Adaptive Plannin_Best Practices for Budgeting Forecasting and Reporting - Whitepaper

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Best Practices for Budgeting,

Forecasting and Reporting



TABLE OFCONTENTS

Budgeting as a Competitive Advantage . . . . . . . . . . . . . . . . . . . . . . . . . 1

Broken Processes & Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

The Solution: Best Practices and New Technologies . . . . . . . . . . . . . . . . . . 2

Best Practice #1: Make Planning Part of the Corporate Culture . . . . . . . . . . 2

Best Practice #2: Align the Strategic and Operating Plans . . . . . . . . . . . . . . 3

Best Practice #3: Start at the Top — and the Bottom . . . . . . . . . . . . . . . . . 3

Best Practice #4: Drive Collaboration between Functions . . . . . . . . . . . . . . 4

Best Practice #5: Adapt to Changing Business Conditions . . . . . . . . . . . . . . 4

Best Practice #6: Model Business Drivers . . . . . . . . . . . . . . . . . . . . . . . . 5

Best Practice #7: Manage Content That is Material to the Company . . . . . . . 6

Spreadsheets: Impeding Best Practices . . . . . . . . . . . . . . . . . . . . . . . . . 7

Alternative Technology Can Promote Best Practices . . . . . . . . . . . . . . . . . 8

The Adaptive Planning Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9



BUDGETING AS A COMPETITIVE ADVANTAGE

The corporate budgeting, forecasting, and reporting process presents a formidable

challenge to most companies, regardless of size or industry. Budgeting is often seen

as burdensome and time consuming. Yet budgeting is also a crucial element of financial management, which in turn is a huge contributor to a company’s overall

success or failure. As a result, companies that are able to address budgeting obstacles

and improve their process will not only be rewarded with more accurate budgets,

more timely re-forecasts, and improved decision-making, but will also foster a

disciplined financial management culture that will deliver a true competitive

advantage. Companies can overcome planning challenges and achieve these goals

by applying budgeting and forecasting best practices and leveraging new technologies.

BROKEN PROCESSES & TECHNOLOGY

For most organizations, the annual planning process is broken. First off, the process

takes months to complete. In addition, because line managers see little benefit to the

effort, they are dragged through the process against their will. When finance does

much of the work themselves, managers refuse to buy in and the plan loses

credibility. What’s more, once the agonizing process is finally complete, the budget is

already outdated. Rather than being a useful decision-making tool, the budget is a

disconnected document that has little impact on the company’s business.

Compounding these broken processes are the underlying budgeting technologies,

which in many companies are simply spreadsheets and email. While these

technologies are ubiquitous and well-understood, they simply do not work well for

planning. Nearly everyone has felt the pain of planning’s “spreadsheet hell” — the

broken formulas, bug-ridden macros, manual consolidations, out-of-synch versions,

and related problems which contribute to a lengthy, frustrating, and error-prone process.

Best Practices for Budgeting, Forecasting and Reporting

Across the board, finance

executives…believe they spend

too much time on forecasting,budgeting, and planning. Of these

executives, 73 percent rely

primarily on spreadsheets and

manual processes. When asked

about the most acute problems

with their current planning

process, more than 60 percent

said it “takes too long.” Nearly 43

percent said “not enough time to

analyze data,” and more than a

third cited “lack of ownership by

business units.”

— CFO Research Services



THE SOLUTION: BEST PRACTICES AND NEW TECHNOLOGIES

Leading companies have learned to overcome these challenges and have gained a

competitive advantage by adopting best practices for budgeting, forecasting and

reporting. Furthermore, they know that the right technology can save time, reduceerrors, and promote company-wide collaboration in the planning process.

By combining best practices with technology, companies can:

> Consistently deliver a more timely, accurate, and flexible plan.

> Strengthen the link between strategic objectives and operational and financial plans.

> Improve communication and collaboration among managers.

> Enhance strategic decision-making, enabling leaders to more quickly identify,

analyze, and forecast the impact of changes as they occur within and around

their business.

The result is a company with significantly improved financial management and

stronger, more competitive business management.

This white paper outlines the budgeting, forecasting, and reporting best practices

and related technologies that have been adopted by leading companies.

BEST PRACTICE #1: MAKE PLANNING PART OF THE

CORPORATE CULTURE

First and foremost, it is critical that a company’s culture embraces and rewards

planning. Excellent business management requires excellent financial management,

which in turn requires a company-wide commitment to excellence in budgeting,

forecasting and reporting.

Most companies acknowledge the importance of corporate planning, and claim to be

actively participating in ongoing planning. But in reality senior management may be

engaged in strategic planning, with finance running the budgeting show, and

department managers viewing the annual planning process as an unwelcome chore.

This is not the picture of a company that truly embraces planning.

Instead, companies that desire excellence in planning set achievable strategic

objectives, demand that these goals be met, and reward those who do so. They

require department managers to produce their own plans and tie incentive

compensation to their ability to manage their business and achieve their goals. In

such an environment, finance can provide tools and support to the managers,

functioning as an important ally instead of an obstacle.

Only 37 percent of respondents

said that the technology they use

to support planning, budgeting,

and forecasting processes makes

those processes either faster or

more effective. This means that 63

percent are giving a

thumbs-down to their BPM

systems. One likely reason for this

result is the prevalence of

spreadsheet usage in corporate

budgeting processes.

— APQC survey




BEST PRACTICE #2: ALIGN THE STRATEGIC AND OPERATING PLANS

Within the “excellent financial management equals excellent business management”

culture, the next step is to ensure the ongoing alignment of the strategic and

operating plans.

Because of their responsibility to engage department managers in the planning

process, finance has the unique opportunity to help clearly communicate the

corporate strategic plan to the individuals who run the business. Finance can help

translate strategic goals into specific departmental plans and related expense drivers,

such as headcount and equipment.

By translating their strategic goals into operational plans, and by tracking and

measuring performance against plan, leading companies are able to make

meaningful progress in achieving their objectives.

BEST PRACTICE #3: START AT THE TOP — AND THE BOTTOM

An important ingredient in successful budgeting and forecasting lies in a company’s

ability to plan from the bottom-up and to meet top-down strategic objectives.

Some companies establish top-down targets and then turn the annual budget

process over to finance, with a mandate to meet the numbers. Other companies

require detailed bottom-up planning, and then “plug” the total company numbers at

the top so that the plan meets strategic targets. Neither of these approaches reflects

a commitment to planning excellence.

Instead, leading companies provide initial guidance from senior management — a

top-down perspective on strategic goals, objectives, and expectations. Next,

department managers build a plan from the bottom-up, showing how they intend to

meet those goals. This process will often require frequent iterations for the top-down

and bottom-up approaches to meet.

The result is a plan that:

> Is supported by department managers, because they helped create it and will be

rewarded for meeting it.

> Is supported by senior management, because the operational goals are aligned

with the strategic goals.

> Is supported by finance, because they added value to a productive, collaborative

effort, rather than demanding participation in an exercise with little added value.

Today, the pace of business

change can be rapid, and thus a

sluggish planning and budgeting

process can be a competitive

disadvantage. …Companies that

can replan and rebudget more

nimbly are better able to keep

costs in line in difficult economic

times, and then are in a better

position themselves to take

advantage of a recovery.

— Business Performance

Management Magazine




BEST PRACTICE #4: DRIVE COLLABORATION BETWEEN FUNCTIONS

Not only should strategic and operating plans be aligned, but plans between

functional areas should also dovetail. Best practices include direct involvement from

line-of-business managers and a collaborative approach to budgeting and forecasting.

In addition to understanding strategic goals, department managers also need to

know what other functions are planning. For example, in a company that is planning

a new product rollout, manufacturing needs to ramp up production, marketing

needs to produce new collateral, and sales needs to add new headcount. But the

marketing plan should also include programs timed to support the new sales reps.

The facilities department needs to plan for new headcount, equipment, and product

storage. And so forth.

This collaborative planning can be accomplished through an iterative process that

provides managers with the opportunity to forecast and share different scenarioswith each other. Finance can play a key role in facilitating the coordination of plans

across the company.

BEST PRACTICE #5: ADAPT TO CHANGING BUSINESS CONDITIONS

The preceding best practices establish a foundation for making better business

decisions. The next important steps are evaluating actual progress against budget

and re-forecasting in response to changing business conditions.

All businesses, particularly those in flux, are better served by a planning process that

can quickly adapt to change in the company or in the market. The key elements of

such a process are:

Frequent Re-forecasting: Especially in fast-moving, quickly growing businesses with

multiple market pressures, forecasting may be needed on a monthly or even

biweekly basis. Ongoing re-forecasting will help managers to continually answer

critical questions such as “What did we expect?”, “How are we doing against our

plan?”, and even more importantly, “How should we adapt our plans as a result?”

Rolling Forecasts: A company engaged in ongoing rolling forecasts is always looking

forward to the immediate or near-term future. The forecast timeframe should extend

out two to eight quarters, depending on the volatility of the business.

Planning should be an ongoing process with frequent opportunities for managers to

view the latest internal and external data on how the company is doing. They should

be able to make alterations to their plans based on new information, which can come

Our study found that companies

that believe their budgets are

very accurate attribute this to

better collaboration more thanany other factor.


Management Magazine


In addition to the qualitative

benefits that… companies

achieve through improved

planning outcomes, those that

use rolling forecasting save a

median of 25 days on their annual

budgeting cycle.

— APQC survey



from many sources, including other managers, monthly actual data, and revisions to

top-down targets. Finance should be able to quickly consolidate plan data from all

areas of the company, and to disseminate new information in real time. This processwill facilitate more informed decision-making in areas such as pricing changes,

product line changes, capital allocations, organizational changes, and the like.

BEST PRACTICE #6: MODEL BUSINESS DRIVERS

An important feature of a first-rate budget or forecast is that it is based on a model

with formulas that are tied to fundamental business drivers. Simply importing and

manipulating past actuals does not reflect the underlying cause and effect

relationships in a business. Building modeling into plans provides a way to ensure

appropriate consistency across functions. It also provides a way to promote planning

coordination between functions. For example, future sales forecasts can be tied to themarketing expenditure needed to generate the necessary number of leads.

Finance can provide managers with a useful model that includes information about

past actuals and current headcount, as well as formulas that are driven by

assumptions. This does not violate the best practice of requiring department

managers to be responsible for creating their own budgets. Instead, it saves them

time by providing a solid framework to flesh out — a starting point that contains

important information about their organizations’ relationships to other functions. It

also harmonizes with the best practice of collaboration across functions.


Significant, unforecastable

changes to the environment…can

happen anytime. Any company

can respond to events

haphazardly, but those that have

the right planning processes in

place can respond faster and in a

more coordinated fashion.


Management Magazine



BEST PRACTICE #7: MANAGE CONTENT THAT IS MATERIAL TO

THE COMPANY

A focus on material content in budgeting will free managers from unnecessary detail,

enabling them to produce better plans. While supporting detail can provide audittrail and insight into managers’ thinking, more detail does not necessarily make for a

better plan.

According to a Hackett Group study of planning best practices, the fewer the number

of line items, the better the planning practices. Hackett found that world-class

companies average 15 to 40 line items in their budgets, compared to highly

inefficient companies that averaged 2,000 line items.

Managing material content means that a company pays attention to whatever has a real

and significant impact on expenses, revenues, capital or cash flow. This company will:

> Avoid false precision. A complex model might not have any more precision than a

simpler model. More detail and intricate calculations can lure managers into the

trap of thinking their plan is therefore more accurate.

> Monitor volatile — not stable — accounts. Efforts are best spent on fluid expenses

such as headcount and compensation.

> Aggregate accounts. The budget does not need to reflect the same level of detail

as that in the general ledger. Even if the GL has 15 different travel accounts,

managers can often plan in one.

BEST PRACTICE #8: BE TIMELY AND ACCURATE

The final best practice is to ensure that the planning process is timely and accurate.

Many companies have an inefficient and inflexible planning process, at the center of

which is the annual budget. These companies’ time-consuming distribution and

consolidation processes practically guarantee that the plan data is irrelevant before it

is even shared. And plans based on stale data and assumptions are of no value.

According to the Hackett Group, the average annual planning and budgeting process

is three to five months long. A plan that takes this long to prepare is out of date by

the time it is completed. The Hackett Group reports that world-class organizations, on

the other hand, spend less than two months preparing the annual plan.

World-class organizations have been able to shorten their planning cycles by

implementing the best practices described here. They have also leveraged technology

so that they can manage budget consolidation and aggregations in real time.


In a typical planning environment,

more than half of all time is spent

gathering and re-keying data,

which leaves little time for

analysis. The average company

spends only 16% of their time in

the value added activities of

explaining the “why,” and

exploring the “what if.”

— Hackett Group

…decreased cycle times in

planning, budgeting, and

forecasting processes lead to

better business

outcomes…Assumptions about

the business environment or

market behavior made 90 days

before a budget is completed are

much more likely to be incorrect

than assumptions made only 30

days in advance.

— APQC survey



Technology can especially help improve timeliness and accuracy in the area of

consolidations. Real-time consolidation removes the necessity to manually process

results, leading to a smoother, more consistent, and more accurate planning process.Variance reports delivered within two to four days from the period close allow

managers to immediately evaluate their performance against plan, and then

effectively adjust their businesses as a result.

At an operational level, this type of planning will be less costly and will produce more

accurate results than the processes followed by most companies today. At a strategic

level, a company’s ability to make timely and sound financial plans will allow it to

provide more credible guidance to stakeholders, and to make better, more informed

and faster business decisions.

SPREADSHEETS: IMPEDING BEST PRACTICES

In addition to adopting budgeting, forecasting and reporting best practices, leading

companies have also made changes to the technologies used to support the process.

Spreadsheets are still the predominant corporate planning tool. In a CFO Magazine

research study, 73 percent of finance executives said they use spreadsheets and

manual processes for forecasting, budgeting, and planning. Not surprisingly, more

than 60 percent of these executives said that the process takes too long. Most would

agree it is also riddled with errors.

While spreadsheets are good personal productivity tools, they are not collaborativeplanning applications. Spreadsheets are fundamentally unsuited for a complex,

dynamic, shared financial planning process for several reasons, including:

> Data distribution and consolidation is time-consuming, rendering frequent

re-forecasting unfeasible.

> Spreadsheets are incapable of supporting the kind of iterative planning needed in

a changing business environment.

> There is little or no security or audit trail.

> Plan accuracy is always in question, since:

o Most data is editable, despite password protection

o Links are easily broken

o Formulas can be changed, both intentionally and inadvertently

o Version control is nearly impossible

o Consolidation is manual.


…heavy spreadsheet usage

substantially increases the

budgeting and planning cycle time.

Those who use spreadsheets

extensively take a median of 30

more days to complete their annual

budget than do the people who

rely less on Excel.

— APQC survey

The spreadsheet’s defects are

behind the difficulties

organizations have with the

[budgeting and planning] process.

We therefore advise organizations

to eliminate spreadsheets if they

want to budget and plan more

effectively.


Management Magazine



These inherent weaknesses undermine the accuracy of the entire planning process.

This erodes line managers’ confidence in the process, and reduces their level of

engagement. Finance is viewed as pushing a bad product, and the plan loses

credibility. Spreadsheets are clearly not the best way to manage a top-notch

budgeting and forecasting process.

ALTERNATIVE TECHNOLOGY CAN PROMOTE BEST PRACTICES

Leading companies have recognized that spreadsheet-based planning impedes their

implementation of these budgeting and forecasting best practices. They have moved

to a purpose-built application with lean infrastructure requirements. This type of

planning software enables them to accurately plan and re-plan quickly, using the

same or fewer resources than they formerly devoted to the process.

Streamlining the planning process demands technological tools capable of

supporting a faster, more flexible, and adaptive approach to planning. By using an

on-demand, dedicated budgeting and planning application that is delivered over the

web, organizations are able to implement the best practices outlined in this paper.

With such software, the planning process can be:

> Integrated: Strategic, operating and financial plans reside in one system. Managers

do not need to keep their own planning systems on the side.

> Collaborative: Web-based, distributed planning enables anytime, anywhere

participation. The ability to use a secure web connection allows everyone to access

the budget information at anytime from anywhere there is Internet connectivity.

> Adaptive: Simplified version control and the ability to frequently reforecast allow

companies to respond to business changes with “what if” scenarios as often as

necessary.

> Timely: Information is always current because departmental users contribute

directly to a central planning database. Deadlines are more easily met because

consolidations and rollups are done automatically.

> Efficient: Finance managers and department managers spend less time managing

data, and more time managing the business.

> Relevant: Customized views for managers increase adoption and ownership.Formula capabilities enable modeling business drivers.

> Accurate: Plans contain fewer errors, since broken links, stale data, improper

rollups, and missing components have been eliminated.


On-demand [dedicated budgeting

and planning] solutions need

minimal IT resources, are quick to

implement, and can have a low

total cost of ownership. They enable

corporations to focus IT assets and

staff on their core business activities

and outsource everything else.

— Ventana Research



THE ADAPTIVE PLANNING SOLUTION

Adaptive Planning is the leading provider of on-demand, web-based budgeting,

forecasting, reporting and analytical applications. The company helps corporations

conquer budgeting inefficiencies and gain greater visibility into their own financialand business performance by:

> Providing affordable, full-featured modeling software that automates the ongoing

cycle of budgeting, forecasting and reporting, so that managers can quickly and

easily formulate coordinated plans.

> Enabling companies to use timely and accurate information to analyze and

respond in real time to changes in their business environments.

> Reducing the requirement for corporate IT, with a hosted, web-based software

solution that is instantly available and requires no new IT infrastructure or resources.

For more information on Adaptive Planning, call 650-528-7520 or

visit www.adaptiveplanning.com.

opyright © 2005, Adaptive Planning

00 W. El Camino Real, Suite 260ountain View, CA 94040650 528 7500 ■ F 650 528 7501ww.adaptiveplanning.com




Spreadsheets: An Inadequate Solution for

Budgeting, Forecasting and Reporting



TABLE OFCONTENTS

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

What’s Wrong with Spreadsheets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Data distribution and consolidation is time-consuming and error-prone . . . . . . 2

Analyzing complex business trends is difficult and results are latent . . . . . . . . . 3

Ensuring compliance is impossible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

With spreadsheets, there is never just one set of facts . . . . . . . . . . . . . . . . . . 4

Re-forecasting is infrequent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

The Spreadsheet Alternative: What to Look for in a Budgeting,

Forecasting, and Reporting Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The Adaptive Planning Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Making the Switch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9



EXECUTIVE SUMMARY

For years, large companies have reaped the benefits of purpose-built budgeting,

forecasting and reporting applications. Unfortunately, because such applications are

costly and complex to implement, deploy and maintain, mid-sized organizations havenot been able to reap the same benefits.

Instead, these organizations have conducted the budgeting and forecasting

process through a readily-available, inexpensive and easy-to-use application —

the spreadsheet.

While spreadsheets are good desktop personal productivity tools, they are not

collaborative planning applications. As the planning process extends beyond a single

user, spreadsheets fail to support a complex planning process. They were never

designed for multiple users. They were not intended to be the foundation of a

dynamic, shared function like financial planning. And they certainly weren’t designedto provide the security required for financial information.

All companies — large and small — have complex financial planning processes.

Mid-market organizations should not settle for the limited functionality of simple

spreadsheets when their financial planning process involves multiple people,

requires real-time access to data and demands comprehensive security.

The good news is that there are excellent alternatives available today. Finance managers

should look for a purpose built application, such as Adaptive Planning, that is:

> Easy to use

> Requires no IT resources for implementation or maintenance

> Consolidates budgets in real time, automatically

> Enables powerful driver-based modeling and scenario analysis

> Facilitates compliance with regulatory requirements

> Creates a single data repository for all financial plans, forecasts, and reports

> Scales and expands to the needs of the business

> Affordable

Spreadsheets: An Inadequate Solution for Budgeting, Forecasting and Reporting



WHAT’SWRONG WITH SPREADSHEETS?

Spreadsheets are fine for what they were designed to do — provide individual users

with a robust tool for data analysis. But many financial professionals still choose to

use spreadsheets as the foundation for their company’s budgeting and planningprocess simply because they are inexpensive and familiar.

Using a spreadsheet as the backbone of the planning process is complex,

time-consuming and error-prone, focusing the majority of the effort around low

value data management and not on high value business analysis and evaluation.

And, as organizations grow to incorporate budgeting and forecasting best practices,

spreadsheets become untenable.

There are many shortcomings of using spreadsheets for the budgeting process. Five

primary shortcomings include:

1. Data distribution and consolidation is time-consuming and error-prone.

Distributing and consolidating the data needed during the budgeting and

forecasting process is difficult, involving multiple steps, each with its own

opportunity to introduce errors:

> First, the finance manager puts together a master budget spreadsheet.

> Next, the finance manager manually segments the master budget spreadsheet

into pieces by department, creating multiple smaller spreadsheets for each

department manager to view and update. For some organizations, this can mean

tens or even hundreds of spreadsheets that must be manually distributed. Links

between spreadsheets are easily broken in this process resulting in missed

information, inaccurate numbers and wasted time correcting the links.

> Third, the finance manager must email the spreadsheet segments to each

department manager. As is often the case in a manual process, departments can

be missed or a spreadsheet can be mistakenly sent to the wrong department,

leading to security breaches, regulatory non-compliance, and time wasted

resending the right files.

> Next, the finance manager must manually follow up with each department

manager to collect the spreadsheets. Inevitably, not all the spreadsheets will be

returned on time or the data will be incomplete.

> Finally, the finance manager must consolidate each of the spreadsheets back into

the master spreadsheet, spending a significant amount of time ensuring that

departmental finance managers use the latest version of the spreadsheets, enter

the right data at the right level of detail, and do not break formulas or otherwise

alter the spreadsheets.


Across the board, finance

executives at midsize companies

believe they spend too much timeon forecasting, budgeting, and

planning. Of these executives, 73

percent rely primarily on

spreadsheets and manual

processes. When asked about the

most acute problems with their

current planning process, more

than 60 percent said it “takes too

long.” Nearly 43 percent said “not

enough time to analyze data,” and

more than a third cited “lack of

ownership by business units.”

— CFO Research Services

Companies that rely heavily on

spreadsheets typically take 30

days longer to complete their

budgets than those that don't.

— APQC benchmarking survey



This process not only diverts valuable time that should be spent on higher value

analysis of the budget and the business, it adds a great deal of risk. And it reduces

financial professionals to data entry clerks.

In addition, there is the likelihood that the data is old before it has even been shared.

It’s not real-time, and therefore, impossible to trust with real certainty.

2. Analyzing complex business trends is difficult and results are latent.

Budgeting and forecasting is not just about collecting data, it is also about

understanding how the business is running and being prepared for change. When

businesses are in flux — due to growth, cutbacks, new product introduction,

acquisition or divestiture — conducting careful scenario analysis becomes critical.But using spreadsheets for such complex analysis quickly escalates from difficult

to intractable.

Changes in the business mean changes to the structure of the model. This can mean

creating new sheets, updating formulas within all financial statements, modifying

reports, and so on. Each structural change takes time and risks introducing errors into

the model. And if the change requires input from department managers, it can take

days, or even weeks, to develop the new model structure, collect the relevant data,

and then analyze it once it has been collected. Such delays make it difficult for

businesses to react quickly to changes or to take advantage of business opportunities.

The finance department should be empowered to use the financial model to plan for

and react to changes in the company or marketplace. They need to quickly make

structural changes to their model. They need access to real-time data so they can

quickly act upon trusted, accurate information. Because the spreadsheet-based

budgeting and planning process is so time consuming and exhausting, finance

managers miss the real information in their efforts to manage the data. The simply

can’t see the forest from the trees.

3. Ensuring compliance is impossible.

In the post-Sarbanes-Oxley world, companies of all sizes are facing strict

requirements for transparency and data security. Public companies must ensure

that they have strong controls around financial processes. And even private

companies are under increased scrutiny from lenders, auditors and investors. A

meticulous budgeting and forecasting process is central to the good governance

of every company.


More than half (54%) of

companies would like to

re-forecast monthly or more, and

48% have the need to re-forecast

on demand to react to changes in

their business.

— Business Finance Magazine

In a typical planning environment,

more than half of all time is spent

gathering and re-keying data,

which leaves little time for

analysis. The average company

spends only 16% of their time in

the value added activities of

explaining the “why,” and

exploring the “what if.”

— Hackett Bench-Marking



Spreadsheet tools were simply not designed for rigorous financial controls. The

limited retrofitting that has been done — such as adding passwords to spreadsheets

or attempting to limit which portions of a spreadsheet are editable — are the worstkind of half-measure. They do not accurately address compliance issues, but rather

make the entire process more cumbersome and difficult for everyone involved.

With spreadsheets, organizations face numerous compliance-related risks, including:

> Data security — Because there is little to no security inherent in a spreadsheet

model, they make it virtually impossible to ensure that the data has not been

tampered with, viewed by unauthorized individuals within the company — or

worse — forwarded to others outside the company.

> Data inconsistency — Multiple versions of spreadsheets floating around in email

make it difficult to ensure that analyses are performed on the most up to datefinancial plan or forecast.

> Audit trails — Spreadsheets lack audit trail capabilities that allow financial

managers to see who made changes and when.

4. With spreadsheets, there is never just one set of facts.

Getting everyone in the organization “on the same page” is not just a good idea; it is a

financial best practice. Operating with critical information scattered around the

organization in spreadsheets is a virtual guarantee that at least some key members of

the management team will be working from old, out-of-date numbers.

Does everyone have the latest headcount forecast? Are they hiring to the current

targets? Ordering the correct amounts of raw materials? Planning to support the

agreed to number of sales representatives?

Looking at a budget spreadsheet in an email inbox, or on a hard drive, does not allow

a departmental finance manager to tell whether a spreadsheet is the latest and

greatest — or the one from last week. It is only a matter of time before someone

generates a plan based on the wrong set of numbers. And only a matter of time

before the impact of that mistake is material.


In a survey of 168 finance

executives, 33 percent of

respondents with revenue under

$100 million say that “spreadsheet

hell” is a fair description of what

goes on in their departments. That

figure jumps to 59 percent for

larger companies.

— CFO IT

30 to 90 percent of all

spreadsheets suffer from at least

one major user error. The range in

error rates depends on the

complexity of the spreadsheet

being tested. In addition, none of

the tests included spreadsheets

with more than 200 line items

where the probability of error

approaches 100 percent.

— The Journal of

Property Management



5. Re-forecasting is infrequent.

Annual budgets are no longer enough. In today’s competitive, dynamic market,rolling forecasts — revised monthly, quarterly or at least semi-annually — are key

not only to understanding the company’s current financial situation, but also its

future. The market, competitors and economy change constantly. Companies must

have a plan to anticipate these changes, which are an undeniable part of the

budgeting process.

But clearly the process with spreadsheets is just too time consuming. Finance

must be able to quickly reforecast and engage department managers in that

process. Surveys consistently show that financial managers would like to reforecast

more frequently but fail to due to the time and effort associated with a

spreadsheet-based process.

It’s clear that spreadsheets — a 30-year-old technology — are not up to the task of

budgeting in today’s dynamic companies. Large companies have known this for years

and have standardized on a number of enterprise solutions — Hyperion, Cognos, and

Cartesis to name a few. But the lengthy implementation times, high costs and large

staffs required by these solutions make them ill-suited to mid-sized companies.

What alternatives do these organizations have?


Despite its ubiquitous nature and

popularity as a planning and

budgeting tool, spreadsheetsoftware alone has proven to be

poorly suited for enterprise

planning processes.

— Forrester Research



THE SPREADSHEET ALTERNATIVE: WHAT TO LOOK FOR IN A BUDGETING, FORECASTING, AND REPORTING SOLUTION

While it is clear that spreadsheets are not the right way to manage the budgeting and

forecasting process, there is a confusing array of new purpose-built solutionstargeted at the mid-sized company.

These organizations should evaluate several criteria in their efforts to replace

spreadsheets and select an application that best fits their needs. These criteria include:

1. Easy to use

2. Requires no IT resources for implementation or maintenance

3. Consolidates budgets in real time, automatically

4. Enables powerful driver-based modeling and scenario analysis

5. Facilitates compliance with regulatory requirements

6. Creates a single version of all financial plans, forecasts, and reports

7. Scales and expands to the needs of the business




THE ADAPTIVE PLANNING SOLUTION

By eliminating spreadsheets for budgeting and planning, organizations can simplify

and streamline this complex and error-prone process, while ensuring quality and

accuracy — improving efficiency and meeting today’s stringent compliancerequirements for financial information.

Adaptive Planning delivers an easy and intuitive system that brings the power of

large-scale enterprise financial planning systems to mid-market organizations. Unlike

other mid-market solutions, Adaptive Planning requires no installation because it is a

hosted solution — making it fast and easy to migrate from spreadsheet-based

planning. And it’s easy to use — eliminating the need for extensive training and

ensuring adoption.

Reasons to choose Adaptive Planning include:

1. Adaptive Planning is easy to use

Working in Adaptive Planning feels like a familiar spreadsheet. Department

managers provide information in a grid view that looks and feels just like a

spreadsheet, so there’s nothing new to learn. And, since Adaptive Planning is a true

web-native budgeting, forecasting and reporting system, it ’s as easy to navigate as

the web.

With customized secure access, each user can see only what they’re responsible for.

There’s no learning how to navigate to the right place, and users can’t make a

mistake and fill out the wrong information.

2. Adaptive Planning requires no IT resources.

Some organizations have a large IT staff. They have a culture of implementing,

customizing and configuring software and doing all of the required maintenance

and systems work. But most mid-sized companies don’t have this luxury.

Adaptive Planning is so easy, there is literally nothing to install. All budgeting,

forecasting, analysis and reporting tools are immediately available through a

standard browser. Updates to the software are handled by our staff, not yours, so

you are always up to date with the latest software release. And our world-class

hosting facilities ensure that your data is secure and constantly backed up

3. Adaptive Planning consolidates budgets in real-time.

Spreadsheets are never up to date until the master budget spreadsheet is created

— which is a manual and extremely time-consuming task. Things aren’t much

better with a lot of budgeting and forecasting software packages — finance

managers still typically end up with numerous budgets that must then be rolled

up and reconciled to a single version.




With Adaptive Planning, departmental users contribute their input to the central

budget. There aren’t separate spreadsheets and subsets of data scattered around.

And there’s no “button” to push to consolidate — the system does it automaticallyand continuously.

4. Adaptive Planning provides powerful, scenario-based analysis.

Growing businesses — those that are introducing new products, expanding

geographically and through acquisitions, and being driven to change by

competitors — need to be able to design business financial models based on key

drivers and create scenario analyses on a moment’s notice.

Adaptive Planning gives mid-sized companies the most powerful scenario

planning tools available, with the ability to create and modify scenarios

dynamically, quickly compare scenarios against each other, and lock scenarios andcreate baselines for later reference and variance reporting.

5. Adaptive Planning ensures compliance.

Adaptive Planning was built with compliance in mind. Adaptive Planning

inherently protects companies against the issues that spreadsheets can often

complicate, like data security, version control and audit trails.

In addition, Adaptive Planning provides a critical compliance capability that simply

doesn’t exist with spreadsheets — the ability to drill down into specific numbers to

find the root data and ensure its accuracy.

6. Adaptive Planning delivers a single version of the truth.

A centralized, database-driven system inherently eliminates the need for multiple

versions and confusing data. With Adaptive Planning, everyone across the

company — from department level managers to the executives — always have

instant access to the most current information. They will never need to verify

numbers or compare versions, and most importantly, they will never plan and

execute based on inaccurate information, an outdated strategy or a rejected budget.

7. Adaptive Planning is expandable and scalable

Businesses change rapidly, and the budgeting, forecasting, analysis and reporting

solution must be able to keep up. Adaptive Planning protects organizations fromchange. Model structures are managed centrally, making it easy to react to changes

in the business or the underlying assumptions. Departments can be added on the fly

and users can be added as the organization grows, all within an easy to use

administration interface.




MAKING THE SWITCH

Large companies will likely find their best solution in the big, enterprise class

packages available for planning, budgeting, forecasting and reporting. Tiny

companies will be best served by a spreadsheet-driven process. But companies in themiddle can’t afford the cost and complexity of the heavy enterprise software

packages, and they need capabilities that go far beyond spreadsheets.

For mid-size companies, the fastest to implement, easiest to use and most cost

effective approach is to use a hosted solution like Adaptive Planning. Adaptive

Planning delivers the powerful financial planning and analysis capabilities that

mid-sized organizations need — affordably and with zero IT impact.

Make the switch to Adaptive Planning. Visit www.adaptiveplanning.comfor

more information.

00 W. El Camino Real, Suite 260ountain View, CA 94040650 528 7500 ■ F 650 528 7501ww.adaptiveplanning.com

Documents

Adaptive Plannin_Best Practices for Budgeting Forecasting and Reporting - Whitepaper