financial planning, budgeting, and forecasting (2010)

Financial Planning, Budgeting and Forecasting:

Will the Economy Emerge? Will You?

Cindy Jutras

Vice President & Research Fellow, Aberdeen Group

Nasreen Quibria Senior Analyst, Aberdeen Group

Jeffrey Frank Business Analyst, GROWMARK

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Your Feedback is Important to Us Once the webcast is completed, there will be brief survey questions. Please let us know what you think!

As a thank you for completing the survey, your name will be entered in for a drawing to win a copy of the book “Five Key Principles of Corporate Performance Management” by Bob Paladino.

Slide 4

Financial Planning, Budgeting and Forecasting:

Will the Economy Merge? Will You?

Slide 5

Cindy Jutras

Vice President & Research Fellow, Aberdeen Group

Nasreen Quibria Senior Analyst, Aberdeen Group

Jeffrey Frank Business Analyst, GROWMARK

Vice President of Product Strategy Host Analytics, Inc.

Ric oversees product design and product marketing of the Host Analytics CPM Suite. Ric has over 25 years experience in Finance and Accounting and has held strategic roles in the design of financial analytic and performance management applications within the top software companies in the industry. Additionally, Ric held financial executive level positions at multi-national corporations with first-hand involvement in the financial planning and budgeting process. Ric is a CPA.

Ric Ratkowski

Slide 6

Vice President and Research Fellow Aberdeen Group

Cindy has over 33 years of business experience in enterprise applications. She conducts fact-based research on enterprise applications and business performance management. Cindy’s past experience covers a variety of manufacturing, consulting and software companies where she held a diversity of positions in marketing, sales, software design and development, project and general management. She has spoken at executive conferences on her original supply chain concept, Virtually Vertical Manufacturing. She is the author of the book ERP Optimization as well as numerous magazine articles and published white papers.

Cindy Jutras

Slide 7

Senior Analyst Aberdeen Group

Nasreen Quibria is a Senior Analyst in the Financial Management and GRC Practice at Aberdeen Group. Before joining Aberdeen, she was Director of Payments at the Association for Financial Professionals. Nasreen has a track record of leading successful initiatives in financial services and technology industries. Nasreen also brings expertise in risk management and financial services from her experience at Marsh and CIBC World Markets. Nasreen holds a B.A. in economics from Wellesley College and an M.B.A. in finance and strategy from Boston College.

Nasreen Quibria

Slide 8

Business Analyst GROWMARK

Jeff is a Business Analyst for GROWMARK in the Business Analysis and Research department. He is charged with leading the corporate budget effort for GROWMARK. Jeff has been in his role for a little over a year and has been with GROWMARK for a little over two. Prior to joining GROWMARK, Jeff spent three and a half years at a public accounting firm that specialized in auditing agribusiness cooperatives, including many of the members of the GROWMARK family. Jeff began his work there as an auditor and transitioned to handling the internal accounting and IT needs of the firm. Jeff holds a Bachelors degree in accountancy from Northern Illinois University and is a Certified Public Accountant.

Jeffrey Frank

Slide 9

Agenda

Financial Planning, Budgeting and Forecasting: Will the Economy Emerge? Will You?

Cindy Jutras, Vice President & Research Fellow Nasreen Quibria, Senior Analyst Aberdeen Group

Experiences at GROWMARK Jeffrey Frank, Business Analyst GROWMARK

Q&A

Slide 10

Agenda

© AberdeenGroup 2008

Financial Planning, Budgeting, and Forecasting

Will the Economy Emerge? Will You?

Cindy Jutras Vice President & Research Fellow

Nasreen Quibria Senior Analyst

© AberdeenGroup 2010 12

Aberdeen

Benchmark

Survey

Structure

o Aberdeen PACE Model

o Pressures

o Actions

o Capabilities

o Enablers

o Strategies and Tactics

o KPIs – Usage and

Specifics

o Follow-up Surveys

interviews


Aberdeen’s History in Financial Planning, Budgeting, and Forecasting Research – Following the Trends in Real GDP

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

2007 2008 2009

Perc

ent C

hange in U

.S. R

eal G

DP

Financial Planning and Budgeting,

April 2008

Financial Planning Budgeting, and Forecasting: Managing in

Uncertain Economic Times, January 2009

2010

Financial Planning Budgeting, and

Forecasting: Will the Economy Emerge? Will

You?, February 2010

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

2007 2008 2009

Perc

ent C

hange in U

.S. R

eal G

DP

Financial Planning and Budgeting,

April 2008

Financial Planning Budgeting, and Forecasting: Managing in

Uncertain Economic Times, January 2009

2010

Financial Planning Budgeting, and

Forecasting: Will the Economy Emerge? Will

You?, February 2010


Survey Demographics

39%

Small (< $50m)

36%

Midsize ($50m to $1 billion)

25%

Large

(>$1 billion)

Company Size

57%

Americas

13%

Asia/Pacific

30%

EMEA

Geography


Satisfaction Level with Company’s Current Financial Planning, Budgeting, and Forecasting Process

28%

44%

13% 13%

3%

9%

49%

20% 22%

0%

6%

19%

35% 35%

6%

0%

10%

20%

30%

40%

50%

60%

Very satisfied Somewhat

satisfied

Neutral Not satisfied Very

dissatisfied

Perc

enta

ge o

f R

espondents

, n =

171

Best-in-Class Industry Average Laggard


Top Pressures Year over Year

34%

42%

34%

37%

24%

25%

32%

29%

39%

21%

22%

34%

41%

47%

0% 10% 20% 30% 40% 50%

Current processes are too long &

resource intensive

Current / past accuracy of the budget

negatively impacts corporate performance

Corporate mandates for cost control

Need to better align Planning /

Budgeting with corporate goals

Market volatility creates the need to

dynamically account for change ('agility')

2010

2009

2008

Percentage of Respondents


Best-in-Class Criteria

Definition of

Maturity Class Mean Class Performance

Best-in-Class:

Top 20%

of aggregate

performance scorers

102% overall budget accuracy*

99% forecast accuracy

20% improvement in profitability year over year

66% “always” finalize budget prior to the next fiscal year

Industry Average:

Middle 50%

of aggregate

performance scorers



6% improvement in profitability year over year


Laggard:

Bottom 30%

of aggregate

performance scorers



8% decline in profitability year over year


*Ratio of actual to budget


28%

52%

40%

20%

40%

19%

19%

38%

41%

47%

0% 10% 20% 30% 40% 50% 60%

Develop a consolidated view of the process

and the results, to be available on demand

Improve data quality

Involve more decision-makers in the

planning / budgeting / forecasting process

Automate the process flows associated

with the budget process

Develop a formal planning / budgeting /

forecasting workflow process

Percentage of Respondents

2010 2009

Strategic Actions of Best-in-Class


How Do Companies Approach Financial Budgeting?

14%

71%

14% 26%

44% 30%

22%

50%

28%

0%

25%

50%

75%

Budget drives strategy Strategy drives budget Strategy and budget are

independent

Perc

enta

ge o

f R

espondents

, n =

171


For top performing companies, strategy drives budget


What Budgeting Methodology are Companies Using?

Laggard companies are predominantly focused on historical data

budget)

38%

22% 28%

13%

59%

14% 20%

7%

63%

6%

22%

8%

0%

25%

50%

75%

Budgets prepared

based on historical

data (Previous

Year’s Actuals)

Zero-based

budgeting (start

with a clean slate /

no historical data)

Performance Based

Budgeting (PBB)

(Result oriented

planning and

budgeting)

Driver-based

budgets (for

example: net new

customers drives

customer service

Pe

rce

nta

ge

of R

esp

on

de

nts

, n

= 1

71



How has this shifted?

69%

16% 18%9%

56%

13%22%

8%

0%

20%

40%

60%

80%

Budgets

prepared based

on historical

data (Previous

Year’s Actuals)

Zero-based

budgeting (start

with a clean

slate / no

historical data)

Performance

Based

Budgeting (PBB)

(Result oriented

planning and

budgeting)

Driver-based

budgets (for

example: net

new customers

drives customer

service budget)

2009 2010

More companies are adopting performance based budgeting


and implemented

66%

59% 61%

71% 71%

52%

38% 40%

65% 60%

32% 27%

20%

59%

49%

0%

20%

40%

60%

80%

Ability to

reforecast as

market conditions

change

Ability to perform

“what if” scenarios

and change

analysis

Ability to

incorporate

business drivers

into the on-going

forecasting

process

Finalized goals

and budgets are

clearly

communicated to

those who are

held accountable

Corporate

process for

budget revisions,

roll-ups, and

approvals have

been established

Pe

rce

nta

ge

of R

esp

on

de

nts

, n

= 1

71


Process Capabilities


Ability to Conduct “What if” Scenario Analysis with Forecasting / Re-forecasting…

20% 9%

33%

22%

14%

30%

41%

45%

0%

25%

50%

75%

100%


Yes , but selectively because it’s

entirely manual

Yes, some portion of the

process is automated

Yes , it’s automated

More Best-in-Class companies have fully automated or semi-automated “what if” scenario analysis capability with forecasts / re-forecasts


33%

40%

23%

33%

37%

71%

27%

45%

0% 20% 40% 60% 80%

Financial reporting and consolidation

features of an ERP or other

application


(stand-alone) application

Budgeting and forecasting features

of an ERP or other financial

application

Planning/budgeting/forecasting


Percentage of Respondents, n = 171

Best-in-Class

All Others

33%

40%

23%

33%

37%

71%

27%

45%

0% 20% 40% 60% 80%


features of an ERP or other

application



Budgeting and forecasting features

of an ERP or other financial

application

Planning/budgeting/forecasting



Best-in-Class

All Others

Current “Systems” – Enabling Technologies


Business Intelligence and Analytic Tools

12%

17%

17%

21%

26%

30%

57%

23%

29%

30%

32%

45%

47%

65%

0% 10% 20% 30% 40% 50% 60% 70%

Data cleansing tools

Data integration tools

(including ETL)

Event management

(triggers and alerts)

Corporate / Enterprise performance management application

Enterprise BI platform

Dashboard / scorecard tools

Query and reporting tools


Best -in-Class

All Others


What about spreadsheets? 88% still rely heavily on them

Why?

Comfort level

Can’t make a

business case

Expense

52%

58%

39%

19%

26%

10%

64%

40%

46%

24%

25%

12%

71%

27%

50%

46%

44%

8%

0% 20% 40% 60% 80%

Data is exported from applications to spreadsheets and is manually shared

Data is exported from applications to spreadsheets and can be securely

accessed from a shared server

Data from multiple spreadsheets must be manually consolidated

Spreadsheets are our only method of communication and interaction through

the process

Spreadsheets are our primary method today, but we are planning to replace

this within the next 12 months

Spreadsheets are our primary method today despite the fact that we have

implemented applications intended to replace them

Best-in-Class

Industry Average

Laggard

Financial Planning, Budgeting and Forecasting 2010 Survey Results Revealed

Jeffrey Frank

Business Analyst, GROWMARK

Slide 27

Agenda

• Overview of GROWMARK

• The budget process

– Process overview

– Old way of budgeting

– Budgeting with Host Analytics

• The benefits

• Future use

• Questions

Slide 28

Overview of GROWMARK

GROWMARK, Inc. is a regional agricultural cooperative providing products and services through FS supply and grain member cooperatives and retail outlets to more than 250,000 farmers in the U.S. and Ontario, Canada.

Slide 29


• Wholesale and retail product sales – Seed – Fertilizers and ag-chemicals – Energy products – Facility equipment (trucks, tanks, etc.) – Grain systems

• Grain marketing for farmers • Sales to non-farmers

– Energy accounts – Turf business

Slide 30


• History – Organized in 1927

– Entered Canada in mid 90s

– First big jump into retail in 2002

• 2009 sales of $6.1 billion

• 1,400 full-time employees

• Geography – 35 states (mostly mid-west and northeast)

– Southern Ontario

Slide 31

The Budget Process

• My role

• Other staff

• Budget overview

• Scale and complications

• The old way

• Budgeting with Host Analytics

Slide 32

My Role

• Coordinate entire budget process

• Performs consolidation of all budgets, including budgeting consolidation entries

• Prepares final published report for Budget/Audit Committee and GROWMARK Board

• About to begin third budget cycle, second as budget lead (always worked in Host Analytics environment)

Slide 33

Other Staff

• Approximately 100 active participants in budget process

• One other primary staff member in my department – Capital budget

– Overhead departments

• Three others in my department available to help pull things together and review components

Slide 34

Budget Overview

• Performed annually

– Forecast for current year (annually)

– Budget for next year (monthly)

– Plan for next two years (annually)

• Bottom-up approach

– Zero-based budgeting

– Lots of detail

– Market outlook used for corporate consistency

Slide 35

Scale

• 16 core business units

• 30+ general ledgers inside consolidation

• Multiple levels of consolidation

• Canadian operations (7 different currency tables)

• Over 6200 unique accounts/sub accounts in home office ledger

• 200+ budgeted units

Slide 36

Major Complications

• Commodity driven business

• Weather has huge impact

• Farmers planting decisions effect more than our seed sales

Slide 37

Other Complications

• Decentralized operations

• Staff reporting structure (lack of control)

– Retail units have separate operating boards

– Some unit staff aren’t employed by GROWMARK

• Inconsistent software use

• Heavily customized software

Slide 38

Budgeting the Old Way

• Several years ago – Entirely in Excel

– Lots of linked worksheets

• More recently – Distributed Excel worksheets

– Loaded into Access for consolidation (common COA)

– Pivot tables for reporting

– Manual prep of published document - Word

Slide 39

Problems with the Old Way

• Very iterative

• Lots of manual operations

• No real-time output available

• Budget changes were time consuming

• Couldn’t keep up with growing business model

• Expensive to maintain (time required)

• Access not supported by IT department

Slide 40

How We Use Host Analytics

• Hierarchy designed around Lawson G/L structure – Carried forward from prior Access database

• Load all ledger data for comparison – Perform monthly reconciliation

• 7 attribute columns – 2 years of actual – Prior budget period – Current year forecast – Budget Year (calculated from spreads) – 2 years for financial plan

• Templates usually mirror internal statement layouts • Global drivers for retirement premiums, depreciation, etc.

Slide 41

Benefits of Host Analytics

• More easily accommodates late changes

• Reduced time spent on manual processes

• Accuracy

– No more plugging the balance sheet

• Excellent slicing of data with reporting

• Budgets easily compared to actual

• SaaS model requires very little help from IT

Slide 43

Future Improvements

• Develop templates for retail units that better align to their own statements

• Reduce use of Excel worksheets used to create template inputs – move into Host Analytics

• Design templates based more on relationships rather than financial statement location – Debt/interest expense – Fixed assets/depreciation

• Move towards true driver-based budgeting – Market outlook – Interest rates

Slide 44

Potential Future Uses for Host Analytics

• Initiatives templates for capital budgeting – prioritization of capital

• Building our patronage calculation – Hundreds, maybe thousands, of allocations

– Over 70 pages of Excel worksheets

• Forecasts and year-end estimates – Make forecasts for management a few times a year

– Report results at annual meeting before year is closed

• Part-year budget for spring/fall seasons

Slide 45

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47

Your Feedback is Important to Us

Once the webcast is completed, there will be brief survey questions. Please let us know what you think!

As a thank you for completing the survey, your name will be entered in for a drawing to win a copy of the book “Five Key Principles of Corporate Performance Management” by Bob Paladino.

Slide 47

We’ll Help You Get There

Slide 48

financial planning, budgeting, and forecasting (2010)

Economy & Finance