workshop session: continuous planning and rolling...
TRANSCRIPT
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BUSINESS FORECASTING AND INNOVATION FORUM 2015 September 17-18, 2015 – Boston, MA
September 17, 3:30PM
Workshop Session: Continuous Planning and Rolling Forecasts
Utilize rolling forecasts to adapt to dynamic business challenges and opportunities
Juan Porter – President and Founder at TopDown Consulting
Juan Porter has over 25 years combined client, vendor, and consultant experience with Oracle Hyperion. He is a member of the Oracle Hyperion Partner Advisory Council, he is actively involved in various Hyperion user groups, he has served as the chair of Hyperion’s National Steering Committee, and he has led many Hyperion enhancement committees.
Juan is the president and founder of a leading nationwide consulting firm, which serves over 400 of the Global 2000’s largest and best performing companies. Industry analysts, editors, and authors frequently seek his expertise on the future direction of EPM, current Hyperion releases, as well as insight into strategic and practical ways to solve business problems. Juan has authored articles for publications such as SearchOracle.com, CIO Insight, and Enterprise Applications. He is the Chairman of the OAUG Hyperion SIG and is also a regular presenter for OAUG, ODTUG and other industry groups.
View presentation online at: www.businessforecasting2015.com
Continuous Planning and Rolling Forecasts
September 17, 2015
Juan Porter, President & Founder
TopDown Consulting
• President & Founder of
TopDown Consulting
• Over 25 years experience
delivering EPM solutions to
numerous Fortune 1000 clients
across more than 20 industry
verticals
• Specializations include enterprise
performance management,
business process, business
intelligence, data warehousing,
and master data management
• Regular blogger, frequent speaker,
and contributor to various industry
publications
Representative Sample of Clients
− Adecco
− AT&T
− CoBank
− DirecTV
− E*Trade
− Estee Lauder
− Franklin Templeton
− Group 1 Automotive
− HSBC
− Iron Mountain
− Olympus
− Pella
− Shutterfly
− Thompson Creek Metals
− Wachovia
− Washington University
School of Medicine
JUAN PORTER – EXPERIENCE OVERVIEW
ROLLING FORECASTS – AN OVERVIEW
ROLLING FORECASTS – AN OVERVIEW
TRADITIONAL PLANNING PROCESS
• Annual process− Out-of-date when finalized
• Time consuming (3-6 months), expensive
• Focus is on detail data preparation
• Heavy use of offline spreadsheets
• Becomes basis for comparison/variance− Basis for compensation (bonuses)
− Relevant to today
• Authorization to spend – “It’s in my budget”
TRADITIONAL FORECASTING PROCESS
• Monthly or Quarterly
• Focuses on the current year
• Derived from plan or prior forecast
• Short window (2-3 days) after monthly close
• No time for scenario modeling
• Adjustments are made on what’s happened so far
• Different level of detail than plan − Data is often summarized
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jan Fcst
Feb Fcst
Mar Fcst
Apr Fcst
May Fcst
Jun Fcst
Jul Fcst
Aug Fcst
Sep Fcst
Oct Fcst
Nov Fcst
Dec Fcst
FY15
Forecast
Actual
FY16
TRADITIONAL FORECASTING PROCESS
SO WHAT’S THE PROBLEM
WHAT IS A ROLLING FORECAST?
• More fluid approach to planning and forecasting− If you are doing this, may not need to do a typical annual plan
• Emphasizes the forward movement of the business− Always looking ahead 12 to 18 months
− No cliff event like end-of-year
• Focus on what you manage− Not what you transact
• Continuous process− Combines traditional plan and forecast
ROLLING FORECAST
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jan Fcst
Feb Fcst
Mar Fcst
Apr Fcst
May Fcst
Jun Fcst
Jul Fcst
Aug Fcst
Sep Fcst
Oct Fcst
Nov Fcst
Dec Fcst
FY15
Forecast
Actual
FY16
WHY ROLLING FORECASTS?
• Forward looking
• Tightly linked to strategy
• Focus on what matters, avoid excessive detail
• Basis for Scenario Modeling
• Respond quickly to changes in Markets & FX Rates
• Focus more on factors and analysis rather than data
gathering
Something to consider -
Does this eliminate the need for an annual plan?
18-MONTH ROLLING FORECAST
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jan Fcst
Feb Fcst
Mar Fcst
Apr Fcst
May Fcst
Jun Fcst
Jul Fcst
Aug Fcst
Sep Fcst
Oct Fcst
Nov Fcst
Dec Fcst
FY15 FY16
Forecast
Actual
HOW IS THIS DIFFERENT?
• More proactive approach to managing the business− Perpetually forecasting (rolling fashion)
− Improved view beyond current year
• Synchronized with the business− Process, metrics, etc.
• Less work once implemented − Reduced cost of doing business
− Less burnout
− Free up time for other activities
− Allows for better analytical decisions
• Operations should be actively involved
FORECASTING IS MORE ACCURATE WHEN PREPARED BY
OPERATIONS RATHER THAN FINANCE
Source: Accenture – The Future Used to be Easier, Planning for Success in Dynamic Environments, 2012
IMPLEMENTING A ROLLING FORECAST
LEADING PRACTICES
• Clearly define vision
• Driven by CFO, supported by CIO
• Understand that ERP is not the only source of data
• Use technology for it’s intended purpose
• Involve the right people
• Know what’s needed and how it will be used
• Challenge the current state – encourage change
• Communicate
UNDERSTAND THE PROJECT PHASES
Strategic
Roadmap
Requirements
& DesignBuild Test Deploy
Review &
Assess
• Create strategic vision
• Analyze current solution &
processes
• Perform gap analysis
• Identify risks & challenges
• Identify requirements
• Define scope & objectives
• Obtain executive commitment
• Design applications, data
integrations, reports
• Setup environment
• Build solution
• Develop integrations
• Unit testing
• Validate data
• Integration Testing
• UAT
• Performance Testing
• User training
• Go-live
• Support
• Project review
• Measure success
• Lessons learned
A Strategic Roadmap is a comprehensive strategic framework for
guiding and measuring project initiatives
• Strategic Vision / End State
• Current State Assessment
• Recommended Implementation Approach and Scope
• High-Level Project Timelines
• Resource Requirements
• Preliminary Cost Estimates
• Identification of Risks and Challenges
• Definition and Measurement of Success Factors
DEFINING A STRATEGIC ROADMAP
IDENTIFYING SUCCESS FACTORS
Audience Tangibles Experience Realize
Executives
Ability to perform “what-if”
scenarios quickly
Monthly close efficiencies
Shorten planning cycle
Confidence in reports
Improved analysis and
forecasting
Compliance
Report earnings in ?? days
Forecast more accurately
Reduce audit fees
Execs using Dashboards
Project Team
Go Live on schedule
Get internal recognition
Improve data quality
# of users on solution
Deliver project on time and
within budget
Become self-sufficient
Simplify processes
Make users happy
Set target date and budget
Reduce maintenance by ??
Reduce errors by ??
User satisfaction rating
Measure ROI
End Users
Ability to perform “what-if”
scenarios quickly
More time spent on
analysis, less on data entry
Easy of use
Better access to data
More timely reporting
Less manual input
Identify amount of time saved
Improve accuracy
IT
Reduce cost of IT support
Verify compliance
Ability for internal team to
support solution
Stable environment
Integrate security
Fits internal standards
Compliance
Supportable
Achieve internal standards
Measure performance
DEFINE BUSINESS REQUIREMENTS
• Evaluate current Plan/Forecast process− How did our current planning and forecasting process evolve
over time?
− What do we like about the current process?
− What do we dislike about the current process?
• Understand organizational direction− Where are we going as a business?
• Determine what information you need to manage, and
how you want to measure it− What’s important to us?
− What questions are we trying to answer?
− Align with corporate goals and objectives
DEFINE PROCESS REQUIREMENTS
• Ownership & Responsibility− Who will own solution and process
• Change requests− Dimensions, Drivers, Forms, Users
• Collection of data− What question are you trying to answer
• Review & Approve− Understand changes from prior forecast
• Report & Analyze− Standardize views
− Basis for comparisons
DEFINE SOLUTION REQUIREMENTS
• Choose the right technology− Packaged solution or spreadsheet based
• Timing of the implementation
• What resources do you need − Project team, SME’s, IT support
− Temps for data entry and validation
− Hardware, Servers
• Level of detail needed− Consistency across organization?
− What can manager control or influence?
DECIDING YOUR APPROACH
• Balance the business needs with technology− Process and technology need to be aligned
− On-Premise, Private-Cloud, Cloud-based
• Determine what needs to change− What are the key questions you are trying to answer?
− How do you want managers to interact?
• Pinpoint possible areas of resistance and manage them
through executive leadership− Identify cheerleaders and detractors
− Socialization of change
SUCCESS THROUGH CHANGE MANAGEMENT
• Effective Change Management = User Adoption
• Socialize vision, solution, and new processes− Leverage Executive support
− Identify thought leaders
− Get buy-in from users at all levels
− Listen / Empathize
• Communicate with and involve users throughout project− Build ownership through participation
• Capture their ideas, suggestions, and concerns− Encourage them to share what works
CHALLENGES TO IMPLEMENTING
• Initial project is labor intensive
• Resistance to change− People are always resistant to change
− Perception that Driver-based not as accurate/detailed
• Costs associated with change− Software & support
• Existing data− It’s never as clean as you think
• Training, testing and parallels
KEYS TO SUCCESS
• Define, then Build
• Walk before you run− Data collection, Drivers / Calcs, Enhanced Analytics
• Socialize solution− Prototype, CRP’s
• Determine level of detail− What is a manager responsible for?
− What can a manager control?
• Driver-based models− Focus on key elements (drivers) impacting the business
− Minimizes data entry
− Ability to model different scenarios (Best/Worst case)
SIMPLICITY THROUGH DRIVERS
WHAT ARE DRIVERS
• Calculations that require user to enter a single base
element (cause) of a calculation and results (effect) are
driven from that
• Certain elements are centrally defined/controlled− Unit price/cost, discount rates, etc
− Salary mid-points, benefits, taxes, etc
− Depreciation rates
• Unit x Rate = Amount− Unit is input by user and is their focus
− Rate is centrally supplied/controlled
− Amount is derived result
WHAT IS DRIVER-BASED PLANNING?
Linking of operating activity
and actions to a set of
managed assumptions
Two conditions that
should be met for Drivers
Operating Activity
Managed Assumptions
Discrete and Discoverable
1
Persistent throughout various groups within a company
2
IS THIS DISCOVERABLE?
REVENUE/COST BASED DRIVERS
• Drivers set by Corporate or LoB− Unit Price and Cost
− Discounts, Returns, DiF, etc
− Currency dependencies
• Units sold are input by users
• Strategically link Sales and Manufacturing− Total units sold has an impact on cost basis
− Improves Finance’s visibility and modeling
Units Sold
Price
Cost
Sales
CoS
Disc, Ret Revenue
ANOTHER PERSPECTIVE
ReportingCorporate
Cost
Units Sold
Sales Force
Manufacturing
Price
Disc, Ret
Currency
EMPLOYEE-BASED DRIVERS
• Drivers set by Corporate or LoB− Salary levels by grade or position
− Benefits and Payroll Tax rates
− Currency dependencies
• New Hires are input by users
• Focus on type of resource and when to hire− Improves modeling of different hiring plans
New Hire• Position
• Date
Grade
Mid-point
Benefit
Rate
Salary
Expense
Benefit
Expense
Payroll
Tax Rate
Payroll
Taxes
Grade
Mid-point
Benefit
Rate
Salary
Expense
Benefit
Expense
Payroll
Tax Rate
Payroll
Taxes
Facility
Expense
PC
Purchase
Office
Space
Capital
Expense
Facility
Allocation
Depr
Rate
Depr
Expense
Recruiter
Fee
Recruiting
Expense
EMPLOYEE-BASED – ADVANCED DRIVERS
New Hire• Position
• Date
ACTIONABLE DRIVERS
• 20% drivers / 80% cost
• Set expectations: Better to be “good” than never
achieving “perfect”
• Identify operational drivers that yield financial data
• Management of universal financial drivers− Diesel price per liter,
− Canadian to US dollars exchange rate
− Commodity prices
• Ability to do sensitivity analysis
• Average Selling Price
• Discounts, Returns
• Average Cost per Unit
• Salary Grade Mid-Point
• Commission rate
• Merit Increase
• Annual Increase
• FICA, FUTA, SUTA
• State Unemployment
• Health Benefit
• Memberships
• 401K Contribution
• Stock Options
• Capital Purchases
• Depreciation
• Square Footage
• Country specific
• LoB specific
EXAMPLES OF DRIVERS
MEASURING WHAT YOU NEED TO MANAGE
UNDERSTANDING THE FORECAST
• Basis for variance analysis− Communicate what is being measured
− Focus should be on what can be controlled, not just raw $’s
• Understand why there is a variance− Track and store comments / explanations
− Visibility into assumptions and dependencies
• Don’t make currency the issue− Local currency based
− Constant rate based
BEYOND THE NUMBERS
• Don’t rely on just AvB type reports− Can you “visually” see what’s happening?
• Use graphs and charts to spot trends− Bar, Line, Pie, Bubble, Scatter
− Easier to identify contribution
WATERFALL REPORTS
• Measures accuracy in forecasting
• Identify trends and behaviors
• KPI and metric oriented
ADDITIONAL CONSIDERATIONS
ADDITIONAL CONSIDERATIONS
• Change Management− Users need to understand benefits
• Impact of multiple years on calculations/drivers
• Transition of new hires to employees
• New capital purchases included in depreciation forecast
• Parallel the process− Balance this with other ongoing initiatives
− Take the time for adoption of the process
• Integration with other processes− Monthly Close
− Strategic / Long-Range Plan
Q & A
