Report Highlights Planning, Budgeting and Forecasting

Earlier this year, I wrote on the importance of planning, budgeting and forecasting to cope with unforeseen events, such as a rapid deterioration in economic conditions.

Aberdeen Group has issued a report on this topic, "Financial Planning, Budgeting and Forecasting: Managing in Uncertain Times," which is available as a free download from our site.

The results are revealing. Best-in-class companies, the overall top 20 percent of the companies measured, closed their books faster, more accurately and showed more improvement in profitability. Here are 5 compelling facts about best-in-class companies:

• Produced 317% improved profitability through better planning, budgeting, and forecasting
• Are 36% more likely to reforecast as market conditions change
• Are more likely to apply "what-if" scenarios during the reforecast process to create higher budget accuracy
• 80% more likely to drill-down to successive levels of detail from summaries
• Reduced their budgeting cycle times by 24% year-over-year

What’s a common thread for Best-in-Class companies? 100% percent of those measured by Aberdeen invested in applications to assist in the planning process.

If you’re not best-in-class, take a look at this report and see how you can emulate the strategies of leaders in financial planning, budgeting and forecasting. And if you’re already there, the report has recommended actions on how you can get even better results.

Posted by Christina McKeon, Director of Product Marketing, Performance Management

Three Things You Need to Know About XBRL

Spring is not too far away, and with the change of seasons comes a change in the financial reporting requirements. XBRL (eXtensible Business Reporting Language) mandates go into effect April 13, when the SEC will require the 500 largest public companies to file XBRL-tagged versions of their financial results. By 2011, all public companies will be filing with XBRL.

If you’re a financial professional facing XBRL compliance, here are three things you need to know.

1. It’s here—After years of hearing about XBRL being the next great thing, you can’t wish it away anymore or hope a new administration might change prior decisions. If you don’t have a transition plan in place and face an XBRL mandate between 2009 and 2011, you need to tackle this requirement now. But don’t panic if you think that your company is behind on making XBRL plans (See #3 below).  In the first year of filing, public companies will file using XBRL for their three primary financial statements and footnotes—all of which can be presented as a block of text. After the first year, data must be filed in a more detailed format, tagging the detailed quantitative disclosures within the footnotes and schedules.


2. Automated financial consolidation is critical—Trying to tag your financial data coming out of a manual consolidation process will be a nightmare. If you are not using a dedicated application to close your books, get one now. It will pay for itself in the time, money, and frustration you’ll save by not having to manually tag data in individual files. If purchasing financial consolidation software is not in the budget, work it into the budget as soon as you can. While you may be able to get through the first year’s filings, you will absolutely need an automated consolidation process before you attempt to tag financial data in the footnotes of your financial statements in subsequent years.


3. There’s no reason to panic—Take a few deep breaths. As I mentioned above, there is a phased approach to the XBRL requirements. It makes sense, too, for you to approach your XBRL initiatives in phases. Remember that the SEC has been running a voluntary program with filers and learned many lessons along the way. You too will learn lessons along the way, and that’s why it is important to take incremental steps that allow for some adjustments. Your first phase will likely involve tagging your financial data after the books have been closed.  Subsequent phases can address tagging the data earlier on in the close process. Ultimately, you have to do what is most efficient for your company.

XBRL is imminent. So, if you haven’t already taken steps, it’s definitely time to start moving in that direction. Start by taking stock of your existing consolidation process, and then tackle your XBRL initiative in phases so you can learn and adjust as you go. This will give you the best results with the least amount of disruption.

Posted by Christina McKeon, Director of Product Marketing, Performance Management

Performance Management: A Cure for the “Should’ve, Could’ve, Would’ve” Syndrome

There’s a bug on the loose and it’s spreading through conference rooms around the world. It’s called “Should’ve, Could’ve, Would’ve Syndrome.” Its symptoms go like this—glazed eyes from staring at spreadsheets and all your formulas are out of whack from a quick change in the business weather.

You sit in front of a group of fellow executives, slack jawed, and begin to utter things like, “We could’ve anticipated this change to profitability, if only our spreadsheets took into account a global slowdown. We would’ve planned the budgets differently if we thought this might happen.”

As many companies try to adapt their business to the current economy, weekly meetings are probably full of “should’ve, could’ve, would’ve” comments like these. How do you get past what wasn’t done and move on to doing something that turns into informed decisions that get the best results given your constraints?

The first step is moving past the practice of managing the business through spreadsheets. It may seem like the easiest thing in the world to get a data dump and start “running the numbers.” The problem with this approach is that it leads to your version of the truth, not the company’s version of the truth.

A dedicated performance management application that automates and manages all of your key business processes for strategy, planning, budgeting, forecasting, and consolidation is the cure. This is a single version of the truth. It tracks past performance and future plans so you can adjust your strategy when business conditions change—such as the economy tanking. 

Let’s take a quick look at how a planning solution can help you mitigate the risks associated with an economic downturn. This planning environment lets you create models for your business. Basically, you are designing “what-if” scenarios that let you simulate outcomes so you can see the financial results of a business decision before you execute. 

How much will your company have to cut its operating expenses to meet an operating margin target? With a planning system, you can lock down expenses or time periods that cannot change and then spread the cuts across different operating units. You automatically have answers to how operating expenses need to be adjusted across multiple levels of the organization, and these answers feed directly into your financial and management reports.

Once you determine what cuts need to be made and where they need to be made, it’s time to cut budgets. If you have already tried to cut budgets across 87 different spreadsheets, then you know what pain is. With a budgeting solution that is tied to your planning solution, you can link budgets across the organization so that your sales budget flows into an inventory budget and then into an operations budget. Your amended budget is integrated to your key financial and management reports so those reports are updated as the budgets are adjusted.

Don’t worry, you aren’t alone. The “Should’ve, Could’ve, Would’ve Syndrome” is an equal opportunity illness affecting spreadsheet abusers everywhere. Performance management is a cure that helps make future planning, budgeting, and consolidations more efficient and much less painful.

Posted by Christina McKeon, Director of Product Marketing, Performance Management