Lamorte prez future of fpa - gmi feb 8 2013
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Future of FP&A: Is software the answer?
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Lamorte prez future of fpa - gmi feb 8 2013
- 1. THE FUTURE OF FP&A: IS SOFTWARE THE ANSWER? Ben Lamorte, Senior Consultant ©2013 Virtual Profit Solutions. All rights reserved.August 27, 2013
- 2. Business Activities • Senior Consultant, Virtual Profit Solutions • VP at Alight Planning 2006-12 • Principal, Decision Consulting (Adobe, Kaiser) • Manager, Business Intelligence, planetrx.com • Management Consultant, APM/CSC Healthcare Ben Lamorte, Financial Modeler and Planning Visionary Writing on FP&A • How much time should finance spend doing THE RIGHT THING? • Why Financial Reporting Software Delivers No Value? • The Value of Agile Planning Over Time • Driver Based Planning: How is it Defined? • Application Requirements for Rolling Forecasts with Rand Heer Education • MS Management Science & Engineering, Stanford University 2
- 3. AGENDA I will: Review trends in FP&A and software You will: Reflect on what the future of FP&A might look like at your organization Key Takeaways: Frameworks for prioritizing new FP&A initiatives 3
- 4. FROM A RECENT “THE FUTURE OF FP&A” PRESENTATION “FP&A has evolved from a profession for Accountants who want more excitement in their lives to a profession embracing MBA’s and commercially adept Finance folks. We will no longer: Rely on bored individuals to crank out Daily and Monthly reports… The present challenge is to convince our Presidents to invest in technology, to hire enough staff who are commercially minded as well as technical or statistical… The future of FP&A is fast approaching & we must push the boundaries of technology and analysis or we will be left behind.” 4 *Source: Jennifer Scott, VP Finance, former Expedia 2010 IE Group Boston FP&A Summit
- 5. HOW HAVE YOU USED FP&A SOFTWARE? 1980s - Spreadsheets for Everything! 1990s - Pillar & Adaytum Era for Budgeting Software. OLAP & BI Emerging. 2000s – Era of many dedicated FP&A software tools. Hyperion/Pillar, Cognos/Adaytum, SAP/BPC/OutlookSoft, Business Objects/SRC, Host Analytics, Alight, Adaptive Planning, Prophix, Centage, Quantrix, Xlerant, MS Forecaster, Whitebirch… 2011 - *88 per cent of public sector finance professionals admit they are reliant on spreadsheets for their budgeting processes… Mostly streamlining existing budgeting/reporting/consolidation processes. August 27, 2013 5 *Source: Advanced Business Solutions
- 6. THE FP&A MATRIX: WHERE ARE YOU NOW? Turn to your neighbor and discuss the following question: Which FP&A task is most important to you RIGHT NOW and why? FP&A Task Importance (1-5) Doing It? (Y/N) Using Spreadsheets Happy? (1-5) Using Software Happy? (1-5) Budgeting Profitability by product/customer Rolling Forecast Scenario Analysis Workforce Planning Balance Sheet & Cash Flow Long-Range Planning 6 1 = Not at all. 5 = Completely
- 7. BUDGETING & REPORTING 1990S Planning Maturity Curve A Framework to analyze the ROI of dedicated FP&A Software Effort Business Value Source: Planning Maturity Curve as Developed by Alight, LLC 7
- 8. BUDGETING & REPORTING 1990S Basic FP&A Tasks in Spreadsheets Budgeting Reporting Effort Business Value Source: Planning Maturity Curve as Developed by Alight, LLC 8
- 9. BUDGETING & REPORTING 1990S FP&A Software Focused on “Eliminating the Headache” Budgeting Reporting Effort Business Value “What FP&A Software Customer Says” Budgeting & Reporting Tool: • Saves Time Source: Planning Maturity Curve as Developed by Alight, LLC 9
- 10. 2000S – BUDGETING AND BETTER REPORTING Improved Dashboards, BI tools make reporting easy to visualize outside of finance leading to MORE INSIGHT AND ACTION Budgeting Reporting Effort Business Value “What FP&A Customer Says” • Saves Time AND • Adds some Value! •ENGAGES others in the financial model •Business decisions are more financially-informed Source: Planning Maturity Curve as Developed by Alight, LLC 10
- 11. 2010S – BIG VALUE Budgeting Reporting Effort Business Value Source: Planning Maturity Curve as Developed by Alight, LLC **Source Ventana Research: http://www.facebook.com/note.php?note_id=140497886040 11
- 12. 2010S – BIG VALUE Future is EXCITING. Some of you may already be there! Most ARE NOT - My guess is 90% ARE NOT **Ventana Research: 6% adopted Driver-Based Planning in 2000s…. Budgeting Reporting Effort Business Value Source: Planning Maturity Curve as Developed by Alight, LLC BIG VALUE: Rolling Forecasts, Driver-Based Planning, Real- Time Planning **Source Ventana Research: http://www.facebook.com/note.php?note_id=140497886040 12
- 13. RECENT PUBLISHED CASE STUDIES How FP&A Teams Impact Profits! This is THE FUTURE • McAfee Transforms Quota Management & Sales Compensation >400% ROI on Software in Months! Source: Get Smart About Sales Finance. Webinar hosted by Ventana Research Oct 2012 • Adobe’s FP&A Team Reduces the Sales Cycle, Increases Close Rate! • Source: IE Finance Article: Use the FP&A Pulpit to Business Partner with Sales and Directly Drive Predictable Revenue Matthew Glaser, Adobe, Thursday, November 10, 2011 • SoftLayer’s more accurate and rapidly updated rolling forecast model leads creditors to reduce interest rate, reduces interest expense by $3M in one year! >1,000% ROI on software in 3 years? Source: Institute of Management Consultants Webinar: Measuring the ROI of Planning Software, June 2012 • Pittsburgh Mercy Saves $600,000 Through Collaborative Planning. CFO sets up driver- based planning model with managers across treatment areas, >800% ROI on software in 2 years, gets promoted to President! Source: Spring 2011 issue of HFMA's Strategic Financial Planning newsletter 13
- 14. THE VALUE OF TRADITIONAL PLANNING OVER TIME Source: The Agile Planner Blog, Alight LLC TIME VALUE High ROI at the early stages of planning… But ROI diminishes quickly over time. 14
- 15. THE VALUE OF AGILE PLANNINGTM OVER TIME Source: The Agile Planner Blog, Alight LLC ROI remains high in the early stages of planning… Long-term value from planning increases significantly TIME VALUE Agile Planning Defined: Impactful planning that addresses the right business issues at the right time with the right people at the right level of detail. Unlike budgeting, it is a continuous process that adds increasing value over time. 15
- 16. Communicating the Model in an Excel PowerPoint Cycle Source: Ben’s Life in FP&A at planetrx.com in late 1990s FP&A SOFTWARE THE PAST: EXCEL POWERPOINT CYCLE Source: The Agile Planner Blog, Alight LLC 16
- 17. DO YOU RELATE? IF SO, SHARE YOUR EXCEL-POWERPOINT CYCLE STORY August 27, 2013 17 Raise your hand if you relate Anyone summarizing results from an FP&A software tool (not spreadsheets) in PowerPoint?
- 18. FP&A SOFTWARE: THE SUMMARY 18 FP&A: NOW FP&A: THE FUTURE Software Purpose •Reduce a Pain Point •Decrease Costs by doing less work •Improve the Business •Add Value by doing “THE RIGHT THING” Example Net Benefit Measuring ROI Primary Communication Platform Meeting Outcome FP&A Business Savvy IT Support
- 19. FP&A SOFTWARE: THE SUMMARY 19 FP&A: NOW FP&A: THE FUTURE Software Purpose Example Cut monthly reporting time, reduce annual FP&A labor costs by 20% Introduce a rolling forecast, get better interest rates on debt Net Benefit Measuring ROI Primary Communication Platform Meeting Outcome FP&A Business Savvy IT Support
- 20. FP&A SOFTWARE: THE SUMMARY 20 FP&A: NOW FP&A: THE FUTURE Software Purpose Example Net Benefit Relatively Small Possibly Huge Measuring ROI Easy to estimate Difficult; often requires retrospection Primary Communication Platform Meeting Outcome FP&A Business Savvy IT Support
- 21. FP&A SOFTWARE: THE SUMMARY 21 FP&A: NOW FP&A: THE FUTURE Software Purpose Example Net Benefit Measuring ROI Primary Communicati on Platform PowerPoint. May depend on FP&A software - PowerPoint cycle Dedicated Planning Software with Dynamic Dashboards enabling real- time scenario analysis Meeting Outcome More internal work, preparing for next review Action that drives business FP&A Business Savvy IT Support
- 22. FP&A SOFTWARE: THE SUMMARY 22 FP&A: NOW FP&A: THE FUTURE Software Purpose Example Net Benefit Measuring ROI Primary Communication Platform Meeting Outcome FP&A Business Savvy Suggested: Software alone can help “more rapidly crank out reports” REQUIRED: Software alone cannot improve a business. Now the reports are available, management asks: “so what?” IT Support Moderate to Heavy Must be minimal to meet growing need to quickly respond to internal customers
- 23. FP&A SOFTWARE: THE SUMMARY 23 FP&A: NOW FP&A: THE FUTURE Software Purpose •Reduce a Pain Point •Decrease Costs by doing less work •Improve the Business •Add Value by doing “THE RIGHT THING” Example Cut monthly reporting time, reduce annual FP&A labor costs by 20% Introduce a rolling forecast, get better interest rates on debt Net Benefit Relatively Small Possibly Huge Measuring ROI Easy to estimate Difficult; often requires retrospection Primary Communication Platform PowerPoint. May depend on FP&A software - PowerPoint cycle Dedicated Planning Software with Dynamic Dashboards enabling real-time scenario analysis Meeting Outcome More internal work, preparing for next review Action that drives business FP&A Business Savvy Suggested: Software alone can help “more rapidly crank out reports” REQUIRED: Software alone cannot improve a business. Now the reports are available, management asks: “so what?” IT Support Moderate to Heavy Must be minimal to meet growing need to quickly respond to internal customers
- 24. END OF THE SHOW: WHAT I HOPE YOU TAKE AWAY Tools for prioritizing FP&A initiatives: • FP&A Matrix • Planning Maturity Curve Questions to ask now: 1: Does your company want “BIG VALUE” from FP&A? 2: If so, how do we get started? 24
- 25. LET’S END ON A POSITIVE – BEST PRACTICES! Beginning in May 2010, we have surveyed attendees at various FP&A Conferences to better understand how different companies use Performance Management tools. The response rate is generally between 30-40%, and our survey database now includes 196 respondents. Here's what we've learned: 25
- 26. © 2012 Virtual Profit Solutions. All rights reserved BEST PRACTICES FORECASTING: ANALYSIS 26 Forecasts are linked to Business Drivers Source: VPS Survey, 196 Respondents, June 2012
- 27. © 2012 Virtual Profit Solutions. All rights reserved BEST PRACTICES BUDGETING: STAFF PLANNING 27 Personnel costs are tied to planned FTE’s or Headcount 0% 20% 40% 60% 80% 100% Very Dissatisfied Dissatisfied Satisfied Very Satisfied Planned FTE’s or Headcount tied to Business Drivers Source: VPS Survey, 196 Respondents, June 2012
- 28. © 2012 Virtual Profit Solutions. All rights reserved BEST PRACTICES BUDGETING: PLANNING PROCESS 28 Planning process encourages an effective review of costs and service levels 0% 20% 40% 60% 80% 100% Very Dissatisfied Dissatisfied Satisfied Very Satisfied Corporate Goals are well understood prior to commencing the planning process Source: VPS Survey, 196 Respondents, June 2012
- 29. We have capabilities for scenario modeling © 2012 Virtual Profit Solutions. All rights reserved BEST PRACTICES BUDGETING: SCENARIOS 29 Source: VPS Survey, 196 Respondents, June 2012
- 30. © 2012 Virtual Profit Solutions. All rights reserved BEST PRACTICES PERFORMANCE MEASUREMENT: ROOT CAUSE / ACCOUNTABILITY 30 Key users see their KPI's and performance and understand causes of performance issues Source: VPS Survey, 196 Respondents, June 2012
- 31. © 2012 Virtual Profit Solutions. All rights reserved BEST PRACTICES PERFORMANCE MEASUREMENT: PROFITABILITY ANALYSIS 31 Reliable and Accurate Product Profitability Information Reliable and Accurate Customer Profitability Information Source: VPS Survey, 196 Respondents, June 2012
Hinweis der Redaktion
- Let’s start with you – how have you or are you using FP&A software… Since the 1980s, we’ve all used spreadsheets.Let’s see a show of hands: Anyone here ever use Pillar or Adaytum back in the 90s?Anyone here use any dedicated software for FP&A other than spreadsheets? You can see a partial list here.
- We need to do variance analysis – we have 2 numbers, so what’s the gap between importance and doing it and quite frankly is the level of effort in tune with the level of importance?Here’s a tool that we created that our clients find invaluable to complete before shopping for FP&A software. You can see the rows are planning activities, and I’ve only included a sample here so it’s legible. Each cell should be completed with a Yes or No. Let me give you an example of one of my typical conversations with a prospect. OK, so what are you looking to do with the software: Budgeting? Reporting? Forecasting? Real-Time Planning with Scenarios and What-if on-the-fly? CAPEX?... Yep. That pretty much covers it, we’d also like to do allocations and some consolidations plus automate dashboards and build a 5-Yr plan.So, you want to do it all? Yeah but, we’re already using SAP for budgeting at corporate, and some of us do variance reporting using that tool, but it doesn’t really work for most of us so we do it in Excel. The rolling forecast, that’s something we want to do, and we’re kind of doing it in spreadsheets, but we gave up. Long-Range planning – I think we do it, but not sure… Leo used to do that, but he left. I think the new CFO started a 5-yr model, but not sure anyone’s really using it.Point is: sometimes filling out this matrix is harder than it may appear (and it’s dynamic since our models come and go) + we need to make sure the management team is on the same page about what we are doing in FP&A, what is it working, and what we want to do going forward. Your exercise: just pick ONE cell in the FP&A software matrix that is interesting to you – for any reason. For example for Rolling Forecast, you could choose Not doing it -- and enter “NO” if you don’t need a rolling forecast. OR you could choose long-range planning and have “Yes” in Using Spreadsheets because your Excel model is working just fine, thank you very much.OK, go – you have 2 minutes to discuss with your neighbor.NEXT: anyone want to ask a question about the matrix or share a story about an interesting cell? IF NO response, “I’d like to at least give those of you who are happy in spreadsheets and put a Y in any column to raise your hand. It’s good to see this and interesting to me since software vendors are constantly bashing spreadsheets… OK let’s move on.I will volunteer: At Adobe, - we had a 5-Yr model all in Excel. I was happy – it got a bit crazy with 150 worksheets, and when I completed the project, no one had any idea why I had blacked out a bunch of columns and had created something like 85 different versions of the file… But it worked for me! As we’ll see later, it’s critical to identify activities where FP&A software can make the biggest positive impact going forward.
- Optional Small Group Question:Turn to your neighbor, discuss your Excel-Powerpoint storyAnyone want to share?