Financial Planning Best Practices - Senturus · 9/15/2011 · • Don’t: Close the month without line management input, nor blind-side them with untimely variances . . . • Do:

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Helping Companies Learn From the Past, Manage the Present and Shape the Future

09/15/2011

www.senturus.com

Financial Planning Best Practices

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Agenda

• Introductions

• TM1 Demo

• 12 Elements of Financial Planning Best Practices

• Q & A

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Welcome and Introduction

• Senturus– Greg Herrera, Co-Founder, CEO

– Steve Chapman, Management Consultant

– Chris Fargo, Office of Finance Account Manager

• IBM Cognos– Michael Mackevicius, Technical

Manager

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Who is Senturus ?

• Consulting firm specializing in Corporate Performance Management

– Business Intelligence and Enterprise Planning & Budgeting

– Platform-independent

– San Francisco Business Times Hall of Fame --Four consecutive years in Fast 100 list of fastest-growing private companies in the Bay Area

• Experience

– 11-year focus on performance management

– More than 1,000 projects for 450+ clients

• People

– Business depth combined with technical expertise. Former CFOs, CIOs, Controllers, Directors...

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A few of our 450+ Clients

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The Best Financial Performers: “Value Integrators”

Source: IBM Institute for Business Value, The Global CFO Study 2010

23%

12%

32%

33%

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Their Financial Results

Efficiency + Business Insight Contributes to Outperformance


Value Integrators also have an almost20% better operating efficiency ratio than

all other companies examined.

11.3%

14.0%

12.1%

0.5%

9.4% 9.3%

> 20x more

49%more

30%more

EBITDA5-year CAGR, 2004-2008

Revenue5-year CAGR, 2004-2008

ROIC5-year average, 2004-2008

Value Integrators

All other enterprises

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What do Value Integrators do differently?

Streamlined information delivery

Value Integrators

Percent Adopted

100%80%60%20% 40%

Constrained Advisors

Disciplined Operators

Electronic data capture at the source

Systematic data cleansing and auditing

Business Risks in Performance Reporting

Employed Functional Best Practices

Utilized automated workflow tools

Measurement & monitoring of processes

Common reporting platform

Common planning platform

% More32%

35%

31%

22%

31%

25%

41%

31%

22%

0%

Data and Analytics

Process

Technology


Scorekeepers

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IBM COGNOS TM1 DEMONSTRATION

Foundation for improved performance

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12 ELEMENTS OF FINANCIAL PLANNING BEST PRACTICES

Based on experience across hundreds of clients

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1. Use one planning process for periodic, rolling plans / forecasts

• Don’t: Use one, long annual “budgeting” process; and a different, infrequent (or no) reforecasting process . . .

• Do: Use one, efficient rolling reforecast process

• BENEFITS:– One process for managers to learn (and remember)

– An efficient planning process should complete in a few days at most

– More accurate projections due to frequent reviews and updates

– Continual management actions are based on better trend information and accurate, timely actual-to-plan variances

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1. Planning for Employees

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1. Planning for Cap Ex

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1. Planning for Expense Line Items

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1. Expense Summary

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2. Provide bottoms-up and top-down

planning capabilities in the same model

• Don’t: Limit planning managers to only a bottoms-up planning model . . .

• Do: Provide top-down change and adjustment capability

• BENEFITS:

– Goal and target setting can be done very efficiently at the company, division, department or account levels using “spread” or “breakback” techniques

– Only forecast (non-actual) months and open (“unheld”) accounts are adjusted to achieve the target amount

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2. Top-down planning / forecasting example

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3. Maintain central control over drivers,

assumptions, parameters, and versions

• Don’t: Assume that distributed Excel workbooks will use the correct drivers . . .

• Do: Use drivers wherever possible and secure drivers, conversion factors, and versions centrally

• BENEFITS:

– All planning managers, executives and reports will refer to the “live” scenario / version

– No confusion about what version is active

– Up-to-date global and department drivers / assumptions

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3. Planning drivers example

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3. Planning drivers example

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4. Integrate planning solution security with

company security systems

• Don’t: Assume that data in the distributed Excel workbooks will be secure . . .

• Do: Use company Active Directory and LDAP to integrate security, preferably with single sign-on

• BENEFITS:

– Secure company confidential data

– Minimize redundant maintenance of security files

– Aid end user solution adoption by eliminating separate sign-on’sfor transaction vs. planning vs. reporting systems

(Note: Combined, comprehensive web portals are even better!)

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4. Integrated security example

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5. Use a centralized planning data base for

consolidation and workflow management

• Don’t: Waste time manually tracking distributed Excel

workbooks and manually consolidating them . . .

• Do: Manage plan submittals and their reviews with real-time status and consolidate results with no latency

(CFO study corollary: “automated workflow tools”)

• BENEFITS:

– Better accountability and adherence to planning timetables

– Frequent and accurate roll-ups and reports on evolving plans and forecasts leads to early feedback and adjustments

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5. Workflow status example

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5. Workflow status example

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6. Leverage planning solutions and integrate

planning data across multiple business areas

• Don’t: Build planning silos or only install planning solutions in finance or a few functional areas . . .

• Do: Leverage your industrial-strength planning solution with its centralized data base across the enterprise, replacing Excel-based processes, and sharing plans(CFO study corollary: “common planning platform”)

• BENEFITS:

– Integrated and timely plans between sales, marketing, production, inventory planning, finance, tax and H/R

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5. Planning solution examples

• Sales and Revenue, OpEx and CapEx

• Headcount and Personnel Costs (by employee)

• Inventory (company-wide (“OTB”) or for

distribution centers and stores)

• Production

• Factory Capacity

• Marketing Programs

• Logistics

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6. Planning solution examples

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7. Use the centralized planning data base for

uniform, timely updating of actual data

• Don’t: Distribute actual data extract files or dozens of Excel workbooks . . .

• Do: Leverage the centralized planning data base and distribute actual updates often and instantly to all users in a structure that matches the planning models and after any necessary mappings and reclassifications

• BENEFITS:

– Integrated and timely actual updates, enterprise-wide with centrally controlled, consistently applied organizational changes and historical restatements

– “Single version of the truth” / “Common reporting platform”

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7. Remapping / reclassification examples

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7. Remapping / reclassification examples

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8. Distribute monthly pre-close reports for

feedback on accruals and variances

• Don’t: Close the month without line management input, nor blind-side them with untimely variances . . .

• Do: Leverage real-time reporting capabilities to seek input on needed accruals and to support variance research

(CFO study corollary: “common reporting platform”)

• BENEFITS:

– Shorter, more accurate financial closes

– Line management is prepared for timely, knowledgeable executive review of results

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Integrated Information = Integrated Business Process Dimensional Models

ERP Data

G/L Data

Data

Inte

gra

tion

ConformingBusiness Process

Dimensional Models

StandardReports

Web P

ort

al

Other Sources

Information Security

Data Warehouse

Data

Abst

ract

ion M

odel

Ad h

oc

Query

ing

Planning Data

Slic

ing &

D

icin

g

Dash

board

Auth

oring

Report

Auth

oring

Dashboards/Scorecards

Sourc

e S

yst

em

s of

Reco

rd

Pla

nnin

g

Solu

tions

Self-service Reporting& Analysis

“Single Version of the Truth”

Threshold-basedAlerts

Actual Data

Planning Solutions

Labor Data

CFO study corollary: “common reporting platform”

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9. Distribute month-end Budget vs. Actual

reports the day after close (and close a few days after

period-end)

• Don’t: Take a week or two to close each financial period

• Do: Leverage timely report distribution capabilities

• BENEFITS:

– Actionable, timely BvA reports in the hands of line management

[ There is clearly bottom-line impact to timely management reporting followed by timely actions. ]

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9. Distribute month-end Budget vs. Actual

reports the day after close (and close a few days after

period-end)

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10. Automatically update planning model

structures from source systems

• Don’t: Allow planning dimensions to get out of date; and don’t waste time manually updating lists of accounts, departments, products or their hierarchies.

• Do: Leverage automatic links and scheduled processes to ERP tables, Systems of Record (SOR’s), and/or data warehouse / mart data for dimension updates

• BENEFITS:

– Less data management and more analysis time for FP&A staff

– Uniformly accurate structures across all planning models and planners

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11. Centrally control planning model formulas

and methods

• Don’t: Allow distributed Excel workbooks to introduce errors to the methods and calculations used in planning

• Do: Leverage a centrally controlled planning model and data base(CFO study corollary: “common planning platform” / “common

reporting platform” and data base)

• BENEFITS:

– Guaranteed adherence to and consistent interpretation of company financial policies and definitions (e.g., Exactly what accounts define Gross Margin and Net Margin? Consistently how are key metrics calculated?)

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11. Centrally control planning model formulas

and methods

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12. Use all appropriate company business

dimensions for planning models

• Don’t: Limit planning models and methods to only the segments available in the General Ledger’s Chart of Accounts

• Do: Build planning processes to utilize all the business dimensions needed to model each business area

For example, where appropriate: – Plan sales and revenue by region, by product, by sales rep, and by customer– Plan inventory by product and by store– Plan factory capacity by material category and by construction type– Plan capital expenditures by asset class– Plan marketing by program and/or brand– Plan travel by country, by region and/or by trip

• BENEFITS:

– More accurate plans– Better alignment between finance and business operations– Better integration between planning and enterprise data and reporting

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12. Use all appropriate company business dimensions for planning models

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Summary of Do’s1. Use one planning process . . . and reforecast frequently

2. Provide bottoms-up and top-down capabilities in planning models

3. Maintain central control over drivers, assumptions, and versions

4. Secure planning data by integrating security systems

5. Use a central planning data base for instant consolidation

6. Leverage and integrate planning across business areas

7. Provide timely actual data to all planners

8. Distribute pre-close reports to improve accruals, shorten close cycles and explain variances

9. Distribute actionable, final BvA reports within days of month-end

10. Automatically link account, department and product structure changes to planning models (via ERP’s, SOR’s or DW’s)

11. Centrally control all formulas and models used for planning

12. Utilize all appropriate business dimensions in planning models

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Summary of Don’ts1. Use only one, annual, lengthy budgeting process

2. Provide only a bottoms-up planning method or model

3. Distribute Excel workbooks and loose control over driver values, financial assumption values, and plan versions

4. Risk unauthorized access to planning data due to insecure files

5. Waste time chasing and consolidating distributed Excel workbooks

6. Risk silos of planning data

7. Take days or weeks to distribute actual data to planning models

8. Close financial periods without line management input

9. Wait two or three weeks to distribute final BvA reports to line management

10. Rely on manual maintenance of planning solution structures

11. Loose control of distributed formulas and planning models

12. Limit planning model dimensions to General Ledger segments

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Recommended Next Steps1. Nail the basics . . .

by re-engineering the financial planning processes using most if not all of the 12 best practices and a common planning platform with a centralized data base.

2. Expand performance management’s reach . . .

by going beyond basic financial data, statements and BvA reports to ad hoc user analytics that look at operational measures that are integrated with financial information using a common reporting platform and an enterprise data warehouse*.

Top priority target: product and customer profitability !

* Incrementally-built

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Effectiveness across the full CFO agenda

Source: IBM Institute for Business Value, The Global CFO Study 2008, 2010

Driving integration of information across the enterprise

Providing inputs into enterprise strategy

Supporting / managing / mitigating enterprise risk

Value Integrators

Driving enterprise cost reduction

Strengthening compliance programs and internal controls

Driving Finance function cost reduction

Executing continuous Finance process improvements

Developing your people in the Finance organization

Measuring / monitoring business performance

Percent more effective than baseline

140%100%80%60%0% 20% 40%

DisciplinedOperators

19% Better

ConstrainedAdvisors

33% Better

ValueIntegrators59% Better

Scorekeepers(Baseline)

0%

120%

Constrained Advisors

Disciplined Operators

Scorekeepers

Documents

Financial Planning Best Practices - Senturus · 9/15/2011 · • Don’t: Close the month without line management input, nor blind-side them with untimely variances . . . • Do: