IBM Software Financial Performance Management

Business Analytics

Planning, budgeting and

forecasting: Software
selection guide
2 Planning, budgeting and forecasting: Software selection guide

Contents Abstract
This paper addresses the challenges of planning, budgeting
2 Abstract

and forecasting in a spreadsheet environment and highlights

2 Overview
the advantages of using a software solution designed
specifically for dynamic planning. The business challenges
3 Business Problems
and drivers are discussed, including organizational and
4 Origins of planning challenges
technological best practices to follow. A Planning Software
Selection Matrix is included to assist decision makers in
4 Business drivers
selecting the most appropriate planning software for their
8 The Solution
specific business processes and needs.

10 Planning Sof tware Selection Matrix Overview

12 Conclusion The planning process planning, budgeting, forecasting
and reporting presents a formidable challenge to many
companies, regardless of size or industry. Planning is a crucial
component of performance management that contributes
greatly to a companys overall success or failure, especially
in these mercurial economic times. Despite its importance,
planning and especially the annual budget process is
often seen as burdensome and time-consuming. This attitude
is so widespread that 60 percent of CFOs surveyed in the
2010 IBM Global CFO Study plan to make major changes
to their critical finance practices and processes. Yet
forward-thinking organizations see that when planning is
dynamic and company-wide, it offers enormous opportunities.

Leading companies address planning obstacles directly and

take steps to improve their processes. They take advantage of
new technologies and employ well-established planning and
forecasting best practices. When they do so, they are quickly
rewarded with more accurate plans, more timely re-forecasts
and more effective decision-making. Overall, these tools and
practices save time, reduce errors, promote collaboration and
foster a disciplined financial management culture that delivers
true competitive advantage, often accompanied by a leading
or stable market position.
 IBM Sof tware 3

Specifically, such companies are able to:

Comprehensive scenario planning delivers
Consistently deliver timely, reliable plans and forecasts,
at least three advantages:
along with contingency plans.
Analyze situations where performance begins to deviate
It enables an organization to avoid potential catastrophes
altogether.
from plans and promptly take corrective action.
It sensitizes management to what might occur and, as a
Strengthen the link between strategic objectives and
result, can help management identify both problems and
operational and financial plans.
oppor tunities earlier than it might have, had it not conducted
Improve communication and collaboration among scenario planning.
all contributors. It spurs organizations to think through what we would do if
Enhance strategic decision-making, enabling leaders and to create plans that can be rapidly implemented if a
to quickly identify, analyze and forecast the impact of scenario actually comes to fruition.
changes as they occur.
Steve Player and Steve Morlidge, Five Advanced Practices
for More Robust Forecasting, The Beyond Budgeting
The goal of this guide is to help organizations take the first
Roundtable, 2010.
step toward improved budgeting, planning and forecasting.
The guide outlines a systematic approach to software
evaluation and selection that aligns best practices and leading-
For managers outside of Finance, planning can appear to
edge technology with planning activities. Readers will be asked
be little more than a periodic invasion of their time which
to review their own planning process, identify challenges,
produces minimal benefit. Managers can feel besieged by
define stakeholder requirements and match emerging criteria
demands for detailed information and develop their own
with software features and functions.
methods or solutions to analytics and plans. They can also
feel constant pressure to do more with less, while still being
Planning challenges and
expected to deliver results.
process problems
Corporate decision-makers often voice similar complaints But these inconveniences are minor when compared with
about traditional planning, budgeting and forecasting. the missed opportunities that can result from inflexible and
inadequate planning and forecasting, particularly in times
Low-value activities take up the greatest portion of time. of economic volatility. A well-connected, dynamic planning
Plans are quickly out of date. and forecasting nervous system should be aligned with
Forecasts and reports are too infrequent. operations and should support high participation throughout
Insight into causes is insufficient and leads to the organization. Such a system enables management to
shadow systems. engage in aggressive, creative activity, to develop intelligent
Planning participation is too limited. contingency plans, and to significantly improve resource
Existing applications and spreadsheets are inflexible reallocation to meet changing business conditions.
and do not support a dynamic environment.
4 Planning, budgeting and forecasting: Software selection guide

Origins of planning challenges Align strategic and operating plans

Over the last fifteen years or so, companies have devoted Within the excellent financial management equals excellent
considerable resources to implementing enterprise business management culture, the ongoing alignment of
resource planning (ERP) systems. Yet most planning is still strategic and operating plans is vital. Because of their
performed using spreadsheets, electronic mail and countless responsibility to engage department managers in the planning
staff hours an inexpensive approach in software terms, but process, finance professionals must clearly communicate
ever so costly in the long run because spreadsheets are not corporate strategic plans to those who run the business from
designed to effectively support organization-wide planning and day to day. The importance of this type of alignment is
forecasting processes. Some planning systems themselves can demonstrated by the fact that 70 percent of CFOs are now
impede business responsiveness. Inhibitors are numerous: taking a more prominent role in decision-making, beyond
the traditional role of finance.
Business rules (formulas) are mixed with data and prone
to corruption. Finance can help translate strategic goals into financial
Files must be exchanged frequently among users, but targets and in turn into specific departmental plans and
cross-company teams cannot work together easily. related revenue and expense drivers, such as headcount and
Presenting or analyzing data from different perspectives equipment. By translating strategic goals into operational
is difficult. plans, and by tracking and measuring performance against
Data aggregation is complicated and time-consuming. plan, leading companies are better able to meet or exceed
The business model is not represented well, if at all. their objectives.
Complex calculations, multidimensional analysis and
reporting are impossible.

Supporting best practices

It is vital that planning software supports accepted best
70 percent of CFOs are now taking a more
practices in order to enhance timeliness, information reliability prominent role in decision-making, beyond
and participation by key people throughout the organization. the traditional role of finance.
A best-practice approach requires that planners employ several
key strategies and tactics.
 IBM Sof tware 5

Start at the top and at the bottom functions and promotes planning coordination among
An important ingredient of successful budgeting and functions. For example, by understanding the sales trends
forecasting is the ability to align top-down financial targets and profitability related to particular household products
with bottom-up plans. Some companies establish top-down that may fly off the shelves during an otherwise slow period,
targets and then turn the annual budgeting process over to a retailer can balance product mix, marketing, inventory
Finance along with a mandate to meet those numbers. Other and sales expenses to optimize profits. Finance can provide
companies require detailed bottom-up plans, and then plug the operations managers with a useful model that includes
in the total company numbers at the top so that the plan information about past actuals and current inventory levels
meets strategic targets. Neither of these approaches reflects and marketing promotions as well as formulas driven
a realistic commitment to planning excellence. by assumptions.

Leading companies provide initial guidance from senior Support from Finance does not infringe on department
managements top-down perspective on strategic goals, managers responsibility for creating their own plans. Instead,
objectives and expectations. Then, employees and line-of it saves them time by providing a solid, factual baseline a
business managers build a plan from the bottom up, indicating starting point that contains important information about their
how they intend to meet the established goals. This process departments relationships with other functions. Managers
requires frequent iterations for the top-down and bottom-up can then make adjustments to this baseline to reflect the
activities to meet and reconcile. latest business conditions. This approach also encourages
collaboration across functions.
The result is a plan that is supported by:

Line of business managers because they helped create it

and will be rewarded for meeting it.
Senior management, because operational goals are aligned
Support from Finance does not infringe on
with strategic goals. department managers responsibility for
Finance, because they added value to a productive, creating their own plans. Instead, it saves
collaborative effort, rather than demanding participation
in a budget process that some see as a mere exercise.
them time by providing a solid, factual
baselinea starting point that contains
Model business drivers important information about their
A first-rate plan or forecast is based on a model with formulas departments relationships to other functions.
that are tied to fundamental business drivers. Simply importing
and manipulating past actuals does not reflect underlying
operational causes and financial effects in a business. Building
driver-based models into plans ensures consistency across
6 Planning, budgeting and forecasting: Software selection guide

Drive collaboration between functions For example, if revenue forecasts are below targets, a bank or
Not only should strategic and operating plans be aligned, financial services company may need to recalibrate products or
but plans that affect multiple functional areas should be services to attract new customers or keep current customers
coordinated. Best practices include the direct involvement from leaving. With a model-based approach to forecasting,
of line-of-business managers along with a collaborative marketing can perform what-if analysis to test new product or
approach to planning and forecasting. service initiatives, examining impact by customer and customer
segment. In turn, these scenarios can be evaluated by bank
In addition to understanding broad strategic goals, department sales team members to adjust their sales strategy, such as
managers must also know what other departments are maximizing time spent with the most profitable customers.
planning. For example, in a company that is planning a Updates to plans feed directly to Finance, which then turns
major new product rollout, manufacturing needs to ramp up the marketing and sales projections into net revenue
production, marketing needs to increase advertising and the projections all in a matter of hours or days rather than in
sales organization may need to add new headcount. But the weeks or months, when remedial action may be too late.
marketing plan should also include training programs to
familiarize the sales representatives with the new product. Rolling forecasts
The facilities department may need to plan for new headcount, A company that runs rolling forecasts is always looking
equipment, warehouse space for product inventory and so forward to the immediate or near-term future. For such
on. Such collaborative planning can be accomplished through companies, business does not end on December 31 and
an iterative process that lets managers forecast and share restart on January 1. The forecast time frame should extend
alternative scenarios and contingency plans, which are out two to eight quarters, depending on business volatility.
essential, given todays economic uncertainties. Finance also Additionally, the forecast should reflect the input of all
plays a key role in facilitating the coordination of plans across business units, not just Finance. The process goal is
the company and helps ensure that operational tactics are coordination of the different parts of the organization using
aligned with financial targets throughout the organization. the latest available estimates of what may likely occur,
according to Steve Player, Program Director of The Beyond
Frequent re -forecasting Budgeting Roundtable. Action plans to correct negative
In this challenging global economic environment, with trends or to exploit positive developments can be included
multiple market pressures, forecasting may be needed monthly with discussion of their likelihood of success. These plans
or even bi-weekly. Continuous re-forecasting helps managers can be made dynamic, based on the movement of leading
answer critical questions such as, What did we expect? indicators. 4
How are we doing against our plan? and, even more
important, How should we adapt our plans going forward?
 IBM Sof tware 7

pipeline information and external market data. Finance should

be able to quickly consolidate plan data from all areas of the
company and distribute new information immediately. Such a
process will facilitate more informed decision-making in such
areas as pricing, product family, channel mix, capital allocations
and organizational changes.

Action plans to correct negative trends or to

exploit positive developments can be included
with discussion of their likelihood of success.
Moving from the behavior of annual financial activities into
a more dynamic environment, companies are increasingly These plans can be made dynamic based on
adopting the rolling forecast, such as a five-quar ter forecast. In the movement of leading indicators.
many cases, rolling forecasts are updated quar terly or monthly,
facilitating reduced cycle time with more rapid reaction,
Steve Player, Program Director, The Beyond Budgeting Roundtable
realignment and readiness throughout the organization.
Steve Player and Steve Morlidge, Business Forecasting:
Six Design Principles for Healthier Forecasts, The Beyond
Budgeting Roundtable, 2010.
Manage content that you can act
on reduce what isnt
A focus on content that can be acted on in planning frees
managers from unnecessary detail, enabling them to produce
Planning should be an ongoing process with frequent
better plans. While supporting detail can provide an audit trail
opportunities for managers to view the companys latest
and insight into managers thinking, more detail does not
internal and external performance data. Contributors should
necessarily make a better plan. Managing material content
be able to test new plans or alter existing plans based on new
requires attention to information that has real and significant
information coming from various sources, including other
impact on expenses, revenues, capital or cash flow.
managers, monthly actuals, top-down target revisions, and
leading market indicators such as customer inquiries, sales
8 Planning, budgeting and forecasting: Software selection guide

Content management helps a company: At an operational level, this type of planning is less costly and
produces more accurate results than the processes followed by
Avoid false precision. A complex model might not be any more most companies today. At a strategic level, timely and reliable
precise than a simpler model. More detail and intricate financial plans provide more credible guidance to stakeholders
calculations can lure managers into the trap of thinking and enable faster, better-informed business decisions.
their plan is more accurate.
Monitor volatile not stable accounts. Efforts are best spent Best-practices templates
on fluid expenses such as headcount and compensation. The use of pre-built, best-practice templates or planning
Aggregate accounts. A forecast does not need to reflect the models can help organizations reduce implementation risk and
same level of detail as that in the general ledger. Even if the accelerate time to business value. Best-practice templates for
general ledger has 15 different travel accounts, managers activities such as expense management, resource planning,
can often plan adequately using just one account. capital planning, profitability analysis and integrated financial
reporting are available from software vendors for a wide range
Timeliness and reliability of functional areas and industries. With best-practice
Many companies have an inefficient and inflexible planning templates, companies can build models faster and establish
process at the center of which is the annual budget. Time- dynamic connections that keep strategic objectives, operational
consuming distribution and consolidation processes practically plans, people and initiatives in sync as business conditions
guarantee that plan data will be out of date and irrelevant change. Executives can quickly see the impact of changes in
before it is even published and plans based on stale data operational plans on corporate financials. Functional and
and assumptions are of little or no value. World-class business-unit managers can quickly adjust resource allocations
organizations shorten their planning cycles by implementing to support corporate objectives. And corporate guidelines and
the best practices described here. They also use technology policies are more consistently communicated and applied
to successfully manage budget consolidation and aggregations throughout the business.
on demand. Technology is particularly effective in improving
timeliness and reliability in plan consolidations. In particular, Technology supports best practices
plan consolidation on demand eliminates the necessity of Leading companies have recognized that spreadsheet-based
processing results manually and enables a smoother, more planning impedes implementation of planning and forecasting
consistent, more accurate planning process. Variance reports best practices. They have moved to solutions that address
delivered within two to four days after the period close allow the full cycle of planning processes analytics, modeling,
managers to immediately evaluate their performance against contributing and reporting on a common planning platform
plan and effectively adjust their business activities. with lean infrastructure requirements, which enables them to
plan and re-plan quickly, using the same or fewer resources.
 IBM Sof tware 9

Streamlining the planning process demands technological Relevant. Customized views for users increase adoption and
tools capable of supporting a faster, more flexible and adaptive ownership. Formula capabilities enable modeling of all
approach. By using an on-demand, dedicated planning, relevant business drivers.
budgeting and forecasting solution that is delivered over Accurate. Plans contain fewer errors because broken links,
the web, organizations can readily implement best practices. stale data, improper rollups and missing components
are eliminated.
When evaluating and selecting planning, budgeting and
forecasting software, leading organizations look for solutions The evaluation of a vendors product features and support
that meet these top-level requirements: is a complex task. It requires evaluation of the software
functionality, its value to the planning process and its
Adaptive. The ability to rapidly change models based on ability to support planning best practices. There are also
input and prototypes from business units and to frequently intangible factors such as vendor support, user community
re-forecast enables companies to respond to business changes connections and commitment to customer success once the
as often as necessary. sale is complete.
Timely. Information is always current because departmental
users contribute directly to a central planning database. The key is not just evaluating product features, but also
Consolidations and rollups are done automatically, so evaluating how these features are implemented and by
deadlines are met more easily. whom. It is important to test any planning solution that
Integrated. Planning, analysis, workflow, and reporting reside will be used by a large number of stakeholders and will play
on one common platform. Managers do not need to maintain a critical role in organizational performance.
shadow planning systems.
Collaborative. Web-based, distributed planning enables Workshop evaluation
participation anytime, anywhere with a secure connection. A workshop approach can be used to evaluate not only solution
Led by Finance. Because the Finance office is responsible for features, but also the way a plan is constructed, distributed
planning process development, deployment, reporting and and reported on. A business process should be defined (such
analysis, finance professionals have the best understanding of as capital, headcount or expense) as a context for the evaluation
what is required in terms of software flexibility and ease-of of product features and intangible factors such as ease of
use, both in modeling and day-to-day activities. development, roles, references and customer support.
Efficient. Finance managers and department managers
spend less time managing data and more time managing The following matrix aids the evaluation process by relating
the business. best practices to product features. It also helps prioritize
features and assess how well they relate to vendor offerings.
10 Planning, budgeting and forecasting: Software selection guide

Planning Software Selection Matrix

Feature Categor y Score Impor tance/ Vendor X Vendor Y Vendor Z
Weight (Weight * (Weight * (Weight *
(1=least Score) Score) Score)
impor tant,
to 5=most
impor tant)
Dynamic Planning Blended with Analytics
On-demand (in-memor y) what-if analysis
Individualized analysis and plan prototypes shared with
other planners
Profitability analy tics linked to plan
model to optimize business per formance
On-demand repor ting
Personalized workspace with customized views
Integrated analysis through char ting
Align Strategy & Operational Plans
Module application development
Operational planning aligned with financial planning to
improve decision-making via application linking.
Suppor ts comprehensive planning life cycle, from individual
to group to enterprise and back
Model Business Drivers/Planning applications
Guided modeling w/graphical interface
Driver-based calculations
Dimension separate from models
Multi-cube development environment
Ease of development by finance/business analysts
Manage Content
Real-time workflow
Defined user views
Role-based security
Web client
Personal desktop client
Microsof t Excel client
Annotations suppor t
Suppor ts Timely and Reliable Planning
On-demand plan consolidation
Automated data loads between transactional systems
Cer tified connector to ERP
Standard repor ting
Multi-dimensional analysis
Dashboarding and scorecarding
 IBM Sof tware 11

Feature Categor y Score Impor tance/ Vendor X Vendor Y Vendor Z

Weight (Weight * (Weight * (Weight *
(1=least Score) Score) Score)
impor tant,
to 5=most
impor tant)
Distributed and connected planning modes
Planning types for corporate input, hierarchical,
and continuous
Best Practices Templates (pre-built models)
Capital expenditure planning
Expense planning
Integrated income statement, balance sheet, and cash flow
Profitability analysis
Workforce planning
Company Profile
Quality of references
Revenue
Number of employees
Number of customers
Number of industr y references
Independent industr y analyst ratings
Implementation and suppor t
Implementation methodology
Training options
Suppor t hours
User communities
Customer forums
Online knowledge base
Par tner network suppor t
Vendor consulting
Quality of documentation
IT Infrastructure Suppor t
Database suppor t
LDAP suppor t
Single sign-on
Por tal suppor t
Open API
Metadata suppor t
MDX suppor t
HTTPS suppor t

Total Score
Conclusion
The successful implementation of a planning solution
requires the orchestration of technology, business processes
and best practices. This selection guide outlines key principles
to help a company align its business process and technology
requirements during the process of selecting planning, Copyright IBM Corporation 2014
budgeting and forecasting software. By matching a companys IBM Corporation

planning process to established best practices, facilitated by Software Group

the proper implementation of a planning solution, an Route 100

Somers, NY 10589

organization can significantly improve its financial and

operational performance. The bottom-line results are Produced in the United States of America
March 2014
visibility to performance gaps and alternative actions,
reliable forecasts, and commitments to achievable goals. IBM, the IBM logo, and ibm.com are trademarks of International Business
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and forecast resources; balance risks against expected returns
and work to meet regulatory requirements. By making 1 IBM Institute for Business Value, The New Value Integrator: Insights
from the Global Chief Financial Officer Study, March 2010
analytics widely available, organizations can align tactical
and strategic decision making to achieve business goals. 2 Ibid
For more information, see ibm.com/business-analy tics. 3 Steve Player and Steve Morlidge, Business Forecasting: Six Design Principles
for Healthier Forecasts, The Beyond Budgeting Roundtable, 2010.
Request a call 4 Ibid
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