De-mystifying Budgeting and Forecasting Solutions
By Kevin Held, CFO, TradingScreen
Oh how the process has changed! We now have so many choices that we need to have debates over using in-house versus cloud based systems and whether its correct to do rolling forecasts. The real question is what do you need as the owner of the system and what is the rest of the organization going to expect from it?
These days, the available systems are far more advanced than the combination of Great Plains and FRX report writer and the budgeting and forecasting functionality that was used way back when. Information and data is flowing at such a greater rate of speed than in the past and being nimble in today’s world is a must.
Identifying the needs of the organization is a key component of picking and implementing any system. Don’t always assume you know what your end users want. Sit down with them to learn what their needs are. Talk to them about things such as how tech savvy they are or how they like to see reporting; do they prefer dashboards, do they want reports emailed or do they want to pull down their own information? You should also think about the history of the organization and the reporting that is needed. Have there been new products introduced or have there been internal corporate reorganizations done where the structure is constantly changing? The capability of the systems to handle these types of changes need to be reviewed very closely.
Creating ‘what if’ scenarios and multiple budgets and forecasts can be done in a matter of minutes
How closely the abilities and functionalities of the tool you choose meets the requirements you identify will be a critical success factor in the system.
Business Intelligence tools have made the budgeting and forecasting process so much more dynamic. They provide the best of both worlds by being able to connect to a multitude of different sources to pull data from as well as having budgeting and forecasting capabilities built into them. The beauty of this is that it allows you to get information from other platforms or databases and marry this with your budget or forecast data. In many cases this external information can be used to drive the model from which the budget or forecast is built.
One of the biggest gains that we have seen from these systems is the ability to be able change models and financial forecasts on the fly. Creating ‘what if ’ scenarios and multiple budgets and forecasts can be done in a matter of minutes. As financial executives, we are expected to be able to use information and make decisions from a strategic point of view. This functionality can be invaluable in modelling out new business lines or products and making those ROI determinations.
Make sure that the systems you are looking at talk to your accounting systems. Some have bi-directional information sharing and some do it better than others. There are also partnerships in the accounting system and budgeting/forecasting world. This doesn’t mean that these matchups are the right ones. Depending on your needs, there may be other best of breed platforms which you should consider. They may not link up as easily but in the long run the functionality may be better for you.
Regardless of the system you choose, selecting an implementation partner is critical. Make sure that they understand your business. Make sure that they are asking the questions you would ask if you were in their shoes. A key piece of the exercise is defining for the implementation partner how you want your base system to look. Make sure they agree that what you want is what you need. If at any point in the process you get the sense something isn’t turning out like you expected, stop and ask the right questions to them.
A trap that is easy to fall into is the assumption that you need a system that can do everything. Bigger is not always better. Make sure that you size the tool to meet the needs of the organization. Everyone has visions of grandeur about what they need and where the company will be. It is very important to think toward the future but be realistic on what the needs of the organization are today and what they will be tomorrow. Also be realistic with your expectations of the system’s ability to drive change in your organization.
There are many options available for budgeting and forecasting solutions and all claim to be the best. Make sure that you give this exercise the attention it deserves. Deciding on the correct system for your needs can make your life so much better. The wrong choice will only make you cringe when you use it.