Best Practices for Budgeting, Forecasting and Reporting

TABLE OF CONTENTS
Budgeting as a Competitive Advantage . . . . . . . . . . . . . . . . . . . . . . . . . 1 Broken Processes & Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Solution: Best Practices and New Technologies . . . . . . . . . . . . . . . . . . 2 Best Practice #1: Make Planning Part of the Corporate Culture . . . . . . . . . . 2 Best Practice #2: Align the Strategic and Operating Plans . . . . . . . . . . . . . . 3 Best Practice #3: Start at the Top — and the Bottom . . . . . . . . . . . . . . . . . 3 Best Practice #4: Drive Collaboration between Functions . . . . . . . . . . . . . . 4 Best Practice #5: Adapt to Changing Business Conditions . . . . . . . . . . . . . . 4 Best Practice #6: Model Business Drivers . . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . 6

Best Practice #7: Manage Content That is Material to the Company

Spreadsheets: Impeding Best Practices . . . . . . . . . . . . . . . . . . . . . . . . . 7 Alternative Technology Can Promote Best Practices . . . . . . . . . . . . . . . . . 8 The Adaptive Planning Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

BUDGETING AS A COMPETITIVE ADVANTAGE
Across the board, finance executives…believe they spend too much time on forecasting, budgeting, and planning. Of these executives, 73 percent rely primarily on spreadsheets and manual processes. When asked about the most acute problems with their current planning process, more than 60 percent said it “takes too long.” Nearly 43 percent said “not enough time to analyze data,” and more than a third cited “lack of ownership by business units.” — CFO Research Services

The corporate budgeting, forecasting, and reporting process presents a formidable challenge to most companies, regardless of size or industry. Budgeting is often seen as burdensome and time consuming. Yet budgeting is also a crucial element of financial management, which in turn is a huge contributor to a company’s overall success or failure. As a result, companies that are able to address budgeting obstacles and improve their process will not only be rewarded with more accurate budgets, more timely re-forecasts, and improved decision-making, but will also foster a disciplined financial management culture that will deliver a true competitive advantage. Companies can overcome planning challenges and achieve these goals by applying budgeting and forecasting best practices and leveraging new technologies.

BROKEN PROCESSES & TECHNOLOGY
For most organizations, the annual planning process is broken. First off, the process takes months to complete. In addition, because line managers see little benefit to the effort, they are dragged through the process against their will. When finance does much of the work themselves, managers refuse to buy in and the plan loses credibility. What’s more, once the agonizing process is finally complete, the budget is already outdated. Rather than being a useful decision-making tool, the budget is a disconnected document that has little impact on the company’s business. Compounding these broken processes are the underlying budgeting technologies, which in many companies are simply spreadsheets and email. While these technologies are ubiquitous and well-understood, they simply do not work well for planning. Nearly everyone has felt the pain of planning’s “spreadsheet hell” — the broken formulas, bug-ridden macros, manual consolidations, out-of-synch versions, and related problems which contribute to a lengthy, frustrating, and error-prone process.

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THE SOLUTION: BEST PRACTICES AND NEW TECHNOLOGIES
Leading companies have learned to overcome these challenges and have gained a competitive advantage by adopting best practices for budgeting, forecasting and reporting. Furthermore, they know that the right technology can save time, reduce errors, and promote company-wide collaboration in the planning process.
Only 37 percent of respondents said that the technology they use to support planning, budgeting, and forecasting processes makes those processes either faster or more effective. This means that 63 percent are giving a thumbs-down to their BPM systems. One likely reason for this result is the prevalence of spreadsheet usage in corporate budgeting processes. — APQC survey

By combining best practices with technology, companies can: > Consistently deliver a more timely, accurate, and flexible plan. > Strengthen the link between strategic objectives and operational and financial plans. > Improve communication and collaboration among managers. > Enhance strategic decision-making, enabling leaders to more quickly identify, analyze, and forecast the impact of changes as they occur within and around their business. The result is a company with significantly improved financial management and stronger, more competitive business management. This white paper outlines the budgeting, forecasting, and reporting best practices and related technologies that have been adopted by leading companies.

BEST PRACTICE #1: MAKE PLANNING PART OF THE CORPORATE CULTURE
First and foremost, it is critical that a company’s culture embraces and rewards planning. Excellent business management requires excellent financial management, which in turn requires a company-wide commitment to excellence in budgeting, forecasting and reporting. Most companies acknowledge the importance of corporate planning, and claim to be actively participating in ongoing planning. But in reality senior management may be engaged in strategic planning, with finance running the budgeting show, and department managers viewing the annual planning process as an unwelcome chore. This is not the picture of a company that truly embraces planning. Instead, companies that desire excellence in planning set achievable strategic objectives, demand that these goals be met, and reward those who do so. They require department managers to produce their own plans and tie incentive compensation to their ability to manage their business and achieve their goals. In such an environment, finance can provide tools and support to the managers, functioning as an important ally instead of an obstacle.

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BEST PRACTICE #2: ALIGN THE STRATEGIC AND OPERATING PLANS
Within the “excellent financial management equals excellent business management” culture, the next step is to ensure the ongoing alignment of the strategic and operating plans. Because of their responsibility to engage department managers in the planning process, finance has the unique opportunity to help clearly communicate the corporate strategic plan to the individuals who run the business. Finance can help translate strategic goals into specific departmental plans and related expense drivers, such as headcount and equipment. By translating their strategic goals into operational plans, and by tracking and measuring performance against plan, leading companies are able to make meaningful progress in achieving their objectives.

Today, the pace of business change can be rapid, and thus a sluggish planning and budgeting process can be a competitive disadvantage. …Companies that can replan and rebudget more nimbly are better able to keep costs in line in difficult economic times, and then are in a better position themselves to take advantage of a recovery. — Business Performance Management Magazine

BEST PRACTICE #3: START AT THE TOP — AND THE BOTTOM
An important ingredient in successful budgeting and forecasting lies in a company’s ability to plan from the bottom-up and to meet top-down strategic objectives. Some companies establish top-down targets and then turn the annual budget process over to finance, with a mandate to meet the numbers. Other companies require detailed bottom-up planning, and then “plug” the total company numbers at the top so that the plan meets strategic targets. Neither of these approaches reflects a commitment to planning excellence. Instead, leading companies provide initial guidance from senior management — a top-down perspective on strategic goals, objectives, and expectations. Next, department managers build a plan from the bottom-up, showing how they intend to meet those goals. This process will often require frequent iterations for the top-down and bottom-up approaches to meet. The result is a plan that: > Is supported by department managers, because they helped create it and will be rewarded for meeting it. > Is supported by senior management, because the operational goals are aligned with the strategic goals. > Is supported by finance, because they added value to a productive, collaborative effort, rather than demanding participation in an exercise with little added value.

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BEST PRACTICE #4: DRIVE COLLABORATION BETWEEN FUNCTIONS
Not only should strategic and operating plans be aligned, but plans between functional areas should also dovetail. Best practices include direct involvement from line-of-business managers and a collaborative approach to budgeting and forecasting. In addition to understanding strategic goals, department managers also need to know what other functions are planning. For example, in a company that is planning a new product rollout, manufacturing needs to ramp up production, marketing needs to produce new collateral, and sales needs to add new headcount. But the marketing plan should also include programs timed to support the new sales reps. The facilities department needs to plan for new headcount, equipment, and product storage. And so forth. This collaborative planning can be accomplished through an iterative process that provides managers with the opportunity to forecast and share different scenarios with each other. Finance can play a key role in facilitating the coordination of plans across the company.

Our study found that companies that believe their budgets are very accurate attribute this to better collaboration more than any other factor. — Business Performance Management Magazine

BEST PRACTICE #5: ADAPT TO CHANGING BUSINESS CONDITIONS
The preceding best practices establish a foundation for making better business decisions. The next important steps are evaluating actual progress against budget and re-forecasting in response to changing business conditions. All businesses, particularly those in flux, are better served by a planning process that can quickly adapt to change in the company or in the market. The key elements of such a process are: Frequent Re-forecasting: Especially in fast-moving, quickly growing businesses with multiple market pressures, forecasting may be needed on a monthly or even biweekly basis. Ongoing re-forecasting will help managers to continually answer critical questions such as “What did we expect?”, “How are we doing against our plan?”, and even more importantly, “How should we adapt our plans as a result?” Rolling Forecasts: A company engaged in ongoing rolling forecasts is always looking forward to the immediate or near-term future. The forecast timeframe should extend out two to eight quarters, depending on the volatility of the business. Planning should be an ongoing process with frequent opportunities for managers to view the latest internal and external data on how the company is doing. They should be able to make alterations to their plans based on new information, which can come

In addition to the qualitative benefits that… companies achieve through improved planning outcomes, those that use rolling forecasting save a median of 25 days on their annual budgeting cycle. — APQC survey

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from many sources, including other managers, monthly actual data, and revisions to top-down targets. Finance should be able to quickly consolidate plan data from all areas of the company, and to disseminate new information in real time. This process will facilitate more informed decision-making in areas such as pricing changes, product line changes, capital allocations, organizational changes, and the like.
Significant, unforecastable changes to the environment…can happen anytime. Any company can respond to events haphazardly, but those that have the right planning processes in place can respond faster and in a more coordinated fashion. — Business Performance Management Magazine

BEST PRACTICE #6: MODEL BUSINESS DRIVERS
An important feature of a first-rate budget or forecast is that it is based on a model with formulas that are tied to fundamental business drivers. Simply importing and manipulating past actuals does not reflect the underlying cause and effect relationships in a business. Building modeling into plans provides a way to ensure appropriate consistency across functions. It also provides a way to promote planning coordination between functions. For example, future sales forecasts can be tied to the marketing expenditure needed to generate the necessary number of leads. Finance can provide managers with a useful model that includes information about past actuals and current headcount, as well as formulas that are driven by assumptions. This does not violate the best practice of requiring department managers to be responsible for creating their own budgets. Instead, it saves them time by providing a solid framework to flesh out — a starting point that contains important information about their organizations’ relationships to other functions. It also harmonizes with the best practice of collaboration across functions.

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BEST PRACTICE #7: MANAGE CONTENT THAT IS MATERIAL TO THE COMPANY
A focus on material content in budgeting will free managers from unnecessary detail, enabling them to produce better plans. While supporting detail can provide audit trail and insight into managers’ thinking, more detail does not necessarily make for a better plan.
In a typical planning environment, more than half of all time is spent gathering and re-keying data, which leaves little time for analysis. The average company spends only 16% of their time in the value added activities of explaining the “why,” and exploring the “what if.” — Hackett Group

According to a Hackett Group study of planning best practices, the fewer the number of line items, the better the planning practices. Hackett found that world-class companies average 15 to 40 line items in their budgets, compared to highly inefficient companies that averaged 2,000 line items. Managing material content means that a company pays attention to whatever has a real and significant impact on expenses, revenues, capital or cash flow. This company will: > Avoid false precision. A complex model might not have any more precision than a simpler model. More detail and intricate calculations can lure managers into the trap of thinking their plan is therefore more accurate. > Monitor volatile — not stable — accounts. Efforts are best spent on fluid expenses such as headcount and compensation. > Aggregate accounts. The budget does not need to reflect the same level of detail as that in the general ledger. Even if the GL has 15 different travel accounts, managers can often plan in one.

…decreased cycle times in planning, budgeting, and forecasting processes lead to better business outcomes…Assumptions about the business environment or market behavior made 90 days before a budget is completed are much more likely to be incorrect than assumptions made only 30 days in advance. — APQC survey

BEST PRACTICE #8: BE TIMELY AND ACCURATE
The final best practice is to ensure that the planning process is timely and accurate. Many companies have an inefficient and inflexible planning process, at the center of which is the annual budget. These companies’ time-consuming distribution and consolidation processes practically guarantee that the plan data is irrelevant before it is even shared. And plans based on stale data and assumptions are of no value. According to the Hackett Group, the average annual planning and budgeting process is three to five months long. A plan that takes this long to prepare is out of date by the time it is completed. The Hackett Group reports that world-class organizations, on the other hand, spend less than two months preparing the annual plan. World-class organizations have been able to shorten their planning cycles by implementing the best practices described here. They have also leveraged technology so that they can manage budget consolidation and aggregations in real time.

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Technology can especially help improve timeliness and accuracy in the area of consolidations. Real-time consolidation removes the necessity to manually process results, leading to a smoother, more consistent, and more accurate planning process. Variance reports delivered within two to four days from the period close allow managers to immediately evaluate their performance against plan, and then effectively adjust their businesses as a result.
…heavy spreadsheet usage substantially increases the budgeting and planning cycle time. Those who use spreadsheets extensively take a median of 30 more days to complete their annual budget than do the people who rely less on Excel. — APQC survey

At an operational level, this type of planning will be less costly and will produce more accurate results than the processes followed by most companies today. At a strategic level, a company’s ability to make timely and sound financial plans will allow it to provide more credible guidance to stakeholders, and to make better, more informed and faster business decisions.

SPREADSHEETS: IMPEDING BEST PRACTICES
In addition to adopting budgeting, forecasting and reporting best practices, leading companies have also made changes to the technologies used to support the process. Spreadsheets are still the predominant corporate planning tool. In a CFO Magazine research study, 73 percent of finance executives said they use spreadsheets and manual processes for forecasting, budgeting, and planning. Not surprisingly, more than 60 percent of these executives said that the process takes too long. Most would agree it is also riddled with errors. While spreadsheets are good personal productivity tools, they are not collaborative planning applications. Spreadsheets are fundamentally unsuited for a complex, dynamic, shared financial planning process for several reasons, including: > Data distribution and consolidation is time-consuming, rendering frequent re-forecasting unfeasible. > Spreadsheets are incapable of supporting the kind of iterative planning needed in a changing business environment. > There is little or no security or audit trail. > Plan accuracy is always in question, since: o Most data is editable, despite password protection o Links are easily broken o Formulas can be changed, both intentionally and inadvertently o Version control is nearly impossible o Consolidation is manual.

The spreadsheet’s defects are behind the difficulties organizations have with the [budgeting and planning] process. We therefore advise organizations to eliminate spreadsheets if they want to budget and plan more effectively. — Business Performance Management Magazine

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These inherent weaknesses undermine the accuracy of the entire planning process. This erodes line managers’ confidence in the process, and reduces their level of engagement. Finance is viewed as pushing a bad product, and the plan loses credibility. Spreadsheets are clearly not the best way to manage a top-notch budgeting and forecasting process.

ALTERNATIVE TECHNOLOGY CAN PROMOTE BEST PRACTICES
On-demand [dedicated budgeting and planning] solutions need minimal IT resources, are quick to implement, and can have a low total cost of ownership. They enable corporations to focus IT assets and staff on their core business activities and outsource everything else. — Ventana Research

Leading companies have recognized that spreadsheet-based planning impedes their implementation of these budgeting and forecasting best practices. They have moved to a purpose-built application with lean infrastructure requirements. This type of planning software enables them to accurately plan and re-plan quickly, using the same or fewer resources than they formerly devoted to the process. Streamlining the planning process demands technological tools capable of supporting a faster, more flexible, and adaptive approach to planning. By using an on-demand, dedicated budgeting and planning application that is delivered over the web, organizations are able to implement the best practices outlined in this paper. With such software, the planning process can be: > Integrated: Strategic, operating and financial plans reside in one system. Managers do not need to keep their own planning systems on the side. > Collaborative: Web-based, distributed planning enables anytime, anywhere participation. The ability to use a secure web connection allows everyone to access the budget information at anytime from anywhere there is Internet connectivity. > Adaptive: Simplified version control and the ability to frequently reforecast allow companies to respond to business changes with “what if” scenarios as often as necessary. > Timely: Information is always current because departmental users contribute directly to a central planning database. Deadlines are more easily met because consolidations and rollups are done automatically. > Efficient: Finance managers and department managers spend less time managing data, and more time managing the business. > Relevant: Customized views for managers increase adoption and ownership. Formula capabilities enable modeling business drivers. > Accurate: Plans contain fewer errors, since broken links, stale data, improper rollups, and missing components have been eliminated.

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THE ADAPTIVE PLANNING SOLUTION
Adaptive Planning is the leading provider of on-demand, web-based budgeting, forecasting, reporting and analytical applications. The company helps corporations conquer budgeting inefficiencies and gain greater visibility into their own financial and business performance by: > Providing affordable, full-featured modeling software that automates the ongoing cycle of budgeting, forecasting and reporting, so that managers can quickly and easily formulate coordinated plans. > Enabling companies to use timely and accurate information to analyze and respond in real time to changes in their business environments. > Reducing the requirement for corporate IT, with a hosted, web-based software solution that is instantly available and requires no new IT infrastructure or resources. For more information on Adaptive Planning, call 650-528-7520 or visit www.adaptiveplanning.com.

800 W. El Camino Real, Suite 260 Mountain View, CA 94040 T 650 528 7500 ■ F 650 528 7501 www.adaptiveplanning.com

Copyright © 2005, Adaptive Planning

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Spreadsheets: An Inadequate Solution for Budgeting, Forecasting and Reporting

TABLE OF CONTENTS
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 What’s Wrong with Spreadsheets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Data distribution and consolidation is time-consuming and error-prone . . . . . . Analyzing complex business trends is difficult and results are latent . . . . . . . . . Ensuring compliance is impossible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . With spreadsheets, there is never just one set of facts . . . . . . . . . . . . . . . . . . Re-forecasting is infrequent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 3 3 4 5

The Spreadsheet Alternative: What to Look for in a Budgeting, Forecasting, and Reporting Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 The Adaptive Planning Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Making the Switch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

EXECUTIVE SUMMARY
For years, large companies have reaped the benefits of purpose-built budgeting, forecasting and reporting applications. Unfortunately, because such applications are costly and complex to implement, deploy and maintain, mid-sized organizations have not been able to reap the same benefits. Instead, these organizations have conducted the budgeting and forecasting process through a readily-available, inexpensive and easy-to-use application — the spreadsheet. While spreadsheets are good desktop personal productivity tools, they are not collaborative planning applications. As the planning process extends beyond a single user, spreadsheets fail to support a complex planning process. They were never designed for multiple users. They were not intended to be the foundation of a dynamic, shared function like financial planning. And they certainly weren’t designed to provide the security required for financial information. All companies — large and small — have complex financial planning processes. Mid-market organizations should not settle for the limited functionality of simple spreadsheets when their financial planning process involves multiple people, requires real-time access to data and demands comprehensive security. The good news is that there are excellent alternatives available today. Finance managers should look for a purpose built application, such as Adaptive Planning, that is: > Easy to use > Requires no IT resources for implementation or maintenance > Consolidates budgets in real time, automatically > Enables powerful driver-based modeling and scenario analysis > Facilitates compliance with regulatory requirements > Creates a single data repository for all financial plans, forecasts, and reports > Scales and expands to the needs of the business > Affordable

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WHAT’S WRONG WITH SPREADSHEETS?
Across the board, finance executives at midsize companies believe they spend too much time on forecasting, budgeting, and planning. Of these executives, 73 percent rely primarily on spreadsheets and manual processes. When asked about the most acute problems with their current planning process, more than 60 percent said it “takes too long.” Nearly 43 percent said “not enough time to analyze data,” and more than a third cited “lack of ownership by business units.” — CFO Research Services

Spreadsheets are fine for what they were designed to do — provide individual users with a robust tool for data analysis. But many financial professionals still choose to use spreadsheets as the foundation for their company’s budgeting and planning process simply because they are inexpensive and familiar. Using a spreadsheet as the backbone of the planning process is complex, time-consuming and error-prone, focusing the majority of the effort around low value data management and not on high value business analysis and evaluation. And, as organizations grow to incorporate budgeting and forecasting best practices, spreadsheets become untenable. There are many shortcomings of using spreadsheets for the budgeting process. Five primary shortcomings include:

1. Data distribution and consolidation is time-consuming and error-prone. Distributing and consolidating the data needed during the budgeting and forecasting process is difficult, involving multiple steps, each with its own opportunity to introduce errors: > First, the finance manager puts together a master budget spreadsheet. > Next, the finance manager manually segments the master budget spreadsheet into pieces by department, creating multiple smaller spreadsheets for each department manager to view and update. For some organizations, this can mean tens or even hundreds of spreadsheets that must be manually distributed. Links between spreadsheets are easily broken in this process resulting in missed information, inaccurate numbers and wasted time correcting the links. > Third, the finance manager must email the spreadsheet segments to each department manager. As is often the case in a manual process, departments can be missed or a spreadsheet can be mistakenly sent to the wrong department, leading to security breaches, regulatory non-compliance, and time wasted resending the right files. > Next, the finance manager must manually follow up with each department manager to collect the spreadsheets. Inevitably, not all the spreadsheets will be returned on time or the data will be incomplete. > Finally, the finance manager must consolidate each of the spreadsheets back into the master spreadsheet, spending a significant amount of time ensuring that departmental finance managers use the latest version of the spreadsheets, enter the right data at the right level of detail, and do not break formulas or otherwise alter the spreadsheets.

Companies that rely heavily on spreadsheets typically take 30 days longer to complete their budgets than those that don't. — APQC benchmarking survey

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This process not only diverts valuable time that should be spent on higher value analysis of the budget and the business, it adds a great deal of risk. And it reduces financial professionals to data entry clerks. In addition, there is the likelihood that the data is old before it has even been shared. It’s not real-time, and therefore, impossible to trust with real certainty.

2. Analyzing complex business trends is difficult and results are latent. Budgeting and forecasting is not just about collecting data, it is also about understanding how the business is running and being prepared for change. When businesses are in flux — due to growth, cutbacks, new product introduction, acquisition or divestiture — conducting careful scenario analysis becomes critical. But using spreadsheets for such complex analysis quickly escalates from difficult to intractable. Changes in the business mean changes to the structure of the model. This can mean creating new sheets, updating formulas within all financial statements, modifying reports, and so on. Each structural change takes time and risks introducing errors into the model. And if the change requires input from department managers, it can take days, or even weeks, to develop the new model structure, collect the relevant data, and then analyze it once it has been collected. Such delays make it difficult for businesses to react quickly to changes or to take advantage of business opportunities. The finance department should be empowered to use the financial model to plan for and react to changes in the company or marketplace. They need to quickly make structural changes to their model. They need access to real-time data so they can quickly act upon trusted, accurate information. Because the spreadsheet-based budgeting and planning process is so time consuming and exhausting, finance managers miss the real information in their efforts to manage the data. The simply can’t see the forest from the trees.

More than half (54%) of companies would like to re-forecast monthly or more, and 48% have the need to re-forecast on demand to react to changes in their business. — Business Finance Magazine

In a typical planning environment, more than half of all time is spent gathering and re-keying data, which leaves little time for analysis. The average company spends only 16% of their time in the value added activities of explaining the “why,” and exploring the “what if.” — Hackett Bench-Marking

3. Ensuring compliance is impossible. In the post-Sarbanes-Oxley world, companies of all sizes are facing strict requirements for transparency and data security. Public companies must ensure that they have strong controls around financial processes. And even private companies are under increased scrutiny from lenders, auditors and investors. A meticulous budgeting and forecasting process is central to the good governance of every company.

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Spreadsheet tools were simply not designed for rigorous financial controls. The limited retrofitting that has been done — such as adding passwords to spreadsheets or attempting to limit which portions of a spreadsheet are editable — are the worst kind of half-measure. They do not accurately address compliance issues, but rather make the entire process more cumbersome and difficult for everyone involved.
30 to 90 percent of all spreadsheets suffer from at least one major user error. The range in error rates depends on the complexity of the spreadsheet being tested. In addition, none of the tests included spreadsheets with more than 200 line items where the probability of error approaches 100 percent. — The Journal of Property Management

With spreadsheets, organizations face numerous compliance-related risks, including: > Data security — Because there is little to no security inherent in a spreadsheet model, they make it virtually impossible to ensure that the data has not been tampered with, viewed by unauthorized individuals within the company — or worse — forwarded to others outside the company. > Data inconsistency — Multiple versions of spreadsheets floating around in email make it difficult to ensure that analyses are performed on the most up to date financial plan or forecast. > Audit trails — Spreadsheets lack audit trail capabilities that allow financial managers to see who made changes and when.

4. With spreadsheets, there is never just one set of facts. Getting everyone in the organization “on the same page” is not just a good idea; it is a financial best practice. Operating with critical information scattered around the organization in spreadsheets is a virtual guarantee that at least some key members of the management team will be working from old, out-of-date numbers.
In a survey of 168 finance executives, 33 percent of respondents with revenue under $100 million say that “spreadsheet hell” is a fair description of what goes on in their departments. That figure jumps to 59 percent for larger companies. — CFO IT

Does everyone have the latest headcount forecast? Are they hiring to the current targets? Ordering the correct amounts of raw materials? Planning to support the agreed to number of sales representatives? Looking at a budget spreadsheet in an email inbox, or on a hard drive, does not allow a departmental finance manager to tell whether a spreadsheet is the latest and greatest — or the one from last week. It is only a matter of time before someone generates a plan based on the wrong set of numbers. And only a matter of time before the impact of that mistake is material.

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5. Re-forecasting is infrequent. Annual budgets are no longer enough. In today’s competitive, dynamic market, rolling forecasts — revised monthly, quarterly or at least semi-annually — are key not only to understanding the company’s current financial situation, but also its future. The market, competitors and economy change constantly. Companies must have a plan to anticipate these changes, which are an undeniable part of the budgeting process. But clearly the process with spreadsheets is just too time consuming. Finance must be able to quickly reforecast and engage department managers in that process. Surveys consistently show that financial managers would like to reforecast more frequently but fail to due to the time and effort associated with a spreadsheet-based process. It’s clear that spreadsheets — a 30-year-old technology — are not up to the task of budgeting in today’s dynamic companies. Large companies have known this for years and have standardized on a number of enterprise solutions — Hyperion, Cognos, and Cartesis to name a few. But the lengthy implementation times, high costs and large staffs required by these solutions make them ill-suited to mid-sized companies. What alternatives do these organizations have?

Despite its ubiquitous nature and popularity as a planning and budgeting tool, spreadsheet software alone has proven to be poorly suited for enterprise planning processes. — Forrester Research

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THE SPREADSHEET ALTERNATIVE: WHAT TO LOOK FOR IN A BUDGETING, FORECASTING, AND REPORTING SOLUTION
While it is clear that spreadsheets are not the right way to manage the budgeting and forecasting process, there is a confusing array of new purpose-built solutions targeted at the mid-sized company. These organizations should evaluate several criteria in their efforts to replace spreadsheets and select an application that best fits their needs. These criteria include: 1. Easy to use 2. Requires no IT resources for implementation or maintenance 3. Consolidates budgets in real time, automatically 4. Enables powerful driver-based modeling and scenario analysis 5. Facilitates compliance with regulatory requirements 6. Creates a single version of all financial plans, forecasts, and reports 7. Scales and expands to the needs of the business

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THE ADAPTIVE PLANNING SOLUTION
By eliminating spreadsheets for budgeting and planning, organizations can simplify and streamline this complex and error-prone process, while ensuring quality and accuracy — improving efficiency and meeting today’s stringent compliance requirements for financial information. Adaptive Planning delivers an easy and intuitive system that brings the power of large-scale enterprise financial planning systems to mid-market organizations. Unlike other mid-market solutions, Adaptive Planning requires no installation because it is a hosted solution — making it fast and easy to migrate from spreadsheet-based planning. And it’s easy to use — eliminating the need for extensive training and ensuring adoption. Reasons to choose Adaptive Planning include: 1. Adaptive Planning is easy to use Working in Adaptive Planning feels like a familiar spreadsheet. Department managers provide information in a grid view that looks and feels just like a spreadsheet, so there’s nothing new to learn. And, since Adaptive Planning is a true web-native budgeting, forecasting and reporting system, it’s as easy to navigate as the web. With customized secure access, each user can see only what they’re responsible for. There’s no learning how to navigate to the right place, and users can’t make a mistake and fill out the wrong information. 2. Adaptive Planning requires no IT resources. Some organizations have a large IT staff. They have a culture of implementing, customizing and configuring software and doing all of the required maintenance and systems work. But most mid-sized companies don’t have this luxury. Adaptive Planning is so easy, there is literally nothing to install. All budgeting, forecasting, analysis and reporting tools are immediately available through a standard browser. Updates to the software are handled by our staff, not yours, so you are always up to date with the latest software release. And our world-class hosting facilities ensure that your data is secure and constantly backed up 3. Adaptive Planning consolidates budgets in real-time. Spreadsheets are never up to date until the master budget spreadsheet is created — which is a manual and extremely time-consuming task. Things aren’t much better with a lot of budgeting and forecasting software packages — finance managers still typically end up with numerous budgets that must then be rolled up and reconciled to a single version.

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With Adaptive Planning, departmental users contribute their input to the central budget. There aren’t separate spreadsheets and subsets of data scattered around. And there’s no “button” to push to consolidate — the system does it automatically and continuously. 4. Adaptive Planning provides powerful, scenario-based analysis. Growing businesses — those that are introducing new products, expanding geographically and through acquisitions, and being driven to change by competitors — need to be able to design business financial models based on key drivers and create scenario analyses on a moment’s notice. Adaptive Planning gives mid-sized companies the most powerful scenario planning tools available, with the ability to create and modify scenarios dynamically, quickly compare scenarios against each other, and lock scenarios and create baselines for later reference and variance reporting. 5. Adaptive Planning ensures compliance. Adaptive Planning was built with compliance in mind. Adaptive Planning inherently protects companies against the issues that spreadsheets can often complicate, like data security, version control and audit trails. In addition, Adaptive Planning provides a critical compliance capability that simply doesn’t exist with spreadsheets — the ability to drill down into specific numbers to find the root data and ensure its accuracy. 6. Adaptive Planning delivers a single version of the truth. A centralized, database-driven system inherently eliminates the need for multiple versions and confusing data. With Adaptive Planning, everyone across the company — from department level managers to the executives — always have instant access to the most current information. They will never need to verify numbers or compare versions, and most importantly, they will never plan and execute based on inaccurate information, an outdated strategy or a rejected budget. 7. Adaptive Planning is expandable and scalable Businesses change rapidly, and the budgeting, forecasting, analysis and reporting solution must be able to keep up. Adaptive Planning protects organizations from change. Model structures are managed centrally, making it easy to react to changes in the business or the underlying assumptions. Departments can be added on the fly and users can be added as the organization grows, all within an easy to use administration interface.

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MAKING THE SWITCH
Large companies will likely find their best solution in the big, enterprise class packages available for planning, budgeting, forecasting and reporting. Tiny companies will be best served by a spreadsheet-driven process. But companies in the middle can’t afford the cost and complexity of the heavy enterprise software packages, and they need capabilities that go far beyond spreadsheets. For mid-size companies, the fastest to implement, easiest to use and most cost effective approach is to use a hosted solution like Adaptive Planning. Adaptive Planning delivers the powerful financial planning and analysis capabilities that mid-sized organizations need — affordably and with zero IT impact. Make the switch to Adaptive Planning. Visit www.adaptiveplanning.com for more information.

800 W. El Camino Real, Suite 260 Mountain View, CA 94040 T 650 528 7500 ■ F 650 528 7501 www.adaptiveplanning.com

Copyright © 2005, Adaptive Planning

Spreadsheets: An Inadequate Solution for Budgeting, Forecasting and Reporting | 9

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