue & COGS Sales develop budget scenarios Scenarios W/A/B Version 1 Contribution Margin consistency evaluated against target Finance evaluates the proposal Sales develop budget scenarios Scenarios W/A/B Version 2 Finance evaluates the proposal Sales develop budget scenarios Scenarios W/A/B Version n Cycle continues until consensus between Sales and Finance is reached CONSENSUS Copyright 2014 Oracle and/or its affiliates. All rights reserved. Oracle Confidential - Restricted 17

Process Pains: Sales Budget Process Time Constraints Organizational Complexity Business Rules Version approval & resubmission cycle What-if scenarios & hypothesis Cycle iterativity (workflow) # of People and Hierarchies Roles & Profiles, Accountability Collaboration, Mobility Allocation Drivers & Parameters Algorythms / Predictability Granularity levels / Hierarchies Copyright 2014 Oracle and/or its affiliates. All rights reserved. Oracle Confidential - Restricted 18

Sales Forecast Workflow It s a fast, highly predictive and negotiated" process across the organization CFO provides Sales with actuals and asks for Revenue Forecast Revenue Forecast vs. Budget (Price*Volume) Revenue Budget vs. Forecast & COGS variations Sales collect and consolidate forecasts Baseline + Uplift, Promotions, new products... Version 1 Contribution margin consistency evaluated against target Finance evaluates the proposal Sales develop new forecast based on Finance feedback Baseline + Uplift, COGS variations,... Version 2 Finance evaluates the proposal Sales consolidate forecasts Baseline + Uplift, New events,... Version n Cycle continues until consensus between Sales and Finance is reached CONSENSUS Copyright 2014 Oracle and/or its affiliates. All rights reserved. Oracle Confidential - Restricted 19

Process Pains: Sales Forecast Process Time Constraints Organizational Complexity Business Rules Time-to-market challenges Real-time predictions Impact on value chain (operations) # of People and Hierarchies Roles & Profiles, Accountability Collaboration, Mobility Predictive modeling Demand patterns (external) Sales & Mktg. actions (internal) Copyright 2014 Oracle and/or its affiliates. All rights reserved. Oracle Confidential - Restricted 20

Additional Issues affecting the Sales Forecast Process Revenue Gap Management COGS Gap Management Adjustments (Forecast vs. Budget) Promotions / S&M campaigns Demand Planning, Volume/Price Direct Costs: Actuals vs. Standard Promotions / S&M campaigns Contribution margin convergence Copyright 2014 Oracle and/or its affiliates. All rights reserved. Oracle Confidential - Restricted 21

Oracle Planning and Budgeting Cloud Service (OPBCS) Core Planning and Budgeting Functionality Web and Excel access Built-in multidimensional reporting managed by the planning application Built-in Data integration Two environments with each subscription: production and pre-production https://cloud.oracle.com/enterprise_planning Copyright 2014 Oracle and/or its affiliates. All rights reserved.

OPBCS: First-in-Class Functionality Based on proven technology! Market Leader Flexible workflow and plan management capabilities Intuitive web interface with full MS Office integration Built-in management reporting capabilities Extensive spreadsheet integration for efficient data entry and set up Out of the box support for best practices such as rolling forecast, multi-currency Copyright 2014 Oracle and/or its affiliates. All rights reserved.

OPBCS: Reduce Risk with Predicted Forecast Outcomes Predictive Modeling Move from conventional to advanced scenario modeling Review full range of outcomes Quantify the risk of not achieving your goals Know the probability of outcomes Understand key factors impacting your business Copyright 2014 Oracle and/or its affiliates. All rights reserved.

OPBCS: Mobile Access Extend & Accelerate Adoption Fast Adoption Intuitive role based interface, mobile ready Virtually zero training with built-in starter kits and online tutorials Create once consume on Web, Mobile and MS Office Application diagnostics with governors to simplify administration Copyright 2014 Oracle and/or its affiliates. All rights reserved.

Multiple Reports, Multiple Stakeholders The average worker collaborates with 10 or more people to accomplish daily tasks SIGNER REVIEWER Operations Reviews Board Packages Audit Reports Public Disclosures Regulatory Reporting Group Budget Review OWNER REVIEWER SIGNER AUTHOR AUTHOR AUTHOR REVIEWER AUTHOR Copyright 2014 Oracle and/or its affiliates. All rights reserved. Copyright 2015 Oracle and/or its affiliates. All rights reserved. 28

EPRCS: Collaborate Securely Advanced mobile, self-service and collaboration capabilities Instant visibility to the progress and status of the reporting lifecycle Efficiently bring knowledge workers in and out of the process based on their role Secure at all levels to handle sensitive content, from network to storage Content access based on role https://cloud.oracle.com/enterprise-performance-reporting-cloud Copyright 2014 Oracle and/or its affiliates. All rights reserved. Copyright 2015 Oracle and/or its affiliates. All rights reserved. 29

The Oracle Advantage: Flexibility & Simplicity Private Cloud Build Managed Subscribe Customer manages Customer owns infrastructure Customer owns license Provider owns infrastructure Provider manages Provider owns infrastructure Copyright 2014 Oracle and/or its affiliates. All rights reserved.

Enterprise-level Benefits The strategic impact of an Integrated Sales & Financial Planning process Finance Department 1 3 Generate more accurate, predictable forecasts resulting in increased revenues (2-8%) Achieve consensus between Sales & Finance on new forecasts resulting in better profitability Reduce working capital between 10 and 30% Enterprise-level Benefits Sales & Marketing Generate more accurate forecasts and automate the budget and forecast process Gain timely insight into sales performance and adjust the execution accordingly Increase revenues by optimizing promotions and sales & mktg. campaigns 2 Operations & Production Optimize stock while maintaining adequate service levels. Reduce backorders and out-of-stock. Optimize supply chain while reducing its CAPEX (5-15%) and OPEX (2-10%) IT Department 4 Leverage the Cloud technology to ensure fast adoption, functionality and flexibility Reduce dedicated resources (FTEs, $$$, HW) Move IT budget from CAPEX to OPEX Copyright 2014 Oracle and/or its affiliates. All rights reserved.