Forecasting and Budgeting Software

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FORECASTING ANDBUDGETING SOFTWARE

SECOND EDITION

CHARTECH SOFTWARE PRODUCT GUIDE


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ICAEW 2012

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FORECASTING AND

BUDGETING SOFTWARE

SECOND EDITION

CHARTECH SOFTWARE PRODUCT GUIDE


4/38FORECASTING AND BUDGETING SOFTWARE

Over 25 years of industry experience in:Budgeting and Forecasting, Management Reporting andPerformance Analytics.

Selection appraising your business needs and selecting theappropriate application

Design planning the system to match your reporting requirements

Implementation working with you to build the system

Training exible training with the aim of transferring knowledge

Business Intelligence for Intelligent Business

JTAnalyticsMicrosoft Registered Partner

See theforest and

the trees

Contact DetailsJonathan Teller FCA MBA AIMIS

m: 07768 467 023

e: [email protected]


5/38FORECASTING AND BUDGETING SOFTWARE 01

CONTENTS

1. INTRODUCTION 03

2. THE ELEMENTS OF F&B 05

3. ELEMENTS OF FORECASTING PREDICTION 06

3.1 The three approaches to forecasting 06

3.2 When to use each type 07

3.3 Developing a model in a spreadsheet 07

3.4 Making the model reusable and the limitations of Excel 08

3.5 Models from third parties Excel templates 09

3.6 Models from third parties forecasting packages 10

4. ELEMENTS OF FORECASTING COLLECTION 12

4.1 The role of the accountant 12

4.2 Whats wrong with Excel? 12

4.3 A single company database 13

4.4 Needs of the larger organisation 13

4.5 Variance reporting 14

4.6 Software will not solve everything 15

5. BUYING A PACKAGE 16

5.1 Before you talk to suppliers 16

5.2 A guide to the market 18

6. REVIEWS OF FORECASTING AND BUDGETING PACKAGES 20

Advanced Business Solutions Collaborative Planning 20

4CastPro 22

IBM Cognos TM1 24

Prophix 26

Sage 50 Forecasting 28

7. SUPPLIER LIST 30


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planning

predictive


7/3803

Forecasting and budgeting can mean differentthings to different people and especially to differentaccountants. In general use, the two terms arelargely interchangeable despite their literal sense.As used in the accounting world, forecasting looksto the future and tries to predict an organisationsfinancial outcomes in the light of past results and

known or expected financial and non-financialfactors affecting the business. A forecast, then, isan organisations prediction of where it is likely tobe in, say, 12 or 24 months.

A budget is a financial plan upon which anorganisation can be managed in the light of theforecast. It also looks forward, and users willregularly compare their budgeted figures with thecurrent actual results. In the light of those resultsthe financial predictions, the underlying forecast,and the budget, may be updated.

A forecast then is not a budget, but a budget may

be a forecast.Confusing? In a world where the rules for annualaccounting are enshrined in law and financialreporting standards and regulations, the lack ofa definitive set of rules or best practice on howto prepare a forecast seems a little unnerving.

However, that is as far as we need to take thetheory for the purposes of this software guide.There is a surprising consistency in the approach or approaches taken by most forecasting andbudgeting software providers: enough consistencyto ensure that the software can be applied in themajority of situations, yet with sufficient flexibilityto cater for each organisations specific needs.

As with any technical guide, some jargon isinevitable. For brevity, forecasting and budgetingwill be referred to as F&B throughout the rest ofthis guide. Business intelligence (BI) and corporateperformance management (CPM) software covera lot of the same ground but are strictly separateapplications and are not discussed in detail here.We will just note that suppliers of BI and CPMsoftware aimed at larger organisations often includeF&B packages in their portfolio. The key differenceis that software such as BI and CPM is generallyabout the past, analysing and making sense of pastperformance, whereas F&B is about the presentand the future.

1INTRODUCTION

FORECASTING AND BUDGETING SOFTWARE


8/3804 FORECASTING AND BUDGETING SOFTWARE

Since this guide was first published in 2008 severaltrends have been evident in the market:

F&B systems have become easier to use easier for users to generate their own reports oranalyse data with drag and drop and drilldownfunctions. Having reviewed a number of leading

packages, it was striking how similar they alllooked, and what similar functionality theyoffered.

The underlying technology has become simpler,with a lot of integration of F&B, BI and CPMsystems based on a common database and userinterface.

Performance has improved immensely fallingmemory prices and low-cost 64-bit processingmean it is easier and faster to access data inmemory rather than on a disk.

Cloud computing has made it easier and cheaper

for smaller and rapidly growing companies toinvest in BI without having to worry about theaccompanying IT infrastructure.

There has been a growth in collaboration andworkflow tools, and general workflow automation.

Several of the packages reviewed in the firstedition have been acquired by larger companieswhile others no longer exist. However, the corefeatures of the packages that survive are relativelyunchanged after four years, suggesting that this hasbecome a comparatively mature market. Of course,the basic principles of business F&B are unchanged and the strengths and limitations of MicrosoftExcel, whether 2003, 2007 or 2010 versions, remainthe same.



To understand F&B software and the approachestaken by different packages it is important to grasptwo key points.

1. THE THREE APPROACHES TO FORECASTING

Any forecast has to be derived from past andpresent data, otherwise it is simply a guess. Past andpresent data comes in different formats, so you can:

Forecast from past totals.

Forecast from past transactions.

Forecast from business drivers.

The three approaches to forecasting may beappropriate in different parts of the sameorganisation.

2. PREDICTION AND COLLECTION

It is also important to distinguish between predictionand collection.

For most people, putting together a forecast meanstyping some variables and assumptions about thefuture into a spreadsheet such as Excel and comingup with some projected figures. For them, F&B isentirely about prediction.

But the accountants task is to compile a forecastfor the company as a whole. So when you talk ofputting together a forecast, you usually meantaking everyone elses projections and combiningthem into a single forecast for the whole organisation.

This first sense, generic for everyone, we will callprediction. The second sense, the specialist task of

the accountant, we will call collection.

The first part of this guide will cover forecastingand budgeting in its wider, prediction sense. Thesecond part will cover it in its collection sense,meaning the assembly of a company-wide forecast.

We will also look at the limitations of spreadsheetsand review a number of the principal packages onthe market, what type of forecasting they are bestat, and their qualities in each of the two areas. Thepackages are:

Advanced Business SolutionsCollaborative Planning;

4CastPro;

IBM Cognos TM1;

Prophix; and

Sage 50 Forecasting.

2THE ELEMENTSOF F&B



3.1 THE THREE APPROACHES TO FORECASTING

Three approaches to forecasting can be identified.Each may be appropriate for different parts of theorganisation.

Forecasting from past totals

This is the simplest method of forecasting. You takethe figures you achieved for the 12 months of lastyear, then extrapolate from them to predict thefigures you hope to achieve for the 12 months ofthis year.

Typically, the screen displays a month-on-monthprofit and loss-type (P&L) report in a matrix. Theitems to be forecasted (eg, sales, purchases, rent,salaries, etc) are listed in a column down the left-hand side, while across the top is a row of months(Jan, Feb, Mar, Apr etc). You make your forecastand fill in the boxes on the matrix.

Forecasting from past transactionsTo forecast from past totals, you need to havethose totals available, usually from an accounts/ERPpackage. In practice, however, the standard reportsfrom an accounts package are fairly limited andoften do not give much more than monthly totalsat the company level.

F&B packages are available that will take theindividual pasttransactionsfrom your accountspackage, and then analyse and summarise them toproduce summary reports at a detailed level whichyou can then use as a basis for your forecast.

This is the world of online analytical processing,(OLAP), which we will discuss in detail shortly.

Forecasting from business drivers

These first two approaches are basically the same find out the totals for the past, then extrapolatefrom them to the future. However, the thirdapproach forecasting from drivers is differentin principle. Instead of taking past figures anddeducing a trend, it ignores past performance andlooks to the actual causes (in the jargon, businessdrivers) in the real world.

Drivers are the key variables that determine performance

of the business. For personnel the key drivers mightbe headcount levels, annual salaries, bonus schemes,employer NI rates set by the government. For salesit might be sales volumes and selling prices, newproducts, the level of advertising. For purchasing itmight be raw material costs, cost of energy, and so on.

3ELEMENTS OFFORECASTING PREDICTION



OLAP allows you to analyse high volumes of datadown to great levels of detail, eg, which salesmansold how much of which product in which regionin which postcode in which week? However,the high implementation costs and expensiveequipment that is needed make OLAP very mucha Rolls-Royce solution for larger organisations.

The rest of us will have to make do with Excel andreport writers such as Crystal to get the analysiswe need.

From business drivers

Forecasting from drivers is time-consuming since itmeans going back to first principles and to aligningyour forecast with the way the organisationactually works. This goes way beyond the scope oftraditional budgeting and it takes time to developthe model (see next section). However, developinga model is a valuable exercise in itself, helping youto broaden and clarify your own knowledge about

how your business works.It is worth spending the time to gain this extrainsight into those areas of the business which havea substantial effect on costs or revenues. Typicallythese more macro items would be sales, cost ofsales, and payroll costs.

3.3 DEVELOPING A MODEL IN A SPREADSHEET

Once you have made the decision to go beyondsimply budgeting for an incremental increaseon last years figures and to try to identify yourbusiness drivers, you are now into modelling. Youwill need to design models of the major areas of

the business such as sales, salaries and cash flow.

When you start to develop a model you willobviously have an idea in your own mind of whatthe drivers are and how they interact. But actuallysitting down and creating the model will oftenclarify your thoughts. Halfway through you mayrealise that there are several other variables you hadnot thought of at the beginning, and so you reviseyour model to include them.

The finished model may work fine right now, butat a later date you realise that some other variablesoccur occasionally and they need to be included in

the logic.So models evolve and mature with time. The modelerbecomes more knowledgeable, or circumstanceschange in the outside world, or both.

3.2 WHEN TO USE EACH TYPE

Forecasting from past totals

Forecasting from past actuals is the simplest andquickest form of forecasting. Essentially, however,you are simply assuming that the trend of the pastwill continue in some form or other in the future.

You are not deducing the forecast directly from theactual causes.

Where items are of small value, or are unlikely tochange very much, forecasting from past totals isperfectly adequate. It is also quick and simple. Mostfixed overheads would fall into this micro category.

Forecasting from past transactions OLAP

OLAP-based forecasting is a specialist area and mainlyfor large companies who have a vast amount ofhistorical data that needs detailed analysis.

In fact, companies which need OLAP-based

forecasting do not actually have a forecastingproblem, they have a BI problem. Their problemis one of analysing their historical data (analyticsin the jargon). Until you have made sense of thepresent, you have no foundation for predicting thefuture.

To calculate the summary totals, an OLAP enginehas to be linked to your accounts package to takethe thousands or millions of transactions andcrunch them down into summary totals. Thesetotals are known as cubes because they aremultidimensional (eg, monthly sales by customerby region by product). The OLAP package can

generate any number of these multidimensionaltotals, enabling the user to slice and dice the data,drill down/up for more or less detail, and pivot itto get alternative views.

The technology behind OLAP may be complexbut the concept isnt. If you print off a P&L report,each of the numbers on that report is a cube.Cubes are just monthly or weekly totals.

An OLAP-based package has to be linked at a verydetailed level to data files in the accounts package.This is usually a long and complex operation sincedata files in accounts/ERP packages are designedfor transaction processing, not reporting and toget quick response times, OLAP-based forecastingpackages such as TM1 (see Chapter 4) calculate thetotals in real-time, which requires a powerful server.



To make a model robust and reusable, thesevarious elements have to be clearly identified andseparated out into inputs, processing logic andoutputs. A reusable forecasting model will explicitlyidentify:

what the drivers are;

the logic being applied to the drivers; the assumed values for each driver being keyed

into the model, and, in more complex models,where those values have come from.

The classic mistake with forecasts in Excel is to notkeep these separate. Assumptions and drivers are alljumbled together in complicated formulae insteadof being separately identified.

Advanced skills discipline and documentation

Excel contains the tools for creating a reusablemodel. Storing the assumptions in their own

separate worksheet, and using Named Cells andNamed Ranges will go a long way towards creatinga structured and reusable model. See the simpleexample with VAT overleaf.

However, there seems to be no agreedmethodology about how to construct a forecastingmodel and separating out the assumptions,drivers and results. Most spreadsheet users do notrecognise that a model, once developed, will needto be rewritten and formalised into a structure inorder to make it reusable. Very few document thelogic behind the model so that it can be reviewedand updated by others, or by their successor in the

specific role in the company.Even if they did, in a busy life most accountants areself-taught in Excel and learn just enough to do thejob in hand. Writing a reusable model is a skilledjob, particularly if the model is going to be usedby someone else, for example a budget holder,who may have few or even no spreadsheet skills.In that case, should it allow for data entry errors incase the user types in letter O instead of a number0? Should it include checksums to make sure thenumbers balance internally? How much of eachworksheet should be locked down and passwordprotected to avoid corruption?

Summary of developing a model using Excel

To summarise, Excel is perfect for developing amodel because of its total flexibility. However, oncethe model has been worked out, it now needs to

This brings us to a software tool that is inseparablefrom forecasting and budgeting the spreadsheet.The vast majority of forecasts are produced in aspreadsheet of some form, with most people usingMicrosoft Excel. So from here on we will use Excelto refer generically to spreadsheets.

For something like developing a forecasting model,Excel is ideal. It is a very large blank sheet whichis totally flexible. It is very easy to use and this,combined with its flexibility, means that it can bechanged very quickly, enabling you to work out themodel interactively within Excel as you go along.

A word of warning: Excel is by its nature a two-dimensional worksheet. Pivot tables can be usedto create very rudimentary multidimensionalmodels, but once an organisation needs to modelmultiple dimensions within the same data (eg, time,geography, product line/group, currency, etc)specialist F&B software is the only option.

As we shall see later, there is one area of modellingthat Excel is not very good at, and that is cash flow.

3.4 MAKING THE MODEL REUSABLE AND THELIMITATIONS OF EXCEL

So you have used Excel to develop your model andyou are now satisfied with it. You have identifiedall the important drivers and the model accuratelyreflects how they interact.

Having completed the first step of elucidating themodel, the next step is to fit out the model forfuture use. In three months time you may want to

update it and roll it forward another three months.And while it is very clear in your mind now, whenyou come back to it in three months time youwant to understand the formulae you have usedto calculate the figures and see the assumptionsbehind them.

This is when things tend to start going wrong. Sooften people develop a model and at the time itall makes sense. They come back to it a couple ofmonths later, and it is a struggle to work out whatit all means. When someone else looks at it, it doesnot make sense to them at all.

The need for structureA forecasting model is basically a logic engine. Youtype in some inputs (your future assumptions forthe drivers). The engine applies the logic to themand generates some outputs (the projected results).



Example of a structured model in Excel VAT(continued)

Now from the Formulas menu, choose DefineName and set the Scope to Workbook and giveD3 the name VATRATE. Then go back to theworksheet containing your list of numbers, and

in B2 type the formula = A2 + (A2*VATRATE).

You can use VATRATE in formulas throughoutthe entire workbook.

This is the best way. All your assumptions cannow be stored together in one place. Andthe VATRATE, even though it may be used innumerous formulas in the workbook, only has tobe input once. This one-to-many relationshipminimises data entry and potential errors, andmakes updating easy if the VAT rate changes.

The third solution is the best in the long runbut it is not intuitive and requires some initial

thinking about design. Most people will opt formethod 1 because it is the quickest route tosolving the immediate problem.

3.5 MODELS FROM THIRD PARTIES EXCELTEMPLATES

Buying Excel templates off-the-shelf

If you do not have the skills to build your ownreusable Excel models, then consider buying themfrom outside. One possibility is to buy an Exceltemplate off-the-shelf. Templates are standardmodels which have already been written in Excel.

You key in your assumptions, and the template willgenerate the results for you, often with attractivegraphs to impress the bank manager or investors.

These templates will usually have been written in amore professional manner than models developedby you in-house. However, there are disadvantages.The first is that the template is a standard product.How do you know it will fit the unique requirementsof your business?

The second is that it is usually difficult to evaluate theunderlying logic. You enter the data and resultscome out the other end. But how do you assess the

processing in the middle? Usually it will be buried ina welter of formulae and macros. If the logic is simpleenough to disentangle quickly, you probably couldhave written it yourself. If the logic is more complexthan that, it will probably be too complicated towork out and you just have to take it on trust.

be rewritten and made reusable with the drivers,logic, assumptions and results all separated out.All this is possible in Excel, but it is a skilled job,particularly if the model is going to be used bysomeone else.

Example of a structured model in Excel VATIt is perfectly possible to create a structured andreusable model in Excel. Consider this simpleexample with VAT. Column A (Net) in yourspreadsheet is a list of net amounts 100.00,200.00, 300.00.

A B CNet

100.00

200.00

300.00

You need to add VAT to each one and calculatethe gross values, 120.00, 240.00, 360.00.

Method 1 column A = Net, column B = Gross

The simplest method is to make ONE newcolumn called Gross in column B. Simply togo into cell B2 and enter the formula =A2*1.2.Then copy the formula down to the bottom row.

Method 2 column A = Net, column B = VATRate, column C = Gross

Another way is to make TWO new columns.Column B is called VAT Rate, column C is called

Gross.In column B enter the value 0.2 all the waydown. Then in C2 enter the formula = A2*B2.Copy this formula down the column.

Method 2 is better because the assumed VAT rateof 20% is clearly identified, whereas in method 1it is buried in the formula.

Method 3 create a Named cell VATRATE

But the best way is to set up an entirelyseparate worksheet called ASSUMPTIONS.Then go into ASSUMPTIONS and define a

Named cell called VATRATE.So, in (say) cell C3 of ASSUMPTIONS, typeVATRATE. Click onto D3 and type in 0.2.



3.6 MODELS FROM THIRD PARTIES FORECASTING PACKAGES

Alternatively, consider using a specialist forecastingpackage. These have numerous advantages overExcel:

They are specifically designed for modelling,

whereas Excel is a general purpose package. They are installed by consultants who will

supply the modelling skills you lack yourself.

They come with models pre-built which you canadapt, rather than build from scratch.

They can consolidate all the departmentalmodels into a single company database.

Often, the appropriate point to buy one ofthese packages is when you have developednumerous separate Excel models over time. Theyare reasonably mature, if not particularly easy touse. Having got as far as you can, based on your

own resources plus Excel, it is time to nail them alldown into a single, properly organised, companyforecasting system.

Cash-flow forecasting

One significant benefit of buying a third-partypackage is that cash-flow forecasting can nowbe much more detailed and sophisticated than ispossible with Excel.

An F&B package that is aimed at accountants (notall of them are) will invariably come with a strongcash-flow modelling facility pre-written into it,either within the core product or as an additional

module, and will have the underlying structurethat makes refined cash-flow forecasting possible.Effectively, the cash-flow forecast is the detailedfinancial worksheet that generates the projectedP&L account and balance sheet.

The suppliers consultants will be able to help youadapt the standard cash-flow model to your ownneeds.

Implementation consultancy

Apart from the software itself, implementationconsultancy is crucially important. After all, whenyou start up the package it is simply a blank sheet,a set of tools. You need help to get the best out ofthe software, particularly if you have no previoustraining in creating models.

It comes back to the problem that there are no setstandards for writing a forecasting model. Withaccounting software, a P&L report must havebeen based on the double-entry system. With aforecasting template it can have been built in anyway, and it may be impossible to work out which.

Cash-flow templates and business plansAs a general proposition, therefore, Excel templatesmay not be the answer. But in the specific area ofcash-flow templates they may well be. These arespecifically designed to take a P&L forecast andanticipated payment terms, and work backwards toconvert these into a cash-flow forecast, usually aspart of a business plan to be presented to a bankmanager or potential investor.

The standard of these is generally quite high.Solutions that have been praised by accountantson the pages of AccountingWEB.co.uk are www.planware.org and Cashflow Wizard from www.DecisionCurve.com. Free templates are alsoavailable from websites such as Business Link,Microsoft and some banks.

The limitations of Excel

For forecasting at a departmental level, such asSales, Excel is fine as long as you understand howto construct a model. However, Excel is very limitedwhen it comes to cash-flow forecasting.

A cash-flow forecast will normally be derivedfrom the overall company forecast. But thecompany forecast will itself be a set of embedded

formulae (ie, the summary totals calculated in thedepartmental forecasts). In effect, the cash-flowmodel is a set of Excel formulae applied to a setof numbers which are themselves formulae.

It becomes difficult to reflect the reality of thebusiness if the cash-flow forecast has to take indifferent payment terms for different customers,invoice factoring, letters of credit with overseassuppliers, etc, as well as irregular items such asrent, VAT or loan repayments.

Realistically, Excel is only good for forecasting cashat the simplest level, by applying an average ofdebtor and creditor days to Total Sales and Costs.

Anything more refined starts to get very messy.



Consultants can show you how to develop yourmodels for, eg, salaries and cash flow, in the mosteffective way. They can also help with the salesmodel, where the essential knowledge may belocked away in the brain of an operational managerin the field, who may not be very IT literate. He/she knows the business, but may not know how to

write a model.

Good consultants help you write good models. Itis highly desirable that you are confident that thefigures are reliable when budget holders submittheir forecasts to you.

And they have done all this many times before.Often they will have previously built models similarto yours for other clients. You can progress muchfaster by building on one of theirs rather thanconstructing a new one from scratch.

Interview your consultants

Therefore it is important when buying an outsidepackage not to just talk to the salesman. Find outwho is going to help you implement the systemand interview them to check for personal chemistryand their business expertise. Raise a knotty problemyou have. The ideal response is: Yes, we had thesame problem when I installed with company X.We handled it this way.

Good implementers have a wide experience ofdifferent companies and can be a real help to youin setting up the system well. Note, by the way,that this has little to do with IT. The key skill isbusiness experience understanding the task that

the software is intended to perform.

Good consultants are essential, but do not betempted to hand over to them. Take ownershipof the project, and make sure that your own staffhave ultimate responsibility for building the models.After all, they are the ones who know about thenitty-gritty detail of your business.

And inevitably any models you create with theconsultants will have to be changed at some time.When this becomes necessary, you need to be ableto make the changes yourselves without having tocall them in for help.



4.1 THE ROLE OF THE ACCOUNTANT

So far we have discussed F&B software in its genericsense, helping anyone in the organisation to predictfuture performance for their own department.Accountants make their own predictions likeanyone else but, as an accountant, you haveanother unique role, which is to collect togethereveryone elses forecasts and aggregate them intoone predicted set of results for the organisation asa whole.

We have referred to this as the collection part offorecasting and budgeting, and we can identifyfour main aspects:

Firstly, you take everyones individual forecastsand assemble them into a single P&L forecastfor the whole company.

Secondly, you make changes to this P&Lforecast until it is finally agreed by everyone.

Thirdly, in your role as guardian of thecompanys balance sheet, you take the companyP&L forecast and turn it into a balance sheetand cash-flow forecast.

Fourthly, as operators of the companysaccounting software, you take the actualsachieved, compare them with the budget,then report variances to management.

As an accountant having an overview of thecompanys operations, you may also be expectedto apply some sense check to the forecast. Forexample, if significant growth in sales is forecast

does the company actually have the capacity tofulfil those sales?

4.2 WHATS WRONG WITH EXCEL?

It is at the collection stage that Excel is inadequatefor F&B.

Suppose that a company is using Excel to create itsforecasts. Worksheets containing forecasts for theindividual departments have all been produced.The next step is to set up a worksheet containingthe P&L forecast for the whole company.

This P&L worksheet is largely made up of embeddedformulae pointing to totals in the departmentalworksheets. If a change is made at departmentallevel, it should then flow automatically up to the P&L.

4ELEMENTS OFFORECASTING COLLECTION



For the figures to flow through from one worksheetto another, both Excel worksheets have to be openat the same time. Therefore, in practice, all thedepartmental worksheets have to be stored in asingle Excel workbook. The company forecast isbecoming unwieldy. It is also inherently unsuitablefor large organisations where the budgeting process

is a collaborative one across a number of sites andperhaps countries.

Formulae on formulae

As an accountant, you now have to perform yourown tasks on the company forecast perhapsapportioning central overheads back over theindividual departments, and working out the cash-flow forecast by applying payment terms to salesand costs.

With formulae now being applied to numbersthat are themselves the product of formulae,very soon the company forecast develops into anoverly-complex, Heath Robinson-type contraptionwhich is understood only by its originator. It takesa long time to assemble and is extremely difficultto change. If the logic or assumptions are changedin one of the subsidiary schedules, how can yoube absolutely certain that the change has beencorrectly reflected in the top level P&L?

Human ingenuity together with Excels flexibilitycan achieve much, but this ingenuity is misapplied.Excel is not built for this sort of thing and anothersolution is required.

4.3 A SINGLE COMPANY DATABASE

The need for a single database

The flexibility of Excel is a strength at thedepartmental level, but at the company level it isa weakness. To combine all those departmentalforecasts into a single company forecast requiressoftware that is structured and robust. A singledatabase is required to integrate them all, designedto handle changes at one level and to flow theresults forward or back to another.

The bigger the company, the more complex itsoperations and the more subsidiary schedulesare floating around from individual departments.So the bigger the collection problem becomes,the more important it is to find a single databasesolution to ensure that, as one software supplierputs it, there can only ever be one version of thetruth.

On the other hand, the managers who makedepartmental forecasts still much prefer to use Excel,which is fine for them. The ideal solution then is tohave a third-party package into which you can feedthe departmental forecasts written in Excel. Thisaggregates them all into a single, structured, databaseupon which you can perform further calculations such

as overhead apportionment and cash-flow forecasting.

Can small companies manage with Excel?

Clearly, the larger the company the more the needfor a single database is apparent. However, in asmall company where one accountant writes allthe worksheets and links them all together, thenperhaps everything can be done in Excel.

The problem is that there is an unhealthy relianceon one individual. What if the accountant leaves?What happens when the accountant who puttogether the budget last year has since left. Hisor her successor will usually find that it is just toocomplicated to be able to work out the logic andthe only safe solution is to start again from scratch.

The key points are to ensure that if Excel is usedthen you should make sure it is fully documented,and that deputising and/or succession issues areadequately planned for. Even with Excel, there is alot to be said for buying in a day or two of specialistconsultancy time from an Excel expert to help thefinance team build a robust, reusable model.

Excel is fine in a small company, where the wholeprocess is handled by one person, and for producingdepartmental forecasts. But when you need to

aggregate them all together into a companyforecast, use a dedicated package.

4.4 NEEDS OF THE LARGER ORGANISATION

The larger the organisation, the bigger the numberof subsidiary schedules making up the companyforecast, and therefore the more important thecollection features within any F&B package.

However, the biggest differentiator is the need forcollaboration. Gone are the days when a few peopleat corporate HQ created a budget in isolation andsimply handed it out to everyone else. Nowadays,budgeting is an organisation-wide activity, so

the software system needs to accommodate andmanage a much higher degree of collaboration.Indeed, the availability and functionality of suchsystems has resulted in budgeting becoming aneven more collaborative process!



Remote data entry

If the organisation operates from multiple sites,managers in different towns or different countrieswill be collaborating to produce the forecast. Youhave to consider the process by which they submittheir forecasts.

The least satisfactory solution is for managers tocreate their forecasts in Excel, then email them tothe centre, which keys them into the main forecast.It would be better to upload them to a centrallocation, eg, via Microsoft Sharepoint and ExcelServices. However, the best forecasting packageswill have remote data entry, allowing managersto enter their forecasts directly over the internet.They will also accommodate the multi-currency andmultiple language needs of multi-national groups.

Ideally, a good F&B package will recognise theneeds of both spreadsheet and non-spreadsheetusers and offer a choice of data input methods -

including Excel, although some have opted for theirown look-alike worksheets which incorporate manyfamiliar Excel functions and shortcuts.

Revising existing forecasts

If there is a lot of negotiation over forecasts, andmultiple versions are produced before the final oneis agreed, it needs to be easy for managers to taketheir current forecast and revise it, rather than haveto rebuild a new one from scratch every time.

For example, suppose a manager has forecast inthe first draft of the departmental budget thatdepartmental costs will add up to 120,000. Senior

management reject this and tell the manager thatthe maximum the department can spend is 100,000.The software should help the manager tore-calculate the forecast based on this reduced total.

4.5 VARIANCE REPORTING

As an accountant you are required to take theactual figures, compare them with the budget andshow variances, typically as a part of a monthlymanagement pack which is circulated to seniormanagement.

The actuals will usually be extracted from theaccounts package (Sage, SAP, Pegasus etc.) andthen brought into the forecasting package forcreation of the final reports. So it is essential toconsider any F&B package from this angle whatsort of variance reporting do you want and can thepackage provide it?

Forecasting in larger organisations is often part of anoverall planning and budgetary control system.Managers are held to account, usually in the formof monthly management accounts which show theiractual performance against budget. To achieve this,data needs to be shared across the organisation, inreal time, so communication and reporting tools

such as automated dashboards are critical for thesuccess of an F&B system in a larger organisation.

Forecasts are therefore more negotiable. When amanager submits a forecast, senior managementmight say it is too high and send it back. So, severalversions may be submitted before the forecast isfinally accepted. And sometimes more than onemanager is involved in creating a single forecast.

In a group context there will be a further layer ofcollection, as subsidiaries forecasts are submittedto the holding company for consolidation into thegroup forecast. This is very difficult to achieve on a

timely and cost-effective basis with Excel alone.

Workflow

As more people become involved in creating theoverall forecast, and their individual forecasts aremore subject to negotiation back and forth, it isnecessary to keep track of documents and whichindividual within the organisation has them at anymoment in time.

This is known as workflow. With workflow you cansee a list of the outstanding documents which willmake up the budget. It shows who has got thedocument, and when they received it. Emails between

yourself and the managers are stored as well.

Version control and data integrity

As the forecasts are revised and resubmitted, it willbe necessary to keep track of the different versionsout there, and to record which individual has madewhich changes to the document.

As revised forecasts are received, the new versionneeds to be plugged into the company forecast.Version control also allows you to keep track ofwhich versions of the departmental forecasts arecurrently incorporated into the draft companyforecast.

Large organisations usually need a multi-user databasesystem, with the software resilience and controls overdata integrity that this requires. Top-end solutionsincorporate these features, but at a cost in terms ofboth software and hardware requirements.



account of the latest developments. The 12-monthforecast becomes a rolling forecast since it is beingcontinually updated every quarter. Rolling forecastsare widely regarded as a better way to improvemanagement and help companies think proactivelyabout their business.

However, moving from an annual to a monthlybudgeting cycle can create a huge burden forbudget holders and managers, so the F&B systemneeds to automate and simplify the data entry andreporting process as far as possible.

Matching nominal and budget categories

There is one important piece of housekeepingto be aware of. Generally speaking, organisationsbudget at a level higher than nominal code level.So in their budgets they might have 10 categorieswhich cover 20 nominal codes in the chart ofaccounts.

You need to make sure that the F&B package hasthe facility to assign (map) each nominal code toa budget category, so that reports of actual versusbudget truly compare like with like.

In the same way, if a new (and therefore notbudgeted for) nominal code is set up during theyear, it must be straightforward to assign it to abudget category and to ensure that individualnominal codes cannot be omitted from the finalreports.

4.6 SOFTWARE WILL NOT SOLVE EVERYTHING

A word of warning before we look at the software

buying process. While modern F&B software canhelp automate and improve the budgeting process,it has to be said that the principle underlyingweaknesses in the F&B systems of most companiesare not software-related. To fully realise thebenefits of its new all-singing, all-dancing software,management needs to re-evaluate its budgetingprocess and take this opportunity to improve theentire budgeting cycle not just the software usedin the cycle. This is an area where the accountantand finance team can offer some valuableleadership.

We can assume that every F&B package is capableof reporting in the standard columnar format ofactual, budget, variance for this month and year todate. However, you may require other formats, forexample:

Multiple variances

Rather than simple totals of actual-budget-variance,do you want to report multiple variances? For example,when reporting on sales and cost of sales, you mightwant the software to calculate multiple variances suchas sales price variance, sales volume variance,purchase price variance, exchange rate variance, etc,perhaps as part of a system of standard costing.

Flexed budgets

If one item in a P&L report differs from forecast, itmight invalidate the variances of all the other itemsin the report. In this case do you want to be able tohold flexed budgets reflecting differing scenarios?

For example, in the hotel business, you mightproduce budgets based upon 60%, 70% or 80%occupancy levels. If the company achieves 70%,you will wish to use that version of the budgetwhen reporting actual against variance, thusensuring that all the variances are valid.

Driver variances and KPIs

Reporting results in purely f inancial terms maynot be as meaningful as reporting the key driversdirectly. Therefore aim to include target and actualfigures for the major business drivers in your reports.

Perhaps these could be presented as a set of non-financial KPIs (key performance indicators) whichaccurately reflect the performance of significantbusiness drivers.

Rolling forecasts

Most budgets are produced for a year ahead. Asthe year progresses, if the actuals and budgets startto diverge it will become clear that the budgetedfigures for the latter part of the year may beexceeded or missed.

Critics of traditional budgeting methods arguethat forecasts based on incremental changes to

the previous years actuals are time-consuming toproduce, inefficient and make no contribution tocorporate strategy management.

A better approach is every month or quarter torevise your forecast for the next 12 months to take



Once you have decided that you wish to goahead and buy a package, you need to do somepreparation before you start seeing potentialsuppliers. Firstly, you have to identify who needs tobe involved in the buying decision. Secondly, youhave to set up a test pack of sample data. Thirdly,because the market is so diverse, you need to

define your own needs and get a clear idea ofwhat sort of package you require.

5.1 BEFORE YOU TALK TO SUPPLIERS

The buying team

First, set up a team of users who will attendproduct demonstrations and recommend whichproduct you buy. F&B is often a complex exercise,involving the collaboration of numerous users indifferent departments of the organisation. Thereare three distinct groups:

There are the forecasters, who need to improve

the quality of their forecasts, usually withrespect to sales. They need more sophisticatedtools.

There are the accountants, who need toaggregate everyone elses forecasts together,and derive a cash-flow forecast and balancesheet.

Thirdly, there are the budget holders, whosubmit the forecasts for their own departments.They want a package that is easy to use, likeExcel.

The needs of all three groups are dif ferent and

it is important to make sure that the interests ofall are represented in the buying decision, ratherthan just one of them. So identify the forecasters,accountants and budget holders in your ownorganisation and ensure that someone from eachgroup is on the team.

Put together a test pack

Demonstrations from possible suppliers shouldbe as close to the realities of your organisation aspossible. Therefore, when demonstrating, makesure that they use your data rather than their own.

So, before talking to suppliers, you need to put

together a test pack of your own data which thesoftware should be able to handle. Make sure themore complex areas are covered, eg, sales, salariesand cash flow. Use this during demonstrations.

5BUYINGA PACKAGE



Do we want to include committed costs(ie, sales and purchase orders)?

Is Excel good enough, or do we need a third-party package?

Collection:

How many subsidiary schedules will go intothe company P&L?

Do we need them consolidated into a singledatabase?

Do we need workflow?

Do we need version control?

How should budget holders submit theirforecasts (email, internet, Sharepoint, etc)?

Reporting:

Do we want to produce our monthlymanagement pack with this package?

What layout do we require for eachmanagement report?

Do we want to include non-financial data (KPIs)?

Do we want to implement rolling forecasts?

Implementation:

Should we buy a highly customisable toolkitsolution and invest time and money in settingit up, or would a packaged solution meet ourrequirements?

How much professional help will we needto set up our F&B system in terms of initialconsultancy and ongoing training?

How quickly will we be self-sufficient ie, ableto use the system without help from externalconsultants?

Do we have sufficient internal IT expertise toimplement a complex package? If not, canwe outsource or use a Software as a Servicesolution?

Do we have special requirements such asremote, multi-user access, access from non-PCdevices such as smartphones and tablets,multi-currency or multi-language?

How easy is it to connect the F&B system toour existing accounts and other back-officedatabases?

One of the key requirements in any forecastingsystem is flexibility. So test how easy it is to changea model. How easy is it to amend underlyingdrivers and assumptions? How quickly is theforecast re-calculated?

Define your needs

The variety of F&B packages is enormous, reflectingthe different types of organisation they cater for.You will save yourself a lot of time if you can workout what segment of the market you are in.

Developing the test pack will help crystallise yourthinking on this.

The software package you need depends really ontwo levels of complexity. The first is the complexityof the model(s) you want to set up in order to makepredictions about your business.

The second is the complexity of the business inlogistical terms (number of staff involved in creatingthe forecast, number of sites, etc).

And do you have a prediction problem or acollection problem, or both? If the departments arereasonably accurate with their forecasts but it is alot of work to consolidate them together, you havea collection problem. If the forecasts from somedepartments are inaccurate or inadequate, youhave a prediction problem.

Some key questions

Prediction:

Do we need better analysis of historical data

(OLAP)?

If yes, how many dimensions of analysis do weneed?

Do we need to introduce driver-basedforecasting?

Do our models accurately reflect the drivers ofthe business?

Are our models reliable for repeated use?

Do we need outside help to create bettermodels?

Cash-flow modelling:

Are our cash inflows complex and/or lumpy?

Are our cash outflows complex and/or lumpy?



the additional consolidation module if you needto collect individual forecasts to create an overallcompany or departmental forecast.

Sage 50 Forecasting will take the elements of theP&L forecast and allow you to enter sophisticatedpayment terms onto individual revenue streams or

expenses. And it can handle the lumpy cash itemssuch as VAT repayments. Effectively, it allows you tocreate good quality cash-flow forecasts and balancesheets.

As such, Sage 50 Forecasting is very much anaccountants product, enabling you to take theforecast at P&L level and convert it into a goodquality cash-flow projection and balance sheet. Itcan import data automatically from Excel, whichremains better for departmental forecasting. Asan added bonus, it can also import actual dataautomatically from Sage 50 accounts and manyother SME accounting packages.

Small to medium organisations

Sage 50 Forecasting is fine as long as all thework is done by the accountant. However, as thecompany gets larger, forecasts are now done bythe individual managers who are, after all, closer tothe action and the best qualified to make forecasts.Invariably these are written in Excel and are ofvarying quality.

You could enter the results of all these subsidiaryschedules into Sage 50 Forecasting, but the detailof the schedules would be lost. So if, for example,you want to query the Personnel costs in the

company forecast you will have to go to a separateExcel worksheet to see the detail.

At this point you might invest in a product such as4CastPro, which offers collaborative working andworkflow controls over a local area network, viadistributable spreadsheets or the web.

Such solutions meet the needs of managers andFDs who so far have done all their forecastingin Excel. They are comfortable with Excel andappreciate its flexibility, and want to stick with it.But at the moment they are f inding it hard to linkall the disparate worksheets into a coherent whole.

Medium to larger organisations

As the organisation gets larger it may seeforecasting and budgeting as very much a tool forrunning the business on a day-to-day basis.

What about Excel?

And finally, where does Excel stand in all this?Are we willing to banish Excel entirely, or wouldthere be too much resistance from users?

Can we find a package that uses Excel for datacollection and reporting for those who are

most comfortable with that platform, while alsocatering for non-spreadsheet users too?

5.2 A GUIDE TO THE MARKET

There is a wide variety of packages out there,catering for a wide variety of users. Some aredesigned for small businesses, others for larger.Some aim at the general business user who needs agood set of forecasting tools; others aim specificallyat the accountant, with emphasis on cash-flowmodelling and reporting.

In this section we will look at the various marketsegments and the packages that serve them.

The accountant in practice

Typically, the accountant in practice will be askedby a client to help them put together a businessplan to submit to a bank manager or potentialinvestor. The client has probably already producedtheir own month-on-month P&L forecast. Theynow need their accountant to add a cash-flowforecast and turn it into a professional-lookingbusiness plan.

Use Excel for this, or one of the off-the-shelf Exceltemplates.

The accountant in a small business

In a small, owner-managed business, theaccountant sits down with the Managing Directorand perhaps the sales manager (in the smallestcompany one person may hold all three roles!) towork out the forecasts. Based on discussions withthem, they will type all the forecasts for the variousareas of the business into a spreadsheet.

The final company P&L may end up as a rathercomplex beast in Excel, with lots of updatingand embedded formulae between the dif ferentworksheets. However, because you have produced

it yourself, you are in a position to understand it.Excel can handle the P&L side of the forecast,but if cash-flow projections and balance sheetsare required, it becomes increasingly unwieldy.In this case, consider Sage 50 Forecasting, with



Most of these forecasting modules were developedindependently by specialist companies and weresubsequently bought in and rebadged by themajor players as they jostled to keep up with eachother. Unfortunately, small niche products oftenfail to flourish once they have been taken over bylarge vendors so it is worth looking at the support

and development history of such products sincetheir acquisition. As a general rule, packages fromspecialist independent suppliers are superior.

Larger organisations can afford the expense ofOLAP-based forecasting solutions, such as IBMCognos TM1, which is a high-end OLAP-basedpackage which can analyse millions of transactionsyet still offer speedy response time. TM1 is verymuch a specialist point solution for analysing salesor similar data, but also incorporates the specificrequirements of the accountant.

Departmental heads submit their budgets, theaccountants produce monthly reports on themshowing variances, and these variances are analysedin order to see if the business is still on track or ifthe plan needs to be updated.

This is the emphasis of a product like Advanced

Business Solutions Open Planning, which is a suiteof planning software that is independent withinitself and does not use Excel. It is aimed at themiddle-size organisation that wishes to implementa F&B system, then use it as a central part of therunning of the business. Workflow and versioncontrol are well catered for. Since it concentratesvery much on the company-wide aspects of theforecast, Open Planning is particularly strong onthe needs of accountants.

Moving up to the next level, the upper mid-marketand enterprise space, we come to OLAP-basedproducts such as Prophix, described as a unified

performance management system.

The rise of cloud computing

Many business applications are moving onto aSoftware as a Service (SaaS) basis, often referredto as cloud computing, where both applicationsand data are hosted remotely and accessed via aninternet browser. There are now several establishedF&B SaaS solutions, for example Adaptive Planning(www.adaptiveplanning.com), a highly scaleablesolution which requires simply a computer ormobile device with internet access for each userplus on-site connectors to upload the customersaccounting data to the cloud. Organisations of allsizes will find the low entry cost, rapid deploymentand outsourced IT aspects of cloud solutions veryattractive.

Large organisations

There are numerous packages at the top, enterpriselevel such as IBM Cognos Planning TM1, OracleHyperion and SAP Business Objects, all of whichlink to the suppliers own accounting package.This brings benefits in that the analytics and theplanning can be closely integrated.

Microsoft incorporated its Performance Point Server

into the enterprise version of Sharepoint Server in2009 and no longer markets a separate, standaloneF&B product. Microsoft Dynamics ERP systemsincorporate their own BI and forecasting tools.



Advanced Business SolutionsCollaborative Planning

TARGET MARKET

Collaborative Planning is especially suitable for larger public and

private sector service-based organisations which are accounting-driven. A big advantage is that it comes from a supplier with lotsof experience in implementing accounting systems in this area.

COST

Details on application.

CONTACT DETAILS

Website: www.advancedcomputersoftware.com/abs

Telephone: 0845 160 6162

6REVIEW OFFORECASTINGAND BUDGETINGPACKAGES



As the name suggests, collaboration is a key featureof the system. Access is carefully controlled, everyuse of the system is date- and time-stamped andevery amendment is logged so that managerscan see a detailed audit trail of changes made tobudgets. To meet the demands of public sectororganisations, virements are carefully controlled

and logged to ensure all budget transfers areproperly authorised and approved. Systemmessages or emails can be created automaticallyas completed budgets are passed up and downthe organisation. Work instructions can be storedwithin the application, avoiding the need to keepreference documents on a separate intranet.

The screens are admirably clear and drill-down isexcellent, from group level all the way down tothe cell audit of all changes made to any number.And in the case of past actuals, you can drill downto transaction level. Where budgeting from driversis required, dedicated calculators can be created

to generate data, for example detailed employeeresource data from an HR system can be compiledto generate budgeted payroll costs. Advancedsconsultants will help users build models as partof their implementation, but always aim for skillstransfer so that users are self-sufficient as soon aspossible.

Data can be output to Excel in various forms, allmaintaining the underlying CP hierarchy, formattingand cell notes, for ad hoc reporting, but thesystem includes a comprehensive range of built-inreporting options including graphical dashboards.

SUMMARY

A very attractive enterprise class package, whoseweb-based design based on a single, centraldatabase makes it quick to consolidate budgetsin real-time with what Advanced refers to as oneversion of the truth. Being web-based it allowsmanagers anywhere in the organisation to workon budgets and view reports in real time. Screensare elegant and easy to use. Being able to integratepast actuals from the accounts system with yourbudgets is very helpful, and drill-down is excellent.It gets the whole budgeting process under controlfrom the point of view of the accounts department.

CP has been written generically in order to workwith any of Advanceds three accounting packages,so it can be configured to work equally well withother finance systems in the market.

OVERVIEW

In 2010 Advanced Computer Software Group plc(ACS) acquired COA Solutions, one of the UKslargest suppliers of accounting software to publicenterprise sector and customers. COAs productsincluded a Corporate Performance Managementsuite (BI scorecards analytics dashboards etc)called Collaborative Planning, a budgeting andforecasting system which works with all grouppackages and third-party accounting systems too.COA Solutions became the Advanced BusinessSolutions division of ACS.

Most customers at present are those in Advancedsown accounting systems specialist area mid-market,service-type organisations in the public and privatesectors where budgeting activity is typically drivenby the accounts department, who may be findingthemselves bogged down in pulling togetherinnumerable spreadsheets.

Collaborative Planning (CP) is a web-based systemthat handles budgeting, forecasting and forwardplanning. It consolidates and holds the data in asingle database. You can budget at both generalledger and project level, and create multiple modelswith different dimensions based on data from multiplesources general ledger, sales, HR payroll, etc.

In appearance CP is very attractive and easy to use.It uses tools familiar to spreadsheet users to manipulate,calculate and aggregate data in a browserenvironment. Entering figures is easy, with goodfacilities for entering a total figure and smoothingit, or decreasing and increasing by a percentage.

Wizards are available to automate many processes.Because it is linked to the accounts system, CPholds profiles based on previous year actual andyou can apply these to the budgets as well (one ofthe advantages of buying both your accounts andyour budgeting system from the same supplier).

The Budget Cycle History Details screen shows aglobal view of where you are in the budget preparationprocess. Activities can be timetabled and trafficlighting quickly identifies the status of eachdepartments budget to facilitate overall controland supervision of the budget process. Budgets,once submitted, go to managers who can see their

own consolidated position. They can adjust thenumbers, then send them back to the originators,all of this taking place immediately over the internet.Conversely, central budgets can be set and allocatedacross departments based on user-defined rules.



4CastPro

TARGET MARKET

SMEs with turnover up to 50m.

COSTFrom 1,590 (single user).

CONTACT DETAILS

Website: www.4castsolutions.co.uk

Telephone: 01291 630603



Accounts can be grouped and analysed to givemultiple views, for example by cost centre, location,department or product type.

The spread/fill and 5 Year Plan Tool make it easyto populate a detailed budget very quickly using arange of customisable parameters.

A copy of the data can be made to enable the userto make what-if calculations or flex the entirebudget.

Reporting is a particular strength of the system.4CastPro includes two well-designed (butcustomisable) reporting packs, a ManagementAccounts pack including statutory format anddetailed management accounts, and a Plan Packwhich includes 12 month P&L and balance sheetsfor as many years as required. These enable usersto quickly prepare formatted consolidated reportsfor board meetings, etc without needing to resortto Excel, although they can of course be furtherenhanced and added to in Excel if required. TheJournal facility enables a user to make changesto imported data while reviewing managementresults; journals can then be printed out and passedback to the accounts department for posting.A Word template is also provided to assist indrafting a narrative business plan to accompanythe financial data.

SUMMARY

4CastPro achieves a lot of its original aim of fillingthe middle ground in the F&B software market.It is the natural solution for Access Dimensions users

but would also suit users of Sage 50 and groupswith multiple systems needing consolidation,budgeting, monthly re-forecasting and a monthlymanagement accounts pack but without theinvestment required to implement one of thetop end F&B solutions. However, it works just aseffectively for a single company, single cost centreentity that simply needs an efficient managementreporting and forecasting tool.

OVERVIEW

4CastPro was developed by chartered accountantRichard Walliker to fill a gap, observed in hiswork as FD consultant, between companies suchas SAP and IBM at the one end and Sage at theother. 4CastPro has been developed to datealmost exclusively as a partner product to AccessDimensions, although it does offer links to Sage 50(via ODBC), Pegasus and Systematics, and indeedto any other system via Excel and CSV data export.As such it is ideal for companies needing to bring inand consolidate data from multiple systems, and inmultiple currencies. Access Dimensions users havethe additional benefit of being able to drill downinto underlying transactions in their accounts fromwithin 4CastPro.

The software is written in Visual Studio 2010 and isusually run as a Microsoft VB Jet (Access) databasefor portability although it can be run under SQLServer in larger organisations. Using Access enablesusers to simply take the .MDB data file on a laptopto work off-site.

The software uses an easily-followed tabbedworksheet interface which should enable the userto be up and running very quickly after the initialsetup, which generally requires a couple of daysconsultancy to effectively link to a companysdata sources and pull in actual data to producemeaningful reports.

4CastPro excels in multi-level budgeting andconsolidation. The six-digit cost centre codingenables users to create a sophisticated hierarchy of

cost centres, from the group consolidated budgetat the top down to individual departmental budgets.Each cost centre can import data from a differentsource, which makes for maximum flexibility.

Data can be held for the current and two priorperiods plus up to five future periods.

Entry and control of key data and assumptions aresimplified by the use of a number of dedicatedcalculators for areas such as sales, staff and capitalexpenditure. The FX Import facility holds currencyand exchange rate data for multi-currency scenarios.For more complex budgeting, or where individual

areas need to be delegated, offline calculations canbe made in Excel using templates generated fromthe supplied Excel add-in. Templates can be used toautomatically write back detailed changes into themain budget.



IBM COGNOS TM1

TARGET MARKET

Medium-sized and large organisations with large volumesof historical data to analyse, and requiring a powerful OLAPbudgeting, forecasting and analysis solution.

COST

Price on request.

CONTACT DETAILS

Website: www.cognos.com/products/tm1/

Telephone: 01475 898688



Users access the software via a choice of interfaces,including Excel, web and the new CognosInsight interface that has been designed withnon-spreadsheet users in mind. The personalisedanalysis and planning desktop combines analysis,planning, reporting and personal dashboards in asingle, intuitive-looking interface. At one extreme,

Cognos Insight opens up the opportunity forstandalone users to do analysis with TM1, while thesystem scales up to the largest installations withover 1,000 users.

Users are not left to reinvent the wheel as dozensof helpful Cognos Performance Blueprints pre-configured templates are available to makeimplementation quicker, at less cost and withless risk.

Cognos Analytic Server can be deployed on acentralised or distributed basis, depending on thelevel of interactivity required. A strong feature

of TM1 is its scaleability, but it really comes intoits own in large organisations where it offers asingle secure environment to enable localisedresponsibility for the planning process andcollaboration across business units, functions andgeographical spread, but with clear accountabilityand control at the top level. Users can collaborateacross the organisation by promoting their plansin a tailored dashboard in Cognos Business Insight,publishing material in Cognos Business Intelligenceor moving their plans to the web for widerdistribution.

SUMMARY

TM1 is very much aimed at the end-users ratherthan the IT department. The facility to access itusing both Excel and the Cognos Insight interfacemakes it equally accessible by finance and non-finance staff. It manages to be a system that canbe controlled by the finance department, withbusiness users managing their own work, butwithout a need for constant IT support.

TM1 is a very powerful enterprise-level solutioncombining a comprehensive set of tools forreporting, planning, budgeting and forecasting,so the cost of implementation will be far higher

than that of the other products in this guide. Withthat proviso, TM1 is a superb product as longas you can justify the IT investment to support anOLAP system.

OVERVIEW

Conventionally, analysis of historical data from anaccounts/ERP package (in the jargon, analytics) isdone by BI (business intelligence) software, whilepredicting the future is done by a forecastingpackage, and the two areas are kept separate.However, OLAP-based systems like IBM CognosTM1 straddle both BI and forecasting, takinghundreds of thousands or millions of transactionsfrom your accounts/ERP package and allowing youto slice and dice them any way you want. Havingused TM1s analytical abilities to make sense of thepast, you can then use its forecasting abilities topredict the future.

Initially, organisations are likely to buy TM1 as asolution for a particular departmental problem Cognos say it is suitable for sales analysis, financials,budgets, merchandise planning, risk analysis,mergers and acquisitions, modelling and ABCanalysis, and that it can be used by the FinancialController, FD, Sales Director, Marketing Director,Board and CEO. After the initial installation otherdepartments are likely to see its potential.

Technical

The key advantage of OLAP software is that itcan punch its way through vast amounts of dataquickly enough to offer acceptable responsetimes. Suffice to say that TM1s patented 64-bitin-memory OLAP engine does real-time dataanalysis and writeback (the forecasting element)in the blink of an eye, whatever the size of thedata set. The Cognos Analytic Server includes

data connectors that are shared with IBM CognosBusiness Intelligence to streamline the loading ofdata from disparate sources into models, and toassist users in automating the import of the datathey require, no matter what other systems anorganisation may run.

Once you have installed TM1 and defined thedimensions of analysis you want to use, you canthen create the data cubes (ie, summary totals)you require and base your forecasts and yourmodels on them. You can, however, refine youranalysis by adding, removing or refining thedimensions, move between financial and driver-

based forecasting, and create any number ofwhat-if scenarios with the innovative sandboxfeature. Once you are happy with the final version,this can be locked in read-only mode and time-and date-stamped ready for review and approval.



OVERVIEW

Prophix was established in Ontario, Canada in 1987and has been developing its own software solutionssince 2000. It now has over 40,000 users in 94countries of which the UK is the fastest growingregion. At the top end of the market it competeswith large enterprise focused products such asIBM Cognos, Oracle Hyperion and SAP BPC butis entirely scalable, from a single user to its largestinstallation with 2,500 users. As a unified solutionevery customer gets exactly the same singlesoftware installation and software pricing relates tothe number of users and servers required to run.

Built on the industry leading database platform(Microsoft SQL Server 2008 R2) it is a very opensystem that can be easily used via Open DatabaseTechnology (ODBC) with all sizes of accountingsystems, from enterprise-level ERP systems suchas SAP and Oracle to SME accounting packagessuch as Sage 50. As well as from the generalledger, Prophix can also import source data frommultiple underlying systems including non-financialsources such as payroll (HR), sales and procurementsystems. In addition to ODBC it also supportsconnection via SQL, CSV, Excel and, if needed, theimports can be scheduled to run automatically.

Essentially Prophix is a unified performancemanagement solution. It can be used simply formonth-end closing and management reporting,or for fully integrated budgeting and forecastingright through to a full CPM solution for an entireorganisations per formance management needs. Ithas very strong multi-currency functionality whereall figures can be reported in either native or groupbase currency.

User-definable dashboards can be set up to displayhistoric data, with full drill down to more detaileddashboards for individual areas of the business,and further on down to the underlying data.Data can be further analysed by creating ad-hocreports to identify problem areas the processuses simple point and click formatting, very muchlike Excel but without the related shortcomings.More importantly reporting is based on the currentaccounting data so users can produce detailedtimely real time management information. Ifnecessary, data can also be output to Excel fordisconnected analysis.

PROPHIX

TARGET MARKET

Prophix has historically targeted the finance department ofsmall to medium-size enterprises (SMEs). However, with a broadcorporate performance management (CPM) offering Prophix canaddress many other operational business areas as well, such assales, marketing, human resources etc.

COST

Price on request.

CONTACT DETAILS

Website: www.prophix.co.uk

Telephone: 01256 338611



Any budgeting methodology can be used top-down, bottom-up and zero-based budgeting are allcatered for. Spreadsheet-like templates are used fordata entry, incorporating a wide range of optionsfor spreading and calculating the plan. Users mayadd cell comments (date and time stamped) toexplain entries and external supporting documents

may be appended to comments. Althoughtemplates may display data at nominal accountlevel, data may be entered at transaction level, forexample in an itemised capital expenditure forecast.In fact, line items can be set as mandatory for keyitems, forcing users to itemise a plan submissionrather than just entering a summary figure.

Figures can be allocated on a top-down basisthrough an organisation, for example a top-downdistribution of sales targets across subsidiaries/divisions/sales reps. These may be spread evenly,based on specific historic data, or by the userschosen formula.

The Detailed Planning Manager functionalitywithin Prophix 10 enables users to link Prophix tonon-financial data such as HR, capital expenditureor sales volumes. For example, the payroll expenseforecast can be based on a linked, external payrollsystem and detailed budgeting can be executedon headcount, remuneration, benefit packages,pay rates, bonuses, etc. What-if calculations madewithin the headcount planning model will feedautomatically back into the forecast to see thefinancial impact.

Rolling current year forecasts may be set based on

year-to-date data, and multi-year forecasts of up to60 months can be generated quite simply once thesystem is up and running.

Reporting in Prophix is powerful and very flexible,with output to Excel (fully formatted), PDF or asHTML to Sharepoint to be distributed via an intranet.The Report Binder can combine external documentsand files with Prophix reports, and may be run anddistributed automatically to a stored set of emailaddresses on a set schedule. Output is well-designedand easy to follow for example, the monthlyvariance income statement automatically highlightsin red any variances against the consolidated

budget. Standard reports include cash flow andfull financial accounts. Recurring consolidationjournals can be saved and run automatically eachmonth, and reports run at group level or simplyconsolidating all departments within a single entity.

For buyers at this level, user control and accessrights are important. Each user is given accessrestricted to the information relevant to theirresponsibilities and only sees tasks that have beenassigned to them via Workflow, which automaticallygenerates email reminders of impending deadlines.

The multi-user Workflow Manager, which isconfigurable to suit your organisation, gives aflowchart overview of the budgeting process;clicking on each stage reveals the status of eachtask which is colour-coded to highlight whethernot started, in progress, submitted or completed.

SUMMARY

This is an enterprise-level solution which includesmany of the features found in the leadingenterprise-focused products and yet manages tobe quick to learn and easy to use. Prophix claimsthat the softwares modest IT requirements, fastimplementation and low total cost of ownershipare behind the companys rapid growth in recentyears. This is much more than a F&B solution,as we might expect from a company whichstarted as a business intelligence (BI) reseller. Themanagement reporting functionality is particularlyimpressive, and could streamline monthly reportingin a medium-sized group even without venturinginto the budgeting, forecasting and financialconsolidation side of the software.



OVERVIEW

Sage 50 Forecasting is an updated version ofWinForecast Professional, although it lacks theconsolidation feature of WinForecast whichallows you to combine multiple forecasts up toa group level forecast, and perform group levelfunctions such as eliminations and allocations.Sage WinForecast Professional Consolidation is stillavailable as a separate application for companiesrequiring those features. Both packages can actstand-alone, allowing you to enter budgets and/or actuals manually, as well as accept budget and/or actual values from both Excel and Sage Line 50(now Sage 50 Accounts).

Unlike larger systems, Sage 50 Forecasting doesnot use database technology, all data being heldin a compact single .SFF file, making it relativelyundemanding in terms of hardware requirements.Users install it themselves from CD without theneed for expensive consultancy to implement it.

Sage 50 Forecasting employs the use ofrecord types and entry methods to generatea forecasting model. The software containsparticular sets of record types to deal with difficultcalculations. These seem capable of handlinga range of scenarios, including most spikytype payments, such as quarterly rent and VATpayments. In the case of a Financed Asset, youcan feed in the deposit, interest rates, term of HPcontract or lease etc. Sage 50 Forecasting will workout the monthly capital and interest elements, andfeed them into the balance sheet, P&L and cashflow. It will also handle depreciation and accruals ofinterest within the different records. Specific entrymethods are also provided for payroll and stockusage calculations.

These entry methods are also where you can selectto import values from either Excel or 50 Accounts.

Using the flexibility of the record types and entrymethods you can perform a number of functions.For example, it allows you to take either the P&Lbudgets, prior year or actuals out of Line 50 orExcel, amend or reforecast them, then convertthis forecast into a cash flow or funding projectionbased on anticipated payment terms.

Or you can enter all your budgets manually, usingthe entry methods to assist you in calculating thecash-flow forecast, and then import actual P&L andbalance sheet from 50 Accounts and Excel (or enterthem manually) to give you variance reports.

SAGE 50 FORECASTING 2007

TARGET MARKET

Sage 50 Forecasting is described as being for growing andestablished businesses. Its typical users are SMEs.

COST

From 593.00 + VAT (limited offer of 50% discount from theSage Store).

CONTACT DETAILS

http://shop.sage.co.uk/forecasting.aspx



By using the different record types and entrymethods it also makes it quick and easy to createdifferent what if scenarios, and view the effectson your business. For example, you could explorethe potential effects of purchasing an asset in sixmonths time on your projected bank account.You can then use the outcomes of these what if

scenarios to make preparations for the future.

The software allows you to budget for unlimitedcompanies, divisions or departments down to grossprofit level, but only one set of overheads. SageWinForecast Professional Consolidation is requiredif each company, etc needs to budget for its ownoverheads and net profit.

Sage 50 Forecasting gives users an intuitive andeasy to learn means of controlling working capital.Cash-flow projection is a particular strength if usersneed figures to support funding applications toinvestors or the bank manager.

Forecasting

Once actuals are entered Sage 50 Forecasting willautomatically forecast the outturn for the currentperiod. It allows you to make multiple forecastsreflecting different possible scenarios; this isperformed by saving the forecast as a different file.You can also have two sets of budgets in the sameforecast: original budgets and revised budgets.

Original budgets can be copied over to revisedbudgets, and vice versa, and then amended, or youcan create a completely new set of revised budgetsfrom scratch.

By having both original and revised budgets, onceactuals are entered or imported you can comparevariance reports to both original and revised, aswell as viewing projected reports based on actualsfollowed by either original or revised values.Budgets can be flexed and what-if scenarioscalculated at the press of a button.

For pure forecasting, Sage 50 Forecasting isperhaps a bit limited. For example, there is no easyway to list the assumptions behind the forecast,which remain embedded in the data. Most peoplewill probably continue to run their more complex

calculations through Excel and import the resultsinto Sage 50 Forecasting.

SUMMARY

The original WinForecast package was muchpraised by readers of AccountingWEB over theyears, although some say it has become a littlebit more difficult to use since Sage took it over.The real strength of Sage 50 Forecasting lies in itsability to take a P&L and assist you in generatingbalance sheet and, more importantly, cash-flowprojections. The latter is a valuable mechanism forkeeping control of working capital. Managers whouse it should be able to talk to their bank managerswith confidence.

As a pure forecasting tool it is probably not asflexible as Excel and most people will continueto budget in Excel, pulling the data into Sage50 Forecasting via hot-linking. It would benefitfrom being able to print out a plain English list ofassumptions behind the forecast.

Sage 50 Forecasting works well in a single user

environment where the accountant or managerof the business handles all the budgeting side andholds everything in their own head. Multi-useraccess is possible, but there is no provision forlimiting user access rights or version control. It isnot therefore so appropriate where the data needsto be shared and forecasting is a collaborativeeffort. (A collaborative effort is more suited toWinForecast Professional Consolidation, where itallows you to consolidate individual forecasts.)



There are a number of service providers and software developersoffering F&B solutions. While the following list is not complete, it doesprovide the web addresses for a cross section of the many available.

Advanced Business www.advancedcomputersoftware.com/Solutions abs/budgetingCollaborative Planning

Advanced Business www.advancedcomputersoftware.com/absSolutionsOpen Planning

Adaptive Planning www.adaptiveplanning.com

Budget Maestro and www.centage.comPlanning Maestro

Cashflow Wizard www.DecisionCurve.com

4CastPro www.4castsolutions.co.uk

GoForecast www.financegofer.com

IBM Cognos Express www-01.ibm.com/software/analytics/

cognos/express/

IBM Cognos TM1 www.cognos.com/products/tm1/

Microsoft Office www.microsoft.com/biPerformancePointServer 2007

Oracle Hyperion www.oracle.com/us/solutions/ent-Planning performance-bi/

PlanGuru 2011 www.planguru.com

Planware www.planware.org

Prophix www.prophix.co.uk

Quantrix Modeler www.quantrix.com

Sage 50 Forecasting http://shop.sage.co.uk/forecasting.aspx

SAP BusinessObjects www.sap.com/uk/solutions/Planning and sapbusinessobjectsConsolidation

7SUPPLIERDIRECTORY



Nigel Harris BA CTA trained with Thornton Baker(now Grant Thornton) in Bristol, qualifying in 1981.He subsequent

Documents

Forecasting and Budgeting Software