lamorte prez future of fpa - gmi feb 8 2013

The Future of FP&A: Is Software the Answer?Ben Lamorte, Senior Consultant

2013 Virtual Profit Solutions. All rights reserved.February-7-13

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Business ActivitiesSenior Consultant, Virtual Profit SolutionsVP at Alight Planning 2006-12Principal, Decision Consulting (Adobe, Kaiser)Manager, Business Intelligence, planetrx.comManagement Consultant, APM/CSC HealthcareBen Lamorte, Financial Modeler and Planning VisionaryWriting on FP&A How much time should finance spend doing THE RIGHT THING?Why Financial Reporting Software Delivers No Value?The Value of Agile Planning Over TimeDriver Based Planning: How is it Defined?Application Requirements for Rolling Forecasts with Rand HeerEducationMS Management Science & Engineering, Stanford University

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Planning Maturity ModelIve spent my last 6 years as a software executive with Alight, an EPM software company. Ive spent the last 15 years playing various roles in FP&A, and I started writing on: 1) The intersection of FP&A and software and 2) How do we make FP&A add value because more and more organizations are looking to FP&A, thats right you - the people in this room, for guidance on strategic and operational decision making What were doing here is important, and it looks like FP&A is going to be EVEN MORE important in the future.

Agenda

I will: Review trends in FP&A and software

You will: Reflect on what the future of FP&A might look like at your organization

Key Takeaways: Frameworks for prioritizing new FP&A initiatives

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Planning Maturity ModelFrom my experience, most of us who attend FP&A training sessions like this are here for 3 main reasons: 1) listen to presentations on the latest trends and best practices and I will take care of that

Also: I hear people want to think about what they can do when they get back to the office so I want you to reflect on what the future of FP&A might look like at your organization.

In addition, many of us want to network with colleagues Is anyone here for anything else?

Please dont take Bens theoretical future of FP&A as advice for what you should do. Im talking general trends. I hope you walk away learning about some frameworks that might help you analyze for prioritizing your new FP&A initiatives going forward so you can be successful in the future as an FP&A professional.

From A Recent The Future of FP&A PresentationFP&A has evolved from a profession for Accountants who want more excitement in their lives to a profession embracing MBAs and commercially adept Finance folks.

We will no longer: Rely on bored individuals to crank out Daily and Monthly reports

The present challenge is to convince our Presidents to invest in technology, to hire enough staff who are commercially minded as well as technical or statistical

The future of FP&A is fast approaching & we must push the boundaries of technology and analysis or we will be left behind.4*Source: Jennifer Scott, VP Finance, former Expedia 2010 IE Group Boston FP&A Summit

Planning Maturity ModelIm not the first person to present The Future of FP&A and Id like to read a short excerpt from a recent FP&A Summit in Boston that sets the stage for my presentation.

READThis reminded me almost of a political speech: like NO FP&A Professional left behind and I dont agree that if every child gets a laptop, everyone will be educated. I just dont see that software or technology alone can somehow be the answer for the future of FP&A and yet

How have you used FP&A Software?1980s - Spreadsheets for Everything!1990s - Pillar & Adaytum Era for Budgeting Software. OLAP & BI Emerging.2000s Era of many dedicated FP&A software tools. Hyperion/Pillar, Cognos/Adaytum, SAP/BPC/OutlookSoft, Business Objects/SRC, Host Analytics, Alight, Adaptive Planning, Prophix, Centage, Quantrix, Xlerant, MS Forecaster, Whitebirch2011 - *88 per cent of public sector finance professionals admit they are reliant on spreadsheets for their budgeting processesMostly streamlining existing budgeting/reporting/consolidation processes.

February-7-135*Source: Advanced Business Solutions

Lets start with you how have you or are you using FP&A software Since the 1980s, weve all used spreadsheets.Lets see a show of hands: Anyone here ever use Pillar or Adaytum back in the 90s?Anyone here use any dedicated software for FP&A other than spreadsheets? You can see a partial list here.5

The FP&A Matrix: WHERE ARE YOU NOW?Turn to your neighbor and discuss the following question:Which FP&A task is most important to you RIGHT NOW and why?

FP&A TaskImportance(1-5)Doing It?(Y/N)Using SpreadsheetsHappy? (1-5)Using SoftwareHappy? (1-5)BudgetingProfitability by product/customerRolling ForecastScenario AnalysisWorkforce PlanningBalance Sheet & Cash FlowLong-Range Planning

61 = Not at all. 5 = Completely

We need to do variance analysis we have 2 numbers, so whats the gap between importance and doing it and quite frankly is the level of effort in tune with the level of importance?

Heres a tool that we created that our clients find invaluable to complete before shopping for FP&A software. You can see the rows are planning activities, and Ive only included a sample here so its legible. Each cell should be completed with a Yes or No.

Let me give you an example of one of my typical conversations with a prospect.

OK, so what are you looking to do with the software: Budgeting? Reporting? Forecasting? Real-Time Planning with Scenarios and What-if on-the-fly? CAPEX?...

Yep. That pretty much covers it, wed also like to do allocations and some consolidations plus automate dashboards and build a 5-Yr plan.

So, you want to do it all?

Yeah but, were already using SAP for budgeting at corporate, and some of us do variance reporting using that tool, but it doesnt really work for most of us so we do it in Excel. The rolling forecast, thats something we want to do, and were kind of doing it in spreadsheets, but we gave up. Long-Range planning I think we do it, but not sure Leo used to do that, but he left. I think the new CFO started a 5-yr model, but not sure anyones really using it.

Point is: sometimes filling out this matrix is harder than it may appear (and its dynamic since our models come and go) + we need to make sure the management team is on the same page about what we are doing in FP&A, what is it working, and what we want to do going forward.

Your exercise: just pick ONE cell in the FP&A software matrix that is interesting to you for any reason. For example for Rolling Forecast, you could choose Not doing it -- and enter NO if you dont need a rolling forecast. OR you could choose long-range planning and have Yes in Using Spreadsheets because your Excel model is working just fine, thank you very much.

OK, go you have 2 minutes to discuss with your neighbor.

NEXT: anyone want to ask a question about the matrix or share a story about an interesting cell? IF NO response, Id like to at least give those of you who are happy in spreadsheets and put a Y in any column to raise your hand. Its good to see this and interesting to me since software vendors are constantly bashing spreadsheets OK lets move on.

I will volunteer: At Adobe, - we had a 5-Yr model all in Excel. I was happy it got a bit crazy with 150 worksheets, and when I completed the project, no one had any idea why I had blacked out a bunch of columns and had created something like 85 different versions of the file But it worked for me! As well see later, its critical to identify activities where FP&A software can make the biggest positive impact going forward.

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Budgeting & Reporting 1990sPlanning Maturity CurveA Framework to analyze the ROI of dedicated FP&A SoftwareEffortBusiness ValueSource: Planning Maturity Curve as Developed by Alight, LLC7

Planning Maturity ModelNOW Lets look at the planning maturity curve which is a framework created by Rand Heer, the founder of both Pillar and Alight, to analyze the ROI of dedicated FP&A software to replace spreadsheets.

The goal is to get business value while minimizing the effort required to get there

Budgeting & Reporting 1990sBasic FP&A Tasks in SpreadsheetsBudgeting

Reporting

EffortBusiness Value

Source: Planning Maturity Curve as Developed by Alight, LLC8



Budgeting & Reporting 1990sFP&A Software Focused on Eliminating the HeadacheBudgeting

Reporting

EffortBusiness Value

What FP&A Software Customer Says

Budgeting & Reporting Tool: Saves Time




2000s Budgeting and better reportingImproved Dashboards, BI tools make reporting easy to visualize outside of finance leading to MORE INSIGHT AND ACTION

BudgetingReportingEffortBusiness Value

What FP&A Customer Says

Saves Time AND Adds some Value!ENGAGES others in the financial modelBusiness decisions are more financially-informed


Planning Maturity ModelIn the 2000s, we saw improved reporting and especially graphical dashboards not only streamline reporting, but deliver improved reporting that engaged others outside of finance improved reporting led to some increased business value

2010s BIG VALUEBudgetingReportingEffortBusiness Value

Source: Planning Maturity Curve as Developed by Alight, LLC**Source Ventana Research: http://www.facebook.com/note.php?note_id=14049788604011

Planning Maturity ModelThe question many of us need to ask now is: how do we get to the big value-add? This is where FP&A is headed. A small minority of us have already achieved this huge value-add, but the majority are either never going to get big value out of FP&A or know theres potential, but just have not made it a priority or have attempted to get there and not quite made it for various reasons

In order to get there, FP&A will include activities such as: rolling forecasts, driver-based planning, real-time scenario analysis, relative KPI benchmarking, integrated actuals with connected data sources, dynamic dashboards, etc.

2010s BIG VALUEFuture is EXCITING. Some of you may already be there! Most ARE NOT - My guess is 90% ARE NOT**Ventana Research: 6% adopted Driver-Based Planning in 2000s.

BudgetingReportingEffortBusiness Value

Source: Planning Maturity Curve as Developed by Alight, LLC

BIG VALUE:Rolling Forecasts, Driver-Based Planning, Real-Time Planning**Source Ventana Research: http://www.facebook.com/note.php?note_id=14049788604012

Planning Maturity ModelThe question many of us need to ask now is: how do we get to the big value-add? This is where FP&A is headed. A small minority of us have already achieved this huge value-add, but the majority are either never going to get big value out of FP&A or know theres potential, but just have not made it a priority or have attempted to get there and not quite made it for various reasons

In order to get there, FP&A will include activities such as: rolling forecasts, driver-based planning, real-time scenario analysis, relative KPI benchmarking, integrated actuals with connected data sources, dynamic dashboards, etc.

RECENT PUBLISHED CASE STUDIESHow FP&A Teams Impact Profits! This is THE FUTURE

McAfee Transforms Quota Management & Sales Compensation >400% ROI on Software in Months!Source: Get Smart About Sales Finance. Webinar hosted by Ventana Research Oct 2012

Adobes FP&A Team Reduces the Sales Cycle, Increases Close Rate! Source: IE Finance Article: Use the FP&A Pulpit to Business Partner with Sales and Directly Drive Predictable Revenue Matthew Glaser, Adobe, Thursday, November 10, 2011

SoftLayers more accurate and rapidly updated rolling forecast model leads creditors to reduce interest rate, reduces interest expense by $3M in one year! >1,000% ROI on software in 3 years?Source: Institute of Management Consultants Webinar: Measuring the ROI of Planning Software, June 2012

Pittsburgh Mercy Saves $600,000 Through Collaborative Planning. CFO sets up driver-based planning model with managers across treatment areas, >800% ROI on software in 2 years, gets promoted to President! Source: Spring 2011 issue of HFMA'sStrategic Financial Planningnewsletter

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Planning Maturity ModelNow lets dive into some recent examples (post 2010) of FP&A organizations that recently made it to this future state that Im calling BIG VALUE. McAfee actually used a software tool to plan with dedicated sales analytics to save millions in just a few months this is generating a buzz and you can learn more at the Ventana Research webinar from Oct 2012.

Similarly, a big sales-finance success story made news about how Adobes FP&A team is helping reduce sales cycles and increase close rate. This is a major trend that were also seeing in the $1B+ company space.

Its not just big companies that are getting to BIG VALUE. SoftLayer, a cloud computing and hosting serviceREAD

The Value of Traditional Planning Over TimeSource: The Agile Planner Blog, Alight LLC

TIMEVALUEHigh ROI at the early stages of planningBut ROI diminishes quickly over time.14

Alight Planning PresentationLets look at the time dynamics of getting FP&A to deliver Big Value. In traditional planning activities focused around budgeting and variance reporting, we see good value in the early stages of the fiscal year

The Value of Agile PlanningTM Over TimeSource: The Agile Planner Blog, Alight LLCROI remains high in the early stages of planningLong-term value from planning increases significantlyTIMEVALUE

Agile Planning Defined: Impactful planning that addresses the right business issues at the right time with the right people at the right level of detail. Unlike budgeting, it is a continuous process that adds increasing value over time.15

Alight Planning PresentationWhat Alight called Agile Planning , we see how FP&A can get to BIG VALUE over time. Were no longer constrained by any traditional planning cycles as we might be with an annual budget or even a rolling forecast that looks out x months. Agile Planning is:

READ

Communicating the Model in an Excel PowerPoint CycleSource: Bens Life in FP&A at planetrx.com in late 1990s

FP&A Software The Past: Excel Powerpoint CycleSource: The Agile Planner Blog, Alight LLC16

Planning Maturity ModelDo PLRX thing then give story of the future: Biotech CFO what if the adherence rate was 80% -- well thats a dumb question, everyone knows its 60% and its been that way for the last 5 years. How would it ever go to 80%, but thats the CFO, so change the number.

CFO: OK So that impacts profit by $30M. What if it was 65%?CFO: OK, so that would get us to about $7M per year impact. Question: how long would a marketing program cost to drive adherence rate to 65% and how much will it cost?

So now, were getting somewhere, were using the presentation tool as the planning tool and exploring action items in real-time

Do you Relate? If so, Share Your Excel-Powerpoint Cycle StoryFebruary-7-1317Raise your hand if you relate

Anyone summarizing results from an FP&A software tool (not spreadsheets) in PowerPoint?

Optional Small Group Question:Turn to your neighbor, discuss your Excel-Powerpoint storyAnyone want to share?

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FP&A Software: The Summary18FP&A: NOWFP&A: THE FUTURESoftware PurposeReduce a Pain PointDecrease Costs by doing less workImprove the BusinessAdd Value by doing THE RIGHT THING ExampleNet BenefitMeasuring ROIPrimary Communication PlatformMeeting OutcomeFP&A Business SavvyIT Support

Planning Maturity Model

FP&A Software: The Summary19FP&A: NOWFP&A: THE FUTURESoftware PurposeExampleCut monthly reporting time, reduce annual FP&A labor costs by 20%Introduce a rolling forecast, get better interest rates on debtNet BenefitMeasuring ROIPrimary Communication PlatformMeeting OutcomeFP&A Business SavvyIT Support


FP&A Software: The Summary20FP&A: NOWFP&A: THE FUTURESoftware PurposeExampleNet BenefitRelatively SmallPossibly HugeMeasuring ROIEasy to estimateDifficult; often requires retrospectionPrimary Communication PlatformMeeting OutcomeFP&A Business SavvyIT Support


FP&A Software: The Summary21FP&A: NOWFP&A: THE FUTURESoftware PurposeExampleNet BenefitMeasuring ROIPrimary Communication PlatformPowerPoint. May depend on FP&A software - PowerPoint cycleDedicated Planning Software with Dynamic Dashboards enabling real-time scenario analysisMeeting OutcomeMore internal work, preparing for next reviewAction that drives businessFP&A Business SavvyIT Support


FP&A Software: The Summary22FP&A: NOWFP&A: THE FUTURESoftware PurposeExampleNet BenefitMeasuring ROIPrimary Communication PlatformMeeting OutcomeFP&A Business SavvySuggested: Software alone can help more rapidly crank out reportsREQUIRED: Software alone cannot improve a business. Now the reports are available, management asks: so what?IT SupportModerate to HeavyMust be minimal to meet growing need to quickly respond to internal customers


FP&A Software: The Summary23FP&A: NOWFP&A: THE FUTURESoftware PurposeReduce a Pain PointDecrease Costs by doing less workImprove the BusinessAdd Value by doing THE RIGHT THING ExampleCut monthly reporting time, reduce annual FP&A labor costs by 20%Introduce a rolling forecast, get better interest rates on debtNet BenefitRelatively SmallPossibly HugeMeasuring ROIEasy to estimateDifficult; often requires retrospectionPrimary Communication PlatformPowerPoint. May depend on FP&A software - PowerPoint cycleDedicated Planning Software with Dynamic Dashboards enabling real-time scenario analysisMeeting OutcomeMore internal work, preparing for next reviewAction that drives businessFP&A Business SavvySuggested: Software alone can help more rapidly crank out reportsREQUIRED: Software alone cannot improve a business. Now the reports are available, management asks: so what?IT SupportModerate to HeavyMust be minimal to meet growing need to quickly respond to internal customers


END OF THE SHOW: WHAT I HOPE YOU TAKE AWAYTools for prioritizing FP&A initiatives:

FP&A Matrix

Planning Maturity Curve

Questions to ask now:

1: Does your company want BIG VALUE from FP&A?2: If so, how do we get started?

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Planning Maturity ModelSome of you may want to explore taking steps to get to the future of FP&A, what Im calling BIG VALUE If so, Im happy to discuss further. I can provide a more detailed version of the FP&A Matrix as well.

Thanks all!

Lets End on a Positive Best Practices!Beginning in May 2010, we have surveyed attendees at various FP&A Conferences to better understand how different companies use Performance Management tools.

The response rate is generally between 30-40%, andour survey database now includes 196 respondents.

Here's what we've learned:

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2012 Virtual Profit Solutions. All rights reservedBest Practices forecasting:analysis26

Forecasts are linked to Business Drivers

Source: VPS Survey, 196 Respondents, June 2012

2012 Virtual Profit Solutions. All rights reservedBest Practices budgeting:staff Planning27

Personnel costs are tied to planned FTEs or Headcount

Planned FTEs or Headcount tied to Business Drivers


2012 Virtual Profit Solutions. All rights reservedBest Practices budgeting:Planning process28

Planning process encourages an effective review of costs and service levels

Corporate Goals are well understood prior to commencing the planning process


We have capabilities for scenario modeling

2012 Virtual Profit Solutions. All rights reservedBest Practices budgeting: Scenarios29


2012 Virtual Profit Solutions. All rights reservedBest Practices Performance Measurement:root cause / accountability30

Key users see their KPI's and performance and understand causes of performance issues


2012 Virtual Profit Solutions. All rights reservedBest Practices performance measurement:profitability analysis31

Reliable and Accurate Product Profitability Information

Reliable and Accurate Customer Profitability Information


lamorte prez future of fpa - gmi feb 8 2013

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