A budgeting and planning solution is only part of a Business Performance Management (BPM) solution. This white paper focuses on only the Budgeting and Planning aspect of BPM. The Budgeting and Planning solution enables organizations to align with corporate goals, be more predictive, improve the business processes, reduce the budgeting and planning effort by an order of magnitude and enable the organization to react much quicker than ever before.

Organizations are not running out to implement full Business Performance Management Solutions. In fact, many small to medium sized businesses (SMB) are still using spreadsheets to budget or opt not to budget at all. This is perplexing, considering:

Lastly and most importantly, traditional software vendors and their licensing, maintenance and implementation fees are simply just not palatable. It’s hard enough to convince upper management that the application is a necessity, but dropping the bomb that it is going to cost in upwards of $100,000, doesn't’t go well.

Companies currently using Excel as their budgeting tool will find new savings with an automated budgeting and planning tool. Having the ability to change the budget input templates in a systemized manner, without needing to spend time validating spreadsheet linkages, accuracy of data and re-aligning the individual spreadsheets is a huge time and cost savings to organizations.

We typically see the Excel budget process evolving over time with a number of different people adding to the Excel models. As time progresses, the Excel models become more of a “Black Box” and budget modelers become more and more reluctant to change the models for fear of “unknown” ramifications. Both innovative budget tools and existing legacy BPM vendors provide solutions to systemize the budget template process, eliminate this “black box” found in Excel spreadsheet models and facilitate the ability to update budget models.

Companies have reduced or completely eliminated this “dance” by first performing “top down planning” in the management group to set high level imperatives for the company. These imperatives are translated to financial targets and goals and these goals are allocated down to the different subsidiaries and detailed accounts, based on a modeling methodology. The budget user then receives a very detailed “top down budget” as their targets, with the guideline that their budget must be reasonable but management would like them to hit the targets.

This is an example of a “strategic enhancement” implemented to a limited group of individuals thus reducing the risk of its implementation and achievement of the desired ROI by strategically eliminating budget cycles.

The benefits of understanding the causal affects of changes to the business environment cannot be underestimated. However, it is very difficult to estimate the financial benefit. As the velocity of business increases, the individual companies’ ability to understand and adapt is key.

Understanding direct product profit is imperative when a competitor enters the market with similar product at 75% of your current price. Understanding if you can “make it up in volume” or how to differentiate your product offering is key.

Although there are many ways to identify problems, from walking the shop floor to daily checking facility utilization in reports, we confine this soft benefit to providing a reporting mechanism to identify major outliers when drilling down from summary values. The concept of “Root Cause Analysis” allows the user to start at a high level and immediately drill to the lowest level of data on the key items that had the biggest impact on the summary totals. This method provides predefined heuristics for identifying outliers in the dimension hierarchy.

This soft benefit can have a large multiplier when multiplying the time savings across a number of users, weeks, and months. It may also provide insight to items that may normally be missed in an operational review because the numbers are buried in the details.

Bottom line is all departments plan on some level, whether it is for new computers, new equipment, marketing or client delivery. Most of these plans are performed as a “one-off” departmental process. By providing a flexible tool that can combine both the current “operational plan” with the values to the budget/reforecast, steps and processes can be eliminated and the overall accuracy of the budget process enhanced. In most traditional budget environments, the “corporate budget” is automated using either Excel or older BPM solutions. Operational budgets are not integrated to the corporate budget process and are performed using Excel. These operational budgets are typically the life blood of the operation and used on a daily/weekly cycle to manage production volumes, capacities, hiring and product delivery.