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Fix Your Forecast and Build Your Budget Best Practices for Enterprise Performance Management Emil Fernandez, General Manager EPM National Practice June 29, 2010

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About Perficient Perficient is a leading information technology consulting firm serving clients throughout North America. We help clients implement business-driven technology solutions that integrate business processes, improve worker productivity, increase customer loyalty and create a more agile enterprise to better respond to new business opportunities. View other Perficient on demand webinars at: www.Perficient.com/webinars

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Fast Facts <ul><li>Founded in 1997 </li></ul><ul><li>Public, NASDAQ: PRFT </li></ul><ul><li>16 locations throughout the U.S. & Canada: </li></ul><ul><ul><li>Chicago, Cincinnati, Cleveland, Columbus, Dallas, Denver, Detroit, Fairfax, Houston, Indianapolis, Minneapolis, New Orleans, Philadelphia, San Jose, St. Louis and Toronto </li></ul></ul><ul><li>1,100+ employees </li></ul><ul><li>Dedicated solution practices </li></ul><ul><li>Served 400+ clients in past 12 months </li></ul><ul><li>Alliance partnerships with major technology vendors </li></ul><ul><li>Multiple vendor/industry technology and growth awards </li></ul>

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Our Solutions

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Why do we Budget?

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Planning and Budgeting Challenges <ul><li>Time – takes too long, results obsolete </li></ul><ul><li>Quality – political/negotiation, not reflective of business </li></ul><ul><li>Cost – many wasted resources, dubious benefits </li></ul><ul><li>Flexibility – lack of responsiveness to changes </li></ul>FP&A Group Dept A Dept B Dept C Senior Management

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Reason #1: Spreadsheet driven

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Reason #2: Long Cycle Times

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Reason #3: Complexity of Business Metrics

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Reason #4: Disconnected

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So why is it this way?

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Transactional Systems vs. Management Systems

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<ul><li>Transactional Systems </li></ul><ul><li>Mature technology </li></ul><ul><li>Over 50 years of development </li></ul><ul><li>Pervasive (GL, AP, AR, HR, Supply Chain, etc.) </li></ul><ul><li>Management Systems </li></ul><ul><li>Relatively new (10 years) </li></ul><ul><li>2 nd or 3 rd generation products </li></ul><ul><li>Not well understood </li></ul><ul><li>Requires a cultural change </li></ul><ul><li>Not pervasive, but getting there </li></ul>

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How new? Corporate Performance Management (CPM) Gartner 2001 Business Performance Management (BPM) Hyperion 2003 Enterprise Performance Management (EPM) Oracle 2007

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So what is EPM anyway and why should I care?

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<ul><li>EPM is the “connecting fabric” that allows management to link strategies to plans, continuously monitor execution against goals and drive enterprise-wide performance improvement. </li></ul>

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Management Processes Exist in Silos ANALYZE PERFORMANCE GOAL SETTING SCORECARDS FINANCIAL REPORTING FINANCIAL MODELING VARIANCE ANALYSIS ROLLING FORECAST OPERATIONAL PLANNING MONITOR RESULTS

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Results of Silos… <ul><li>Lack of Alignment </li></ul><ul><ul><li>Can’t Align Company Goals with Plans and Execution </li></ul></ul><ul><li>Low Predictability </li></ul><ul><ul><li>Not Able to Improve Accuracy in Forecasts and Plans </li></ul></ul><ul><li>Inconsistency </li></ul><ul><ul><li>Unable to Base Decisions on the Right Information </li></ul></ul><ul><li>Lack of Transparency </li></ul><ul><ul><li>Not Able to Meet Evolving Disclosure Requirements </li></ul></ul><ul><li>Stale Data </li></ul><ul><ul><li>Data is Out of Date and Irrelevant </li></ul></ul>

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An EPM Strategy Can Eliminate Silos <ul><li>Links strategic goals to operational decisions </li></ul><ul><li>Transforms financial management processes </li></ul><ul><li>Monitors execution in real-time </li></ul><ul><li>Delivers consistent, reliable insights to drive action </li></ul><ul><li>Lowers costs and reduce system complexity </li></ul><ul><li>Single version of the truth </li></ul>Insight Performance Action Set Goals Plan Monitor Analyze Report Align

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EPM Favors More Complex Organizations Complexity Basic Reports Mgmt Rpts Analysis Financial Reporting Private Public Multi-National Multi-Division Financial Modeling Performance Management Small Medium Large Size

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Large Domestic Company <ul><li>Multiple Locations </li></ul><ul><li>Multiple Products/Services </li></ul><ul><li>Distributed Authority </li></ul><ul><li>Multiple Operational Systems </li></ul><ul><li>Frequent Reporting </li></ul><ul><li>Accurate Forecasting </li></ul><ul><li>Resource Management Critical </li></ul><ul><li>Management System Requirements: </li></ul><ul><ul><li>Replace/Augment Spreadsheets </li></ul></ul><ul><ul><li>BI Query & Reporting Tools, Dashboards </li></ul></ul><ul><ul><li>Packaged Budgeting and Planning Application </li></ul></ul>Division 1 Division 2 Division 3 HQ

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<ul><li>More Locations and Systems </li></ul><ul><li>Reporting and Budgeting in Multiple Currencies </li></ul><ul><li>Intercompany Transactions </li></ul><ul><li>Financial & Management Consolidations & Reporting </li></ul><ul><li>Local Tax and Statutory Reporting </li></ul><ul><li>Management System Requirements: </li></ul><ul><ul><li>BI Query & Reporting Tools </li></ul></ul><ul><ul><li>Multidimensional Analysis Platform </li></ul></ul><ul><ul><li>Packaged Budgeting & Planning Apps. </li></ul></ul><ul><ul><li>Packaged Financial Consolidations & Reporting System </li></ul></ul>International Organization EMEA NA APAC HQ UK East Japan France Central China Germany West ANZ

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Time Competitive Advantage OPERATIONAL EXCELLENCE MANAGEMENT EXCELLENCE Cost – Lean and Mean Quality – Six Sigma, TQM Speed – Real-time, JIT Smart – Actionable Insights Across Enterprise Agile – Adaptable to Changing Business Conditions Aligned – Consistent View of Performance

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Enterprise Performance Management (EPM) World-class EPM organizations deliver 2.4 times the equity market returns of industry-peer companies Source: CFO Challenges and Opportunities in the Flat world 1.0 2.40 Peer Group World-Class

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How do I apply EPM Principles to the Budget process?

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<ul><li>Pulling it together – Budgeting the EPM way </li></ul><ul><li>Link the budget to the corporate strategy </li></ul><ul><li>Avoid excessive detail (this is not the GL!) </li></ul><ul><li>Don’t sweat the small stuff (80/20 rule) </li></ul><ul><li>Use targets (top down or bottom up) </li></ul><ul><li>Capture the business drivers </li></ul><ul><li>Focus on data quality </li></ul><ul><li>Combine budget numbers with actuals </li></ul><ul><li>Close the loop – enforce accountability </li></ul><ul><li>USE A PURPOSE-BUILT PLANNING APPLICATION, NOT A DESKTOP SPREADSHEET TOOL </li></ul>

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Question: What is a Planning Application? <ul><ul><li>Answer: </li></ul></ul><ul><ul><ul><li>A purpose-built software program designed to manage the input of budget data across the enterprise, enforce consistent calculation of business rules, and automate the aggregation of the budget. </li></ul></ul></ul>

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Planning Applications – Key Components Managers Web Forms Centralized Database Planning Manager Approve Deny Promote Manage Report Analyze Model Actuals GL OLAP

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Features & Benefits (continued) Feature Benefit Automated Reduces Errors, reduces cycle times Web-based forms Gets away from e-mailing spreadsheets Secure People see only what they need to see Workflow Increases efficiency, reduces cycle times Flexible Able to run multiple what-if scenarios

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Planning Applications – Features & Benefits Feature Benefit Centralized database Single version of the truth (raw data) Calculation Engine Single version of the truth (business rules) Summary-level data Ultra-fast performance, reduces cycle times Easy-to-generate reports Facilitates analysis, reduces cycle times Ability to load actuals Measure and improve enterprise performance

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Does it really work? Yes.

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Texas Children ’ s Hospital Texas Children's Hospital is an internationally recognized full-care pediatric hospital located in the Texas Medical Center in Houston. One of the largest pediatric hospitals in the United States, Texas Children's Hospital is dedicated to providing the finest possible pediatric patient care, education and research. <ul><li>CHALLENGE </li></ul><ul><li>Painfully inefficient (Excel-based) budget process </li></ul><ul><li>Budget cycle sometimes took 6-8 months </li></ul><ul><li>Managers completed Excel worksheets which were batch loaded to PeopleSoft for consolidation </li></ul><ul><li>Consolidated financial statements required 24-48 hours lead-time to produce </li></ul><ul><li>Operating target negotiations would begin after the budget was finalized </li></ul><ul><li>Lengthy and difficult process to make changes and provide updated forecasts </li></ul><ul><li>SOLUTION </li></ul><ul><li>Texas Children’s selected Hyperion for its powerful out-of-the box budgeting and forecasting capabilities, and for its ease of integration with PeopleSoft. </li></ul><ul><li>FEATURES & BENEFITS </li></ul><ul><li>Executive meetings were moved to the start of the budget cycle to set goals and targets </li></ul><ul><li>Operating targets are loaded into Hyperion Planning before the budget season opens </li></ul><ul><li>Drivers and business rules are reinforced by the system </li></ul><ul><li>The system supports 230+ planners both online and offline </li></ul><ul><li>Directors and Executives generate self-service reports on demand </li></ul><ul><li>Now, real-time reporting to the Director level is possible, providing immediate visibility into the numbers </li></ul><ul><li>Actuals loaded directly from PeopleSoft for easy variance reporting </li></ul>

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Wyman Gordon ” Since we implemented our EPM Planning application, we understand our business better and make quicker and smarter decisions. We have one integrated system for budgeting, planning, and forecasting. I can’t believe we ever lived without it.” Steve Tuozzo, Controller <ul><li>Benefits Realized: </li></ul><ul><li>Allows finance to spend more time on analysis by eliminating manual effort for collection and reporting of budget and forecast data </li></ul><ul><li>Managers now have access to more accurate and timely forecast data to make better business decisions </li></ul><ul><li>Reduced errors and increased confidence in the numbers by automating roll-up of forecast/budget data </li></ul><ul><li>Single system of record now provides increased predictability of revenue and expenses </li></ul><ul><li>Improved collaboration by centrally tracking changes, annotations, and comments to plan data </li></ul>

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Continental Airlines <ul><li>Developed EPM Planning application for consolidated Income Statement reporting for Actual, Forecast and Budget </li></ul><ul><li>Managerial and Clerical Budget/Forecast </li></ul><ul><li>Replaced 1000’s of Excel spreadsheets </li></ul><ul><li>Configured to allow multicurrency input </li></ul><ul><li>Accounts dimension –> 6000 Accounts </li></ul><ul><li>Company Dimension –> 6300 Cost Centers </li></ul><ul><li>Over 400+ users submitting their budget/forecast </li></ul><ul><li>Near real-time aggregations utilizing 64-bit servers </li></ul><ul><li>Actuals loaded every 24 hours to base member </li></ul><ul><li>Matching reports created to tie Planning Income Statement to the GL Income Statement </li></ul><ul><li>Rate, Volume, other variance reports created using Financial Reporting and the qualitative analysis added using Annotation Server </li></ul>

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