[IMGCAP(1)]To compete in today’s unpredictable economy your clients’ companies must keep a very close eye on their operational performance and be able to use that information to continuously update their business plans and budgets.

By keeping their business plans fluid, midsized companies can quickly allocate additional resources to take advantage of new opportunities, or hold back spending and take a cautious approach when appropriate. Such fluidity can enable them to better exploit the two attributes that give them an edge over their larger competitors: speed and flexibility.

However, most midsized companies are not able to keep their business plans fluid and hence can not effectively leverage these two attributes. They frequently call upon their trusted CPAs to help them address this issue.

Midsized companies often operate with limited IT budgets. As a result, they do not have the resources and expertise to implement a planning and budgeting system that integrates with their operational system and thereby allow them to easily create and then continually update their business plans. Without such a system, companies often resort to spreadsheets as their primary planning and budgeting tool. While spreadsheets can provide organizations with a simple and ubiquitous tool for business planning, they also create a number of serious issues that affect their ability to create business plans in a timely manner and continuously update them.

To understand the issues created by a spreadsheet-based planning and budgeting environment, we need to first look at a typical planning and budgeting cycle. The planning and budgeting process typically begins with the finance organization, which creates a spreadsheet template loaded with the last planning period’s data and top-down assumptions about the current planning period. This template is sent to various department managers, who circulate it within their department to create a first cut of plans and budgets for the upcoming planning period.

Throughout this process, each department ends up adding more rows and columns to the spreadsheet to document comments or provide additional details before cycling back to the finance organization. Soon the finance organization has multiple versions of spreadsheets from various departments, each with different formats, which they need to manually aggregate and reconcile to create a first cut of the company-wide plan and budget. This plan is then reviewed and refined to incorporate top down assumptions, and then sent back to the various departments for iteration. This process repeats itself a few times, with the final version taking anywhere from six to 10 weeks in a typical company.

Moreover, if the company has foreign subsidiaries, spreadsheets have to be consolidated across currencies, another manually intensive process that causes further delays. Since the budgets are in a spreadsheet format, the process of creating budget variance and other management reports at the end of the quarter is also manually intensive.

As a result, the planning and budgeting processes in midsized companies tend to be chaotic and lengthy due to the use of spreadsheets. This also makes it hard to rapidly share last period’s performance by product line or organization or to quickly realign departmental plans and budgets with changing market conditions.

In addition, spreadsheets do not have checks and balances when entering or updating data, so errors can creep in easily, creating a potential accuracy issue. Finally, in a manual environment, drill-down and drill-across functionality to enable reporting by various management and legal structures is time consuming, and often does not happen. Hence, the finance organization in many midsized organizations spends a great deal of time managing spreadsheets and very little time doing analysis, providing insights and improving processes to stay competitive.

Most midsized organizations recognize that this process is unacceptable and needs to change. However, in the past, the solutions available for budgeting, planning and consolidation have been expensive and complex. With few IT dollars available and limited internal IT expertise, midsized organizations have found it challenging to deploy a cost-effective system until recently. Budgeting and planning solutions, specifically designed for midsized organizations, are now available in the market. But how can you help your clients evaluate various solutions and create a prioritized shortlist? It helps to follow the checklist below.

Midsized organizations should first document their current planning, budgeting and consolidation process, as well as their “to-be” process. Since the “to-be” process is based on the business drivers that are unique to a company, it provides the right context for the company to prioritize the checklist of features shown below. Please note that I have not included basic budgeting and planning features in this list, since such features are expected to be table stakes. I have only included in this checklist the additional (and sometimes unspoken) capabilities that should be included in your client’s evaluation criteria during the selection process. These capabilities are:

1. Integrated Microsoft Excel environment: Managing the implementation of a planning and budgeting system is a major challenge in many midsized companies where all stakeholders are likely to be using an unstructured spreadsheet-based process and apt to resist change. They may also find learning a new user interface time consuming. Hence Microsoft Excel as the UI for budgeting and planning makes the change effortless and should be a key requirement.

2. Ability to reflect re-organizations: Fast-growing midsized companies in industries such as high technology can reorganize quickly and frequently. The ability to easily move reporting relationships between various current and new cost centers is critical for budgeting and planning solutions in such companies.

3. Multiple planning scenarios: In industries where basic assumptions such as commodity costs or average revenue per customer are constantly changing, users should be able to create multiple scenarios and easily alternate between them to reflect their current planning scenario.

4. Integrated planning and budgeting: When plans and budgets need to be revisited frequently, it is critical to have one solution that contains both planning and budgeting capabilities. This allows the finance organization to easily keep updated business forecasts and revised departmental budgets in sync with each other.

5. Integrated consolidation: Organizations with multiple P&L centers require integrated consolidation capability so that planned vs. actual reporting and budget variance reporting can be easily created.

6. Comprehensive reporting and analysis: It is critical for the solution to have the capability to drill-up and drill-down to any general ledger code level (such as product, organization or spend type) to view plans, budgets and actuals at that level. It is also critical that the solution support an ability to create industry-specific reports, for example, same-store sales for companies in the retail industry.

7. Support for different management and legal reporting structures simultaneously: Most midsized organizations have grown to the point where they either currently have (or are likely to soon have) different legal versus management reporting structures. For example, a subsidiary in France that provides professional services requires a separate legal reporting structure, but its P&L may roll into the overall professional services division. The ability to support dual reporting structures is a key requirement for such companies.

8. Business process flows: 100 percent adoption is a key success criterion for an effective budgeting and planning solution. Every stakeholder should be able to easily start using the system. When the organization has limited training budgets and the target user base has a diverse experience and skill base in using such systems, it is critical that the solution support wizard-like process flows, so that every manager, irrespective of their background, can easily create, review or finalize plans and budgets for their groups.

9. Open for integration with any backend system: The budgeting, planning and consolidation solution should support any backend financial system, including the ability to pull data from multiple sources. Most midsized companies do not have fully integrated ERP systems, so their backend data may be in databases, G/L systems, spreadsheets, etc. The ability to easily obtain data from such systems with little IT expertise is a critical success factor.

10. Support growth: When a midsized company achieves the right product/market fit, it will experience sudden growth spurts. It is important that their budgeting, planning and consolidation system should be able to grow with them and not become a bottleneck.

Many budgeting and planning systems on the market are designed for large companies. Such systems differ from budgeting and planning systems for midsized companies in two areas: cost and complexity. The right budgeting and planning system should not sacrifice functionality. In fact it should support all 10 of the requirements listed above to allow the organization to speed up the planning and budgeting cycle, create and manage multiple planning scenarios, easily create management reports, diagnose problems to identify root causes, and provide everyone with one version of the truth.

Furthermore, it should allow a midsized organization to deploy such capabilities in weeks rather than months, and at a low cost, given their limited IT budgets. A key hallmark of such systems is that they hide the complexity and present a familiar UI (such as Microsoft Excel), so that users can easily start using the system with little training.

Due to limited IT budgets and IT expertise, many companies have historically relied on spreadsheets for budgeting, planning and consolidation. This practice puts them at a significant disadvantage in achieving company-wide alignment and being able to quickly react to changing market shifts.

However, with the availability of cost-effective budgeting, planning and consolidation solutions specifically designed for the mid market, your clients’ companies can reduce their planning cycle time, obtain visibility into P&L and variance analysis immediately after the quarter close. They will also gain a tool that allows them to quickly realign their plans with changing market conditions. The checklist above enables you to ensure that their evaluation and selection criterion is well crafted to select the right solution.

Mindy Fiorentino is vice president of solutions marketing for BI and performance management solutions at SAP’s Small and Midsized Enterprises solutions marketing organization.


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