Financial Planning, Budgeting, and Forecasting (2010)


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Financial Planning, Budgeting, and Forecasting (2010)

  1. 1. Financial Planning, Budgeting and Forecasting: Will the Economy Emerge? Will You? Cindy Jutras Vice President & Research Fellow, Aberdeen Group Nasreen Quibria Senior Analyst, Aberdeen Group Jeffrey Frank Business Analyst, GROWMARK Slide 1
  2. 2. For Technical Assistance GoToWebinar Customer Care (800) 263-6317 ( US & Canada, toll-free) (805) 690-5753 ( direct dial ) Website Email 2 Slide 2
  3. 3. Ask a Question!Attendee Control Panel and Grab Tab The Control Panel contains panes that can be expanded or collapsed by clicking the +/- on the left side of each pane. Questions Pane – The hand icon on the Grab Tab will open up the Questions Panel. Attendees can submit questions at any time during the presentation by typing in their question and clicking send. Please address your questions to all panelists. 3 Slide 3
  4. 4. Once theFeedbackcompleted, Your webcast is is Important to Usthere will be brief survey questions.Please let us know what you think! As a thank you for completing the survey, your name will be entered in for a drawing to win a copy of the book “Five Key Principles of Corporate Performance Management” by Bob Paladino. Slide 4
  5. 5. Financial Planning, Budgeting and Forecasting: Will the Economy Merge? Will You? Cindy Jutras Vice President & Research Fellow, Aberdeen Group Nasreen Quibria Senior Analyst, Aberdeen Group Jeffrey Frank Business Analyst, GROWMARK Slide 5
  6. 6. Ric Ratkowski Vice President of Product Strategy Host Analytics, Inc. Ric oversees product design and product marketing of the Host Analytics CPM Suite. Ric has over 25 years experience in Finance and Accounting and has held strategic roles in the design of financial analytic and performance management applications within the top software companies in the industry. Additionally, Ric held financial executive level positions at multi-national corporations with first-hand involvement in the financial planning and budgeting process. Ric is a CPA. Slide 6
  7. 7. Cindy Jutras Vice President and Research Fellow Aberdeen Group Cindy has over 33 years of business experience in enterprise applications. She conducts fact-based research on enterprise applications and business performance management. Cindy’s past experience covers a variety of manufacturing, consulting and software companies where she held a diversity of positions in marketing, sales, software design and development, project and general management. She has spoken at executive conferences on her original supply chain concept, Virtually Vertical Manufacturing. She is the author of the book ERP Optimization as well as numerous magazine articles and published white papers. Slide 7
  8. 8. Nasreen Quibria Senior Analyst Aberdeen Group Nasreen Quibria is a Senior Analyst in the Financial Management and GRC Practice at Aberdeen Group. Before joining Aberdeen, she was Director of Payments at the Association for Financial Professionals. Nasreen has a track record of leading successful initiatives in financial services and technology industries. Nasreen also brings expertise in risk management and financial services from her experience at Marsh and CIBC World Markets. Nasreen holds a B.A. in economics from Wellesley College and an M.B.A. in finance and strategy from Boston College. Slide 8
  9. 9. Jeffrey Frank Business Analyst GROWMARK Jeff is a Business Analyst for GROWMARK in the Business Analysis and Research department. He is charged with leading the corporate budget effort for GROWMARK. Jeff has been in his role for a little over a year and has been with GROWMARK for a little over two. Prior to joining GROWMARK, Jeff spent three and a half years at a public accounting firm that specialized in auditing agribusiness cooperatives, including many of the members of the GROWMARK family. Jeff began his work there as an auditor and transitioned to handling the internal accounting and IT needs of the firm. Jeff holds a Bachelors degree in accountancy from Northern Illinois University and is a Certified Public Accountant. Slide 9
  10. 10. Agenda Agenda Financial Planning, Budgeting and Forecasting: Will the Economy Emerge? Will You? Cindy Jutras, Vice President & Research Fellow Nasreen Quibria, Senior Analyst Aberdeen Group Experiences at GROWMARK Jeffrey Frank, Business Analyst GROWMARK Q&A Slide 10
  11. 11. Financial Planning, Budgeting, and Forecasting Will the Economy Emerge? Will You? Cindy JutrasVice President & Research Fellow Nasreen Quibria Senior Analyst
  12. 12. o Aberdeen PACE ModelAberdeen o PressuresBenchmark o ActionsSurvey o CapabilitiesStructure o Enablers o Strategies and Tactics o KPIs – Usage and Specifics o Follow-up Surveys interviews 12
  13. 13. Aberdeen’s History in Financial Planning, Budgeting, andForecasting Research – Following the Trends in Real GDP 8.0 Financial Planning Budgeting, and Forecasting: Managing inPercent Change in U.S. Real GDP 6.0 Uncertain Economic Times, January 2009 4.0 2.0 0.0 2007 2008 2009 2010 -2.0 -4.0 -6.0 Financial Planning Budgeting, and -8.0 Financial Planning Forecasting: Will the and Budgeting, Economy Emerge? Will April 2008 You?, February 2010 13
  14. 14. Survey Demographics Company Size Geography 25% 30% Large EMEA(>$1 billion) 39% Small (< $50m) 57% Americas 13% Asia/Pacific 36% Midsize ($50m to $1 billion) 14
  15. 15. Satisfaction Level with Company’s Current FinancialPlanning, Budgeting, and Forecasting Process Best-in-Class Industry Average Laggard 60% Percentage of Respondents, n = 171 49% 50% 44% 40% 35% 35% 28% 30% 22% 19% 20% 20% 13% 13% 10% 9% 6% 6% 3% 0% 0% Very satisfied Somewhat Neutral Not satisfied Very satisfied dissatisfied 15
  16. 16. Top Pressures Year over Year Market volatility creates the need to 47% 39% dynamically account for change (agility) 37% Need to better align Planning / 41% Budgeting with corporate goals 29% 34% 2010 Corporate mandates for cost control 32% 2009 34% 2008 Current / past accuracy of the budget 22% 25%negatively impacts corporate performance 42% Current processes are too long & 21% 24% resource intensive 34% 0% 10% 20% 30% 40% 50% Percentage of Respondents 16
  17. 17. Best-in-Class Criteria Definition of Mean Class Performance Maturity Class Best-in-Class:  102% overall budget accuracy* Top 20%  99% forecast accuracy of aggregate  20% improvement in profitability year over year performance scorers  66% “always” finalize budget prior to the next fiscal year Industry Average:  92% overall budget accuracy* Middle 50%  89% forecast accuracy of aggregate  6% improvement in profitability year over year performance scorers  37% “always” finalize budget prior to the next fiscal year Laggard:  66% overall budget accuracy* Bottom 30%  73% forecast accuracy of aggregate  8% decline in profitability year over year performance scorers  27% “always” finalize budget prior to the next fiscal year*Ratio of actual to budget 17
  18. 18. Strategic Actions of Best-in-Class 2010 2009 Develop a formal planning / budgeting / 47% forecasting workflow process 40% Automate the process flows associated 41% with the budget process 20% Involve more decision-makers in the 38% planning / budgeting / forecasting process 40% 19% Improve data quality 52% Develop a consolidated view of the process 19% and the results, to be available on demand 28% 0% 10% 20% 30% 40% 50% 60% Percentage of Respondents 18
  19. 19. How Do Companies Approach Financial Budgeting?Percentage of Respondents, n = 171 Best-in-Class Industry Average Laggard 71% 75% 50% 44% 50% 30% 28% 26% 22% 25% 14% 14% 0% Budget drives strategy Strategy drives budget Strategy and budget are independent For top performing companies, strategy drives budget 19
  20. 20. What Budgeting Methodology are Companies Using? Best-in-Class Industry Average Laggard Percentage of Respondents, n = 171 75% 59%63% 50% 38% 28% 22% 20%22% 25% 14% 13% 6% 7% 8% 0% Budgets prepared Zero-based Performance Based Driver-based based on historical budgeting (start Budgeting (PBB) budgets (for data (Previous with a clean slate / (Result oriented example: net new Year’s Actuals) no historical data) planning and customers drives budgeting) customer service budget) Laggard companies are predominantly focused on historical data 20
  21. 21. How has this shifted? 2009 2010 80% 69% 56% 60% 40% 16% 13% 18% 22% 20% 9% 8% 0% Budgets Zero-based Performance Driver-based prepared based budgeting (start Based budgets (for on historical with a clean Budgeting (PBB) example: net data (Previous slate / no (Result oriented new customers Year’s Actuals) historical data) planning and drives customer budgeting) service budget) More companies are adopting performance based budgeting 21
  22. 22. Process Capabilities Best-in-Class Industry Average Laggard 80% Percentage of Respondents, n = 171 71% 71% 66% 65% 59% 61% 60% 59% 60% 52% 49% 40% 40% 38% 32% 27% 20% 20% 0% Ability to Ability to perform Ability to Finalized goals Corporate reforecast as “what if” scenarios incorporate and budgets are process for market conditions and change business drivers clearly budget revisions, change analysis into the on-going communicated to roll-ups, and forecasting those who are approvals have process held accountable been established and implemented 22
  23. 23. Ability to Conduct “What if” Scenario Analysiswith Forecasting / Re-forecasting… 100% Yes , but selectively because it’s entirely manual Yes, some portion of the 75% process is automated 30% Yes , it’s automated 50% 41% 33% 45% 25% 22% 20% 9% 14% 0% Best-in-Class Industry Average LaggardMore Best-in-Class companies have fully automated or semi-automated “what if” scenario analysis capability with forecasts / re-forecasts 23
  24. 24. Current “Systems” – Enabling Technologies Planning/budgeting/forecasting 45% (stand-alone) application 33% Budgeting and forecasting features Best-in-Class 27% of an ERP or other financial All Others 23% application Financial reporting and consolidation 71% (stand-alone) application 40% Financial reporting and consolidation 37% features of an ERP or other 33% application 0% 20% 40% 60% 80% Percentage of Respondents, n = 171 24
  25. 25. Business Intelligence and Analytic Tools Query and reporting tools 65% 57% 47% Dashboard / scorecard tools 30% Enterprise BI platform 45% 26%Corporate / Enterprise performance 32% management application 21% Best -in-Class Event management 30% All Others (triggers and alerts) 17% Data integration tools 29% (including ETL) 17% Data cleansing tools 23% 12% 0% 10% 20% 30% 40% 50% 60% 70% Percentage of Respondents, n = 171 25
  26. 26. What about spreadsheets?88% still rely heavily on them 0% 20% 40% 60% 80% 52% Data is exported from applications to 64% spreadsheets and is manually shared 71%Why? Data is exported from applications to 58% spreadsheets and can be securely 40% Comfort level accessed from a shared server 27% Can’t make a Data from multiple spreadsheets must 39% 46% business case be manually consolidated 50% Expense Spreadsheets are our only method of 19% communication and interaction through 24% the process 46% Spreadsheets are our primary method 26% today, but we are planning to replace 25% this within the next 12 months 44% Spreadsheets are our primary method Best-in-Class 10% today despite the fact that we have 12% Industry Average implemented applications intended to 8% Laggard replace them 26
  27. 27. Financial Planning, Budgeting and Forecasting 2010 Survey Results Revealed Jeffrey Frank Business Analyst, GROWMARK Slide 27
  28. 28. Agenda• Overview of GROWMARK• The budget process – Process overview – Old way of budgeting – Budgeting with Host Analytics• The benefits• Future use• Questions Slide 28
  29. 29. Overview of GROWMARKGROWMARK, Inc. is a regional agriculturalcooperative providing products and servicesthrough FS supply and grain membercooperatives and retail outlets to more than250,000 farmers in the U.S. and Ontario,Canada. Slide 29
  30. 30. Overview of GROWMARK• Wholesale and retail product sales – Seed – Fertilizers and ag-chemicals – Energy products – Facility equipment (trucks, tanks, etc.) – Grain systems• Grain marketing for farmers• Sales to non-farmers – Energy accounts – Turf business Slide 30
  31. 31. Overview of GROWMARK• History – Organized in 1927 – Entered Canada in mid 90s – First big jump into retail in 2002• 2009 sales of $6.1 billion• 1,400 full-time employees• Geography – 35 states (mostly mid-west and northeast) – Southern Ontario Slide 31
  32. 32. The Budget Process• My role• Other staff• Budget overview• Scale and complications• The old way• Budgeting with Host Analytics Slide 32
  33. 33. My Role• Coordinate entire budget process• Performs consolidation of all budgets, including budgeting consolidation entries• Prepares final published report for Budget/Audit Committee and GROWMARK Board• About to begin third budget cycle, second as budget lead (always worked in Host Analytics environment) Slide 33
  34. 34. Other Staff• Approximately 100 active participants in budget process• One other primary staff member in my department – Capital budget – Overhead departments• Three others in my department available to help pull things together and review components Slide 34
  35. 35. Budget Overview• Performed annually – Forecast for current year (annually) – Budget for next year (monthly) – Plan for next two years (annually)• Bottom-up approach – Zero-based budgeting – Lots of detail – Market outlook used for corporate consistency Slide 35
  36. 36. Scale• 16 core business units• 30+ general ledgers inside consolidation• Multiple levels of consolidation• Canadian operations (7 different currency tables)• Over 6200 unique accounts/sub accounts in home office ledger• 200+ budgeted units Slide 36
  37. 37. Major Complications• Commodity driven business• Weather has huge impact• Farmers planting decisions effect more than our seed sales Slide 37
  38. 38. Other Complications• Decentralized operations• Staff reporting structure (lack of control) – Retail units have separate operating boards – Some unit staff aren’t employed by GROWMARK• Inconsistent software use• Heavily customized software Slide 38
  39. 39. Budgeting the Old Way• Several years ago – Entirely in Excel – Lots of linked worksheets• More recently – Distributed Excel worksheets – Loaded into Access for consolidation (common COA) – Pivot tables for reporting – Manual prep of published document - Word Slide 39
  40. 40. Problems with the Old Way• Very iterative• Lots of manual operations• No real-time output available• Budget changes were time consuming• Couldn’t keep up with growing business model• Expensive to maintain (time required)• Access not supported by IT department Slide 40
  41. 41. How We Use Host Analytics• Hierarchy designed around Lawson G/L structure – Carried forward from prior Access database• Load all ledger data for comparison – Perform monthly reconciliation• 7 attribute columns – 2 years of actual – Prior budget period – Current year forecast – Budget Year (calculated from spreads) – 2 years for financial plan• Templates usually mirror internal statement layouts• Global drivers for retirement premiums, depreciation, etc. Slide 41
  42. 42. Slide 42
  43. 43. Benefits of Host Analytics• More easily accommodates late changes• Reduced time spent on manual processes• Accuracy – No more plugging the balance sheet• Excellent slicing of data with reporting• Budgets easily compared to actual• SaaS model requires very little help from IT Slide 43
  44. 44. Future Improvements• Develop templates for retail units that better align to their own statements• Reduce use of Excel worksheets used to create template inputs – move into Host Analytics• Design templates based more on relationships rather than financial statement location – Debt/interest expense – Fixed assets/depreciation• Move towards true driver-based budgeting – Market outlook – Interest rates Slide 44
  45. 45. Potential Future Uses for Host Analytics• Initiatives templates for capital budgeting – prioritization of capital• Building our patronage calculation – Hundreds, maybe thousands, of allocations – Over 70 pages of Excel worksheets• Forecasts and year-end estimates – Make forecasts for management a few times a year – Report results at annual meeting before year is closed• Part-year budget for spring/fall seasons Slide 45
  46. 46. GoToWebinar Logistics Grab Tab: Click the button with the double right arrow to hide the GoToWebinar dialog box Feel free to ask questions along the way. We will answer the questions at the end. Slide 46
  47. 47. Your Feedback is Important to UsOnce the webcast is completed,there will be brief survey questions.Please let us know what you think!As a thank you for completing the survey, yourname will be entered in for a drawing to win acopy of the book “Five Key Principles ofCorporate Performance Management” by BobPaladino. 47 Slide 47
  48. 48. We’ll Help You Get There Slide 48