Editor’s notE Cloud BudgEting softwarE CovErs EntErprisEs

MovE out and MovE on froM ExCEl

prioritizE BudgEting BEst praCtiCEs

Keep Budgets tethered, Even as they rise to the CloudBudgeting, planning and forecasting practices can help keep companies grounded—but only if they have the right software and strategy.

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Budgets rise skyward

More and more companies are dropping Microsoft Excel and moving to budgeting, planning and forecasting software. Some are even entrusting their financial processes to the cloud.

This three-part handbook is aimed at help-ing people figure out how to consider and use software to improve those budget-centric processes.

Many in finance are finding the best way to plan and forecast is in the cloud. The cloud trend started several years ago with smaller companies. Now, more large organizations are moving their budgeting software to the cloud, for reasons discussed in the lead article of this handbook. In one example, the central control-ler at Intel Security discusses some of the ben-efits the division of Intel Corp. is seeing with cloud budgeting, including speed, ease of use and the ability to access massive amounts of data for analysis and modeling.

The remaining stories offer critical advice for businesses, no matter what type of software they may be considering for budgeting auto-mation. One, by freelancer Linda Rosencrance, includes advice from executives and consul-tants about how to know when the time is right to stop passing around Excel spreadsheets and switch to budgeting, planning and forecasting software.

To close, consultant Barry Wilderman spells out the best practices for putting together a budget that extracts the most value from the software.

Regardless of what type of budgeting soft-ware may be on the horizon for your company, this guide provides some key tips and insights about how to make the most of a big purchase.n

Dan RingNews Writer

SearchFinancialApplications

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Cloud Budgeting software Covers Enterprises

With more than $2.5 billion in annual revenues and millions of customers, Intel Secu-rity Group demands a lot of teamwork from its financial planners.

That’s one reason that this year, the company dropped on-premises Hyperion Planning from Oracle for certain operating expense and rev-enue planning and switched to Anaplan cloud-based budgeting software.

Intel Security is among the first large enter-prises to move to the cloud for financial plan-ning and analysis. Smaller companies led the way, but this year, more and larger organiza-tions have been migrating to the cloud for financial planning and analysis, according to analysts and vendors.

“Two to three years ago … organizations were asking about the cloud and testing the water,” said Christopher Iervolino, an analyst at Gartner. “At this point, they are diving in.”

Jeff Brobst, the central controller at Intel

Security, said the company first began using Anaplan in 2012 when it started phasing out Microsoft Excel-based legacy processes. Intel Security—a division of processor maker Intel Corp., based in Santa Clara, Calif.—began using Anaplan for functions such as forecasting sales commissions and some financial planning and analysis, including determining discount approvals for proposed quotes of customers.

Anaplan now provides more than 25 financial applications to Intel Security, which has 8,000 employees. With Hyperion, which was in place for more than eight years, Intel Security only used two of its applications.

Brobst said Anaplan is very easy to use, makes people more efficient, and looks and feels a lot like Excel, only with cloud advan-tages such as speed. For example, he uses Ana-plan for 18-month rolling forecasts of revenues. Revenue forecasts for software are notoriously tricky, but Brobst said his are generally within

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1% to 2% of actual revenues. Anaplan has improved and sped up revenue forecasts and made them more transparent, allowing collabo-ration among planners, he explained.

Anaplan also has a very good calculation engine, Brobst said. “Not only does it forecast, it quantifies the risk. Because of that, there is more trust. When you have more trust, it allows you to act with more agility.”

Previously, revenue planning was done in Excel, with finance users doing an upload to Hyperion for corporate compliance, Brobst explained. Similarly, some work with operating expenses was handled in the Hyperion applica-tion, and some was in Excel.

Brobst said Anaplan gives users the flexibil-ity of Excel and the additional ability to quickly access massive amounts of data for analysis and modeling of such measures as income, expenses and profits. Excel does not provide use of those large data sets, he said.

Big growth

Smaller companies led the move to the cloud for budgeting software for several reasons.

They typically lack the IT budgets to pur-chase many traditional on-premises products, which initially require more cash up front as well as implementation consulting, Iervolino explained. Smaller companies also lack the larger IT staff needed to support the more complicated infrastructure of many on-prem-ises products and prefer their products to be simpler so finance staff can use their applica-tions without much specialized training.

Now, the cloud is becoming more popular with big organizations for budgeting and plan-ning, according to Iervolino. Large ERP vendors such as Oracle, SAP and Workday are offering cloud budgeting, planning and forecasting to satisfy the demand.

Workday and SAP unveiled new cloud budgeting and planning products in 2015. Another major vendor, Infor, now offers single-tenant software as a service (SaaS) for budget-ing and planning and will deliver multi-tenant SaaS in 2016, the company said in an email.

Cloud budgeting, planning and forecast-ing products are initially less expensive than their on-premises counterparts, Iervolino said. They also have a faster time to value and tend

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to be easier to use, allowing leaders outside of finance to participate and provide more collab-orative forecasting, he said.

Of the different finance areas, budgeting is among the first to move to the cloud for a number of reasons, Iervolino explained. In addition to the faster time to value, there are many cloud products in the category, which means companies have options when choosing software.

Gerard Verweij, a technology consultant for PwC, added that CFOs at large companies are more trusting and understanding of cloud functions after seeing progress and results in cloud software for customer relationship man-agement and human capital management. The SaaS licensing model also means costs can be more predictable and more economical in some cases, he said.

It’s easier for CFOs to move financial plan-ning, budgeting and forecasting to the cloud because there’s relatively less risk than with core financials, Verweij said.

CEOs and CFOs are also seeing that the cloud can be more nimble.

“In order for them to meet their growth

agenda, certainly when you look at companies that need to quickly expand across multiple territories around the globe, they need to scale up quickly,” Verweij said. “They are looking at this more from an agility perspective. That is a key point.”

ChallEngEs ahEad

CFOs, especially ones at large public compa-nies, might be more reluctant to adopt the cloud for core financial functions such as rev-enue and treasury management or management of accounts receivable, accounts payable and general ledger, according to Verweij. However, more are asking about the ramifications of moving these functions to the cloud.

He said PwC is also seeing some challenges for big companies moving financial planning and analysis to the cloud.

In particular, mature public companies are used to systems that are heavily customized to meet their needs, Verweij explained. They may have gaps in their data or broken forecasting processes. They may also struggle with estab-lishing the structured and consistent processes

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and clean data that are required to fully un- lock the benefits of the cloud, according to Verweij.

The big difference with cloud is that new and rich functions are released two to three times a year. Finance leaders need to assess the new functions and see what will benefit their systems.

Despite these challenges, cloud vendors such as Tagetik Software, Host Analytics and Adap-tive Insights said they’re signing new contracts this year with big enterprises.

The Golden State Warriors, LinkedIn, the Minnesota Vikings and the University of Ari-zona were some of the enterprises that pur-chased cloud planning and budgeting from Adaptive Insights in 2015, a company spokes-woman said in an email.

New customers for Host Analytics include AMG Advanced Metallurgical Group, Home-Services of America, Purdue Pharma and Steinway & Sons, according to a company spokesman.

Also in 2015, Tagetik signed contracts to sell cloud planning and budgeting to large compa-nies such as Abengoa, Barilla, Carrefour and Spotify, said Dave Kasabian, chief marketing officer at Tagetik.

Kasabian cited a survey by Saugatuck Tech-nology that found 52% of organizations with 10,000 employees or more plan to move plan-ning and forecasting to the cloud by 2017. The survey, conducted in November and December of 2014 and licensed by Tagetik for marketing reasons, found only 10% of such organizations are currently using the cloud for those func-tions, he said.

Comparing companies of various sizes, the Saugatuck research also found that those with 10,000 or more employees are the least satis-fied with their current planning and forecasting product, he said.

“That creates a big opportunity in the mar-ket,” he said. “A lot of larger enterprises will be demanding cloud over the next couple of years.”

—Dan Ring

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Move out and Move on from Excel

Many organizations are moving away from Microsoft Excel to try dedicated budget-ing, planning and forecasting software because they need more modern systems to help them turn data into business insight, analyze perfor-mance management and reduce errors.

Proponents say budgeting, planning and forecasting software can also help consoli-date and centralize financial information. And that means it’s easier for finance managers to develop more accurate budgets and analyze what-if scenarios.

But how do you know when to make the switch? Here are seven signs that it’s probably time to say goodbye to Excel.

information contained in Excel is being moved

from a standalone to a more transactional

process. “If Excel has to automatically receive input information and data and then process information and data and push it out the back

end, that’s not what the Excel model supports because it requires constant human review and intervention,” said former CIO Rob Living-stone, who owns Australian consultancy Rob Livingstone Advisory Pty. Ltd.

Extra rigor is required to validate data analysis.

When the design, logic and algorithms in an Excel spreadsheet need to be independently reviewed for accuracy using the same test-ing and validation processes used in software development, that’s a good indication it’s time to question whether the Excel approach is still valid, according to Livingstone.

Budgets are managed for numerous entities.

“We were collecting budget information for eight different business entities and manag-ing it all in Excel,” said Monica Ross, direc-tor of strategic projects at Minneapolis-based Parsons Electric, an electrical products and

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services provider that migrated from Excel to budgeting, planning and forecasting software from Host Analytics.

Ross said it was burdensome to consolidate the information that various departments sub-mitted to the finance team.

“They wanted it analyzed and reconsolidated in multiple different ways to make comparisons to prior periods, to make comparisons to other similar business lines within the company—and that was so hard to do in Excel,” Ross said. “It just took so much time to even produce the information for a first view, and then you’d find things wrong with the consolidation. And we never really got to the meaningful analysis that people were seeking.”

More than one person is putting data into a

spreadsheet or trying to pull reports from the

data contained in it. Excel is very good at crunching numbers and is a convenient tool for calculating specific values. But that means a lot of the decision-making processes—and all of the data-sharing and data-quality pro-cesses—are dependent on the person who set up a specific spreadsheet, said Hyoun Park, a

consultant at Blue Hill Research.“That person who builds that spreadsheet is

the point of failure for anything that can hap-pen with the data,” Park said. “When a company reaches the point where one person can no longer be the single point of failure, it’s time to start looking at a more dedicated software solution.”

An organization can probably scale to 20 or 25 employees and have one person in charge of the day-to-day numbers, but after that it starts getting more challenging, Park explained.

“Then you start having a real CFO and a real VP of sales who need to crunch numbers … and that CEO role that typically has done all of that starts getting broken down into multiple roles that need to be able to get into that informa-tion,” he said. “And when you reach that point in your corporate maturity, when you have multiple C-level officers and you have mul-tiple ways you need to look at the data, that’s a good time to move from Excel to a more mature application.”

Your organization is growing larger and more

complex. “You may have more products, more

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employees, and you may be in different mar-kets and trying to do new things. And you may also be facing more regulatory compli-ance,” said Laurie McCabe, a consultant at SMB Group. “[There’s a] point where it’s just time-consuming and labor-intensive to set up and maintain budgets and forecasts in Excel.”

It’s easy to use Excel when you’re a small company. But when you start growing, it’s tough because you have to get input from dif-ferent people and consolidate their spread-sheets, McCabe explained. “Those horrible macros and formulas can get broken, and you have all these iterations of stuff floating around your company,” she said. “It becomes just a massive black hole of time and energy to pull that together into something usable.”

You need consistency—and want happy users.

Harry Vasels, CFO at South Central A\V, described how the different divisions at his company all sent in different budget forms. “They were inconsistent in the way they orga-nized the information, and it was difficult to reconcile the different formats and bring them into the corporate format, which was [an even]

different model,” he said. South Central A\V, an audiovisual equipment provider and subsidiary of South Central Communications, switched from Excel to software from Adaptive Insights (formerly Adaptive Planning).

Before the switch, the company dealt with a lot of inconsistencies in its budgeting process. “It was not well organized, and it was taking a tremendous amount of time to do the process and the budgeting and forecasting. The whole thing was considered a chore, and nobody wanted to do it. It was a dreaded function.”

You want confidence in your budgeting, planning

and forecasting processes. When South Central A\V’s finance department was using Excel, it was never confident that it had a really tight budget put together, Vasels said.

“At the final budget meeting, there were always things that would pop out of the wood-work,” he said. “It was difficult to get people to agree on how to do things. They’d say ‘We’ve always done it like this and this is our model.’ So, they’d take ownership, but they’d only take ownership of their model and not the process.”

—Linda Rosencrance

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prioritize Budgeting Best practices

Many companies rush into buying budgeting automation software without first documenting a set of budgeting best practices. Stopping to examine current practices and compare them to best practices will ready companies to effectively deploy budgeting software.

One person must be responsible for the over-all budget. That person, if not the CFO, should report directly to the CFO. A clear vision must be published, describing where the company is headed. The budget, then, is the development of short-term plans that deal with operational efficiency and strategic objectives. The vision may relate to managing costs and operational efficiency, building new strategies, making capital investments and planning for revenue growth.

Let’s look at budgeting best practices and points to consider when evaluating budgeting automation software.

impart operational efficiency. Departments that have mature product lines do not require dra-matic goals for revenue attainment. Instead, value is achieved by maintaining or lowering operational costs.

plan for growth. When the leadership team identifies areas for growth, the budget must reflect those new revenue targets and the oper-ational costs required to achieve them.

Budget for projects. The completion of a proj-ect means that a corporate objective has been achieved (e.g., building a new factory). Projects consist of tasks that are interdependent and have costs associated with them that must be accounted for in the budget.

account for capital expenditures. Capital expen-ditures require special accounting and budget-ing. For example, a capital expenditure may be

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required for a major software project. Although a project costing $1 million may be completed in one year, the impact on the profit and loss may be only $200,000 a year. But the impact on cash is $1 million for the year.

Consider the time frame for the implementation

strategy. For a long-term strategy (say expand-ing to Eastern Europe), the budget reflects the first year of the strategic plan.

Budgeting best practices also include decid-ing how many individuals are responsible for creating budgets. Team members report to a group leader who reviews each budget and works to edit the budget until it’s finalized. The group leader also consolidates the budgets into a single format and forwards them to the lead-ership team.

To make all this work, management must publish a calendar at the beginning of the bud-get cycle indicating when budgets are due and the revision cycle that the team will follow.

In many cases, creating a budget also requires data from other packaged applications, such as ERP, accounting, human resources,

manufacturing and logistics. In some cases, budgeting takes place in the feeder system, and then values are uploaded to the budgeting application. To make the process easier, a level of data transfer between the budgeting system and other systems is often useful.

Driver-based budgeting is another approach worth considering. Rather than inputting bud-get data directly, it’s often useful to deploy drivers. A driver is a variable that impacts bud-get items. For example, knowing the production level in manufacturing makes it easier to derive budget data for the cost of goods sold. Knowing the head count in a department makes it easier to estimate healthcare benefits. Budget data must still be derived, but it’s much more accu-rate when drivers are used.

Many companies produce a 12-month budget but really run their business on the basis of the next three months. This is called a rolling fore-cast; at the end of each three-month period, a new budget is created. Companies must decide if the rolling forecast approach is valuable and if it’s more appropriate for them than the 12-month approach.

Because the purpose of creating budgets is to

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help run the company better, it’s also impor-tant to create a budgeting book, which is a series of tabular reports and graphs for management. Even better would be to have software that allows managers to create their own what-if analyses and other simulations.

The ability to make midcourse corrections is another characteristic of effective budget-ing. Because budgeting helps provide a level of management supervision, a company must

decide how to report month by month, how to develop an early warning system and how to take corrective actions. If, for example, a department is 30% over budget after the first month, this could be a major problem.

Although many budgeting automation sys-tems can be quite valuable, the impact can be increased dramatically if you first document and then follow budgeting best practices.

—Barry Wilderman

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aBout tHe autHors

dan ring covers finance and HR technology as a news writer for SearchFinancialApplications. He was previously Statehouse bureau chief in Boston for the now closed Ottaway News Service and The Republican, a daily newspaper based in Springfield, Mass. Email him at

dring@techtarget.com.

linda rosEnCranCE has written about technology for more than 10 years and has been a journalist for more than 20. A former Computerworld reporter, she is a freelance writer in Massachusetts and also an author of several true-crime books. Email her at rosencrance1 @gmail.com.

BarrY wildErMan is president and consultant at Wilderman Associates, where he focuses on enterprise performance management. He has over 30 years of expe-rience as an industry analyst, researcher and consultant. Contact him at Barry@WildermanAssociates.com and on Twitter @BarryWilderman.

Keep Budgets Tethered, Even as They Rise to the Cloud is a SearchFinancialApplications.com e-publication.

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