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Is it really worth it to replace spreadsheets with a planning tool

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Financial Planning and Analysis Survey Results: Management Prioritizing New Planning Activities to Drive the Business Forward on the Planning Maturity Curve

Financial Planning and Analysis Survey Results: Management Prioritizing New Planning Activities to Drive the Business Forward on the Planning Maturity Curve

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  • 1. Financial Planning InnovationsIs it REALLY worth it to replacespreadsheets with a planning tool?An Insider‘s GuideBen Lamorte, VP Marketing, Alight Planning AGILE PLANNING
  • 2. Today‘s SpeakerBen Lamorte Business Activities  VP Marketing, Alight Planning  Principal, Decision Consulting (Adobe, Kaiser)  Manager, Business Intelligence, planetrx.com  Management Consultant, APM/CSC Healthcare Publications  Co-author of planning white papers  Editor of ―The Agile Planner‖ Blog Education  MS Management Science & Engineering, Stanford University  BS Mechanical Engineering, UC Davis AGILE PLANNING
  • 3. Feb 8th Agenda Part 1 The Planning Maturity Curve  (Budgeting, Reporting, Forecasting, Agile Planning) Part 2 Adventures in Agile Planning  (…‖The Fun Part‖ of the Planning Maturity Curve) BONUS: 3 BIG FREE TIPS FROM AN INSIDER Part 3 Announcing the Winner  FREE PASS to Alight Event in 2012 (<=$2,000 Value) OR  FREE SOFTWARE from ALIGHT PLANNING (>$2,000 Value)APPENDIX 1: WHY SOFTWARE FAILS?APPENDIX 2: How to Get to Agile Planning! AGILE PLANNING
  • 4. Part 1: Planning Maturity Curve Question! What describes your Planning? 1. Happy with spreadsheets. 2. Not happy with spreadsheets; considering a software tool. 3. Purchased software, it failed; we‘re back in spreadsheets! 4. Purchased a software tool, it was a success! AGILE PLANNING
  • 5. Part 1: HISTORICAL DATA Prior Surveys 19%33% Happy w Spreadsheets Looking for tool Failed with tool Succeeded w tool 30% 18% AGILE PLANNING
  • 6. Business Value from Planning Insights  Understanding things we didn‘t see before Actionable Knowledge  Understanding and acting upon operational drivers ―Financially-Sound‖ Decisions  Scenario analysis gives us the financial impact of choices AGILE PLANNING
  • 7. All Planning SoftwareEffort All Planning Software Claims Every Vendor Says They Do Budgeting & Reporting Reporting Every Vendor Claims: • Saves Time • Adds Business Value Budgeting AGILE PLANNING Business Value
  • 8. Question! Small Group Question:  For those who SUCCESSFULLY replaced spreadsheets with a financial reporting solution, what best describes your success: 1. It saves time but does not add Business Value 2. It saves time AND adds Business Value 3. What is this guy talking about? AGILE PLANNING
  • 9. ―Actual‖ Value of Budgeting & ReportingEffort Typical Budgeting & Planning Software ―What FP&A Customer Says‖ about Impact of Dedicated Budgeting & Reporting Tool: Reporting • Saves Time • BUT DOES NOT ADD Business Value Budgeting Just Doing Budgeting is Not Enough AGILE PLANNING Business Value
  • 10. The Big ROI – Agile PlanningEffort THE BIG ROI COMES FROM ADDED BUSINESS VALUE Forecasting Reporting Agile PlanningTM Budgeting Real-Time Scenario Comparison Budgeting Forecasting & Reporting Adds Real Value AGILE PLANNING Business Value
  • 11. KEY POINT: TYPE 1 and TYPE 2 BenefitsEffort Type 2: Add Value Type 1: Save Time Real-Time Scenario Comparison Budgeting Forecasting & Reporting Adds Real Value AGILE PLANNING Business Value
  • 12. Definition: TYPE 1 and TYPE 2 BenefitsSAVE TIME: TYPE 1 Objectives that streamline basic planningThings that we’re already doing but want to do faster and better as compared to spreadsheets.“Get out of Excel Hell”Reduce the duration of the budget cycleBetter visibility into the budget process and have complete control of versionsEASY TO MEASURE BENEFITS – BENEFITS ARE SMALL IN MANY CASESADD VALUE: Type 2 Objectives that enable better management decisions.Things we wish we were doing but are only partially able to or not currently even attempting to doin Excel.• Better visibility into the impact of changes in the market on cash flow and profitability• Be prepared to deal with uncertainties in the market so that they can be proactive rather thanreactive when things don’t happen “as planned”• Better communicate the business model and answer questions from management team• Grow the business and be prepared to handle that growth and track key metrics along the wayHARD TO MEASURE BENEFITS – BENEFITS ARE VERY BIG IN MANY CASES AGILE PLANNING
  • 13. Planning Maturity—Full Matrix AGILE PLANNING
  • 14. Part 2: 3 Adventures in Agile Planning The 3 Adventures! #1 Kaiser #2 Adams Land and Cattle #3 Pittsburgh Mercy Health AGILE PLANNING
  • 15. 1: Larry Van Kuran, Kaiser Permanente Business Issue: 8 Regions on disparate Pharmacy Management Systems – Know the old systems need updating, but need to explore how and when to move to a centralized system but it will cost $100M + Agile Planning Solution: Set up a model by 8 regions with inputs for rollout by region, scenarios set up to analyze ―delay project 1 year‖, ―critical regions only‖, etc. Outcome: Presented business case to board after getting buy-in from the 8 regions and now live with (Pharmacy Information Management System) PIMS – Getting it done on time had a $400M positive impact to 10-Yr NPV! AGILE PLANNING
  • 16. KAISER – THE “MEETING” Scenario: ―Option 2: GO LIVE KEY REGIONS ON TIME‖NOTE: DATA IS MOCK UP AGILE PLANNING
  • 17. KAISER – THE “MEETING”, Cont. Scenario: ―PUSH PROJECT OUT ONE YEAR‖ OUTCOME - CONCLUDE: DO IT NOW! AGILE PLANNINGNOTE: DATA IS MOCK UP
  • 18. 2: Amy Cyboron, Controller, Adams Land &Cattle Business Issue: Mitigate risks by maintaining an optimal inventory Agile Planning Solution: Set up a model so changes to the purchase plan for cattle let management see the numbers flow through. Outcome: Then work with our procurement group to instruct a reduction in new purchases which gives us better management on inventory. AGILE PLANNING
  • 19. 3: Case Study: Pittsburgh Mercy Progress to Date  Financial Results  $600K+ in documented revenue increases and cost cuts from MET goals  Process Results  No budgeting  Global updates twice a year – detailed updates quarterly  Forecast accuracy to 2%  Manager commitments based on demonstrated best practices  Understanding the business as an operating entity  Reaction to issues on a two year horizon, e.g. present cut plan  Model Status  Now on third model iteration built from scratch AGILE PLANNING
  • 20. Case Study: Pittsburgh MercyRay Wolfe Business Activities  Chief Financial Officer, Pittsburgh Mercy Health System 2006-present  Director of Fiscal and Information Systems– Mercy Behavioral Health 1996-2006  Chief Fiscal Officer, Summit Center for Human Development, 1988-1996  St. Francis Medical Center, Patient Account Manager, 1986-1988 Awards: Ventana Leadership 2010 Education  Juris Doctorate, West Virginia University 1977  BA, Marshall University, 1974 AGILE PLANNING
  • 21. Case Study: Pittsburgh Mercy Community Mental Health and Health Care Related  Mental Health, Mental Retardation, Drug/Alcohol, Homeless  Prevention Services and a Private Foundation  Serving Southwestern Pennsylvania Business Metrics Pittsburgh Mercy Health System has  3 subsidiary corporations  60 community locations  27 major programs product lines  260 revenue/cost center  1,700 employees; 106 Managers & Supervisors  Funded through traditional insurance billing, government grants and capitation contracts, Private Foundations AGILE PLANNING
  • 22. Case Study: Pittsburgh Mercy Demographic Problems  Managers with only clinical backgrounds/ no business skills  60 sites yielded communication barriers and no common language Excel based —  Overload mode of worksheets with link and formula errors  Too much time to maintain and no certainty of integrity  No way to import and compare actual data to the budget design Budgeting became a ritual without meaning  Budgeting full year totals with no seasonality  Tops down budgets w/o manager buy in  No P&L visibility by critical factors  No operational integration AGILE PLANNING
  • 23. Case Study: Pittsburgh Mercy Organization of Forecast Groups and Processes  Group managers by functional areas—e.g.  Community Treatment Teams  Outpatient Clinics  Child Services  15 Groups each meet once a quarter  3 to 12 managers per group  4 members from accounting/finance  Real time process elements  Alight Planning displayed on Overhead Projector with Smart Board  CFO is facilitator; Alight Admin on the mouse and keyboard  Review/ make changes in real time  Everyone sees everything! AGILE PLANNING
  • 24. Level of Detail Technical Issues  What level of detail? Actuals and plan  Transportation example AGILE PLANNING
  • 25. Tips from an Insider: BONUS MATERIALS AGILE PLANNING
  • 26. Tip 1: DO NOT GO BY General ―RANKINGS‖ 2010 Customer Satisfaction (on a Scale of 5.0) Alight Planning 4.65 Host Analytics 4.63 Tagetik 4.56 Longview/Exact 4.36 Vendors with no data include: Adaptive Planning 4.15 Centage, XLerant, Clarity, Satori Prophix 4.07 IBM/Cognos 3.90 Infor 3.73 Oracle/Hyperion 3.71 Microsoft 3.70 SAP/Business Objects 3.69Source: BPM “Beyond the Hype Survey” AGILE PLANNING
  • 27. Tip 2: Do Consider Cloud & Web Forms WEB FORMS? NO YESPlanning ObjectiveSource: The Agile Planner Blog AGILE PLANNING
  • 28. Tip 3: Mitigate Risk of Failure to ReplaceSpreadsheets by… Analyzing Potential ROIKey Question: is your primary objective Budgeting/Type 1 or Agile Planning/Type 2?Type1 Benefits are estimated at about $1,000 per user adopting the annual budgeting tool Note: 2/3 of Non-Finance Personnel do not use the budgeting tool (See Buttonwood Survey)Type 2 Benefits are based on quality of FP&A staff, not related to #user licenses purchased AGILE PLANNING
  • 29. PART 3: Who will be the Winner?? Let‘s Talk! Email: BLamorte@AlightPlanning.com Call Ben at: (415) 456-8528 Join me: blog.alightplanning.com AGILE PLANNING
  • 30. APPENDIX Why Budgeting Software Fails?  Free Resources for In-Depth Analysis of Software Failure  FOCUS Podcast Featuring Sid Ghatak & Mark Gandy  www.focus.com/roundtables/avoiding-business-performance- mangement-software-failure-4-t/  4 Reasons Budgeting Software Projects Fail, the Private ―Un-Authorized by Alight Blog‖  http://benonbudgets.blogspot.com/2010/06/4-reasons-budgeting- software-projects.html  Talk to Me!  Email: BLamorte@AlightPlanning.com  Call Ben at: (415) 456-8528 AGILE PLANNING
  • 31. #1 Worst Practice: Software on the Shelf  Situation: Management thinks buying software licenses for everyone will somehow get everyone more involved and create a culture of collaborative budgeting.  Problem: Buttonwood Group Survey examined 100 companies who deployed budgeting software to replace spreadsheets:  44% of companies reported complete failure to get anybody outside of Finance to actually log into the system in the past 12 months.  How to Avoid: Start with a ―Minimal Configuration‖ ADD Non-Finance USERS LATER! AGILE PLANNING
  • 32. #1 Software on the Shelf AGILE PLANNING Source: Planning Software Usability Survey By Buttonwood Group
  • 33. Worst Practice #2: Go over your budget!  Problem (Quote below from real customer interview!)  “Our software will be just $2,000. We forgot to tell you it costs $10,000 for consulting help to build your model – oh yeah, it‘s really easy to use. Of course, that‘s just to get you going, it could take $18,000 for it to be fully deployed.‖  How to Avoid (Send me an email with other ideas)  Build discounts into pricing if vendor goes over the price!  Example: ―Great! So, if we do in fact pay $10,000 upfront for the 50 hours, can we get a bill-rate of $100/Hr thereafter if additional consulting is requested? After all, it is unlikely we will need more than 50 hours.‖ AGILE PLANNING
  • 34. Worst Practice #3: Wrong Consultant Problem  A month after you buy software, you find out you‘ve been assigned to a consultant whos built one model as practice and recently completed an MBA degree! How to Avoid  Do not agree to purchase any software until you’ve at least met the consultant assigned to your project. If you don‘t click with your consultant, the project may be doomed from the start . AGILE PLANNING
  • 35. FREE RESOURCES Free Resources for In-Depth Analysis of Software Failure  FOCUS Podcast Featuring Sid Ghatak & Mark Gandy  www.focus.com/roundtables/avoiding-business-performance- mangement-software-failure-4-t/  4 Reasons Budgeting Software Projects Fail, the Private ―Un-Authorized by Alight Blog‖  http://benonbudgets.blogspot.com/2010/06/4-reasons-budgeting- software-projects.html  Talk to Me!  Email: BLamorte@AlightPlanning.com  Call Ben at: (415) 456-8528 AGILE PLANNING
  • 36. Where Are You on the Curve? AGILE PLANNING
  • 37. Planning Maturity—Agile Planning The Happy Team AGILE PLANNING
  • 38. Planning Maturity—Agile PlanningEffort Planning Maturity Curve (PMC) Forecasting Implement driver-based planning Integrate (don’t just import) actuals Reporting Implement scenario analysis Forecasting/Agile Planning Move out of Excel Reduce level of detail Budgeting Seat of Pants Business Value AGILE PLANNING
  • 39. Planning Maturity—Agile PlanningEffort Planning Maturity Curve (PMC) Forecasting Implement driver-based planning Integrate (don’t just import) actuals Reporting Implement scenario analysis Forecasting/Agile Planning Move out of Excel Reduce level of detail Budgeting Seat of Pants Business Value AGILE PLANNING
  • 40. Guidelines for Agile PlanningTM1. Move Out of Excel  Deal with structure issues  Deal with modeling issues2. Reduce Level of Detail  Plan the way managers think; not the Happy Accountant  Reduce detail to better integrate strategy3. Implement Driver-Based Planning  Reduce direct input data volumes  Increase ‗modeled elements‘—operational/driver based planning4. Integrate (Don‘t Just Import) Actuals  ―Rolling over‖ actuals in plan files—apples to apples  Using actuals to understand trends—focus on rates5. Implement Scenario Analysis  You can‘t predict the future, but you can construct scenarios  You‘re looking for easy maintenance and comparisons at all levels AGILE PLANNING
  • 41. 1. Out of Excel Structure Issues  Bound by templates: can‘t add line items on-the-fly  Rollup structures with dimensions are difficult to create and maintain  No multi-user security/process controls  Importing (rekeying) actuals is error prone/cumbersome Structure problems Save As relate to budget templates where you need to build in structure and financial intelligence from scratch. Version A Version N… AGILE PLANNING
  • 42. 1. Out of Excel Modeling Issues  Formula and structure errors—aka #Refs  Dependency on key individuals—Lone Ranger Syndrome  Line manager spreadsheet skills are limited; untrained/dangerous. Modeling problems: cell- based linking which discourages driver-based planning which is the source of most errors. AGILE PLANNING
  • 43. 1. Out of Excel What to Look for in Planning Applications  You can build rollup structures with multiple dimensions/attributes  Application incorporates multi-user security and process controls  Users can create line items on-the-fly without breaking things A fundamental deliverable of a Planning Application is user security and process controls. AGILE PLANNING
  • 44. 1. Out of Excel What to Look for in Planning Applications  You can build rollup structures with multiple dimensions/attributes  Application incorporates multi-user security and process controls  Users can create line items on-the-fly without breaking things  Importing capabilities—aka ETL (Extract, Transform & Load)  Object-based linking with audit trails Object-based linking is critical for implementing driver-based planning. AGILE PLANNING
  • 45. 2. Reduce Level of Detail Plan at the Right Level  Lowest level natural class accounts create too much detail  Let managers plan the way they think  Set the stage for driver-based planning It‘s the data that‘s the killer 7 T&E accounts * 100 cost centers * 12 months = 8,400 AGILE PLANNING
  • 46. 2. Reduce Level of Detail Guidelines for ―Right Level‖  Plan/report at a higher level—especially for natural accounts; or  Set up a dual system: traditional budgeting plus forecast at higher level.  Do the math for various alternatives; test imports for a ‗visual picture‘.  Go step-by-step: not everything need be done all at once.  The planning application must have line item detail Example of an account structure at a higher level with line items created by managers. AGILE PLANNING
  • 47. 2. Reduce Level of Detail Benefits of Reducing Level of Detail  Better operational connection for line managers  Reduces overall data volumes; better visibility  Set the stage for driver-based planning Reducing level of detail along with moving out of spreadsheets reduces Effort and enhances Business Value. AGILE PLANNING
  • 48. 3. Driver-Based Planning What Is Driver-Based Planning?  A series of sub-models for revenues and expenses based on drivers  Drivers are typically units of things: unit sales, customers, transactions  The fundamental structure is: Units * Rate = Amount  The spending focus is on big ticket items and large departments Example of a driver model that calculates amount of explosives for a gold mining operation. AGILE PLANNING
  • 49. 3. Driver-Based PlanningSoftware Conversion # Services Hours Per Billable Bill Rate BillableLicenses rate Customers Customer Services Services Sold Hours Revenues Predictive logic diagram for a software/services business It’s about Activities & Rates AGILE PLANNING
  • 50. 3. Driver-Based PlanningSoftware Conversion # Services Hours Per Billable Bill Rate BillableLicenses rate Customers Customer Services Services Sold Hours Revenues Staff Utilization Predictive logic Rate diagram for a Services Hours Per Services Staffing Month Staffing software/services Hours Heads business Services Expenses  Salaries It’s about  PR taxes/ benefits  Supplies Activities & Rates  Travel  Recruitment Training  Etc. Services Profitability AGILE PLANNING
  • 51. 3. Driver-Based Planning Benefits of Driver-Based Planning?  Tight turn-around for forecasting has a chance  Enforces focus on important operational drivers  Visibility into the numbers—allows meaningful causal analysis of variances  Sets up ―real time planning‖ for scenario analysis Driver-based planning delivers a significant increase in Business Value AGILE PLANNING
  • 52. 4. Integrate Actuals Integration Issues  Data spread across multiple sources  Actuals and Plan at different levels  No underlying activity drivers  Actual and plan structures out of sync AGILE PLANNING
  • 53. 4. Integrate Actuals Import Actuals  Metadata and data imports based on chart of accounts structures  Monthly updates from the general ledger  Automated with ―connectors‖ or semi-automated with ETL tools Integrate Actuals  Any source—GL,HR, CRM, RDBMS, OLAP  Any data type—text, number, currency, percentage  Any level—line item, natural accounts, cost center, etc.  Any modeling—simple of complex linking, back calculate rates AGILE PLANNING
  • 54. 5. Implement Scenario Analysis Deliverables  Insights: What‘s Going On with the Numbers  Actionable Knowledge: What Are Our Choices Between Things To Do  Decisions: ―OK gang, here‘s what we‘re going to do!‖ About the Future “Trying to predict the future is like driving down a country road at night with no lights while looking out the back window.” Peter Drucker “The future ain’t what it used to be…” Yogi Berra AGILE PLANNING
  • 55. 5. Implement Scenario Analysis Types of Scenario Analysis  Manage Resource Allocations: Adjust Short Term ―Who Gets What‖  Strategic Planning: Extend Time Frames; Same Model As Short Term AGILE PLANNING
  • 56. 5. Implement Scenario Analysis Types of Scenario Analysis  Manage Resource Allocations: Adjust Short Term ―Who Gets What‖  Strategic Planning: Extend Time Frames; Same Model As Short Term  Black Swan Planning: Understand Improbable Events [Nassim Taleb] AGILE PLANNING
  • 57. 5. Implement Scenario Analysis Implementation Guidelines  Easy to Create: On-the-Fly; No IT; Selectively Include Line Managers  Easy to Maintain: Change Data and Structure in Near Real Time  Real Time Feedback: The Planning Tool is the Presentation Tool  Scenario Drill Down: Comparison & Analysis at All Levels AGILE PLANNING

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