by Pras Chatterjee, Solution Marketing Director, EPM, SAP
Time and again in my work, I meet organizations that are so wedded to their legacy solution for budgeting that they are simply not ready to make the next step. They may even be stuck on a legacy software solution that has not kept pace with their current technology landscape or are still struggling with a solution built around spreadsheets. For me, the key questions they need to ask themselves are:
1. Can’t I still live with my current process?
2. Can I afford to change things?
3. What is the next step?
Can’t I Still Live with my Current Process?
I would say not, as in most instances these companies have to sacrifice data quality, suffer from drawn out budget cycles and typically spend so much time maintaining the integrity of the process, they have little left to provide proper analysis. Outside of finance, the company will be developing new products, constantly fine tuning their go-to-market strategy, keeping up with new reporting requirements, acquiring and disposing business, all of which increase the need for information and analysis, but on the planning and budgeting front nothing ever changes.
The current process might be disjointed spreadsheets designed several years ago by users no longer with the company so that the administrator maintaining them today has to gingerly tread through the budgeting process in constant feat that some lookup or link will explode at some point and the whole thing will come down like a house of cards. But the rest of the organization think they are a star and constantly wonder what might happen if they were to leave. And because no one has comprehensive knowledge about how the model works, there is little enthusiasm for making changes so key stakeholders such as marketing, sales and operations are never invited to review and update the budgeting process and reports still contain KPIs that are now considered obsolete.
But what’s worse is that such legacy systems simply haven’t kept up with the changing needs of business users today. They cannot access the data on demand and can only update their inputs to a prescribed timetable rather than immediately any important event happens in their area of responsibility that will impact revenues and expenses. As such the budgeting system is providing them with little value because they are having to address their business challenges first and then update their figures after the event whenever the next re-forecast is scheduled. This is far from ideal as what business users need today is a solution that is updated in real-time so it can be used to support decision making rather than just reporting on the financial of events after they have happened.
Can I Afford to Change Things?
I’m often asked “Well how much is it going to cost me?” meaning the software licenses and the implementation services. But this is only half the picture and I encourage them to reflect on how much the inefficiencies inherent in their legacy system may be costing them today with financial analysts slaving away gathering data from business users and then manually tabbing input numbers into templates – I’ve even come across instances where budgeting was so time-consuming, it was pretty much the finance departments’ only task! In addition to the costs associated with a laborious and people intensive process though, you’ve got the unfathomable cost of not having a system that would provide business users with timely information that would allow to make quicker and smarter decisions that would improve margins. My guess is that’s just huge.
Think instead of a real-time planning and budgeting process where inputs are coming from all facets of the organization, (marketing, sales, operations, HR etc), so that the model is constantly updated with data such as forecasts of raw material costs for the next 6 months; the very latest sales forecasts for the quarter and any movement in the number of employees during the month. Once I’ve painted this picture, most people ask, “Even if I had this information, how long would it take me to process it?” But with the advent of in-memory computing such as SAP HANA, this is not even a valid question as huge amounts of data can be processed so that clients have benefited from 400x reduction in their planning cycles. This:
- Means the finance department is released from the drudgery of processing and can spent more time providing value-added analysis to the business.
- Enables budget models to provide infinite “What If” scenario analysis simply by making changes to low-level drivers with results calculated within a few seconds rather than having to wait overnight to generate another data set.
- Removes the cap on the amount of data that a budget model can contain and the level of granularity at which planning can be done.
- Gives business users instant access to information like never before.
So, What’s the Next Step?
Because of the technological advances of recent years, the type of planning and budgeting process I’ve described above – which many would call ‘Integrated Business Planning’ – is no longer a pipe-dream. With solutions such as SAP Business Planning and Consolidation, version for SAP NetWeaver, powered by SAP HANA, all of this is possible today and many companies are already benefiting from it. So I would encourage you to evaluate your current platform and think of where you can be, want to be, or more importantly need to be. As now there are no longer any technology restraints on planning and budgeting, the possibilities are endless.
Originally published on CFO Knowledge and republished with permission.