VideoDana Gilman would undoubtedly agree with that assertion. When Gilman signed on as vice president of planning and control at catalog specialist Miles Kimbal, budgeting was a very clubby affair. While 10 or so employees had some input in the process, says Gilman, there was no accountability for those numbers. "Mostly, the controller and president were doing the work by themselves on Excel in a corner office," she recalls. "Budgeting was kind of a dark hole."
Eager to shed a little light on the subject, the company president decided to purchase Geac's MPC system, a dedicated B&P program and reporting platform. With the application, managers at the $200 million (in revenues) retailer can run analyses of sales and costs, by channel, down to the SKU level. In October 2003, Miles Kimbal started applying this sales analysis to its budgeting process. "The biggest benefit of the software is that it's spread information out across the entire organization," says Gilman. "It's no longer locked in the controller's office."
Of course, businesses can get their sales forecasts right and still miss net revenue projections. As always, the devil is in the details — here, details about expenses. Case in point: Aspect Communications, a San Jose, California-based call and contact center specialist. While the company's revenues have been steady, controller Bruce Ruberg says the costs to generate those revenues have mostly been out of whack. In fact, up until 2002, the company was operating at a loss. Ruberg blames the red ink, in part, on a lack of communication during the B&P process.
To get a better sense of future expenses, Aspect is switching next year to Oracle Corp.'s Enterprise Planning and Budgeting program. With the software, employees will no longer be told to simply go meet their targets. "Then," says Ruberg, "it will be, 'This is what we will do in revenues, and this is what it will actually cost to generate those revenues.'" By emphasizing a bottom-up approach to planning, Ruberg hopes to break down the silos of information that have arisen during years of spreadsheet-based budgeting. "The old approach was, 'This is what I do, but I don't know what those other folks do,'" he notes. "Well, that's not a very successful way of running a business."
Back at Hendrick Motorsports, where they run a very successful racing business, the speed of the FRx software is generating all sorts of budget collaboration. In fact, Lampe says he now has time to actually confer with employees who are more comfortable with a pit row than an Excel row. In day sessions, Lampe brings in his crew chiefs, puts Forecaster up on a projector, and walks them through the planning process. "I used to think it was inefficient to go through this together," he says. "But you know, things come up in conversation that you wouldn't get if somebody just typed a number in. You begin to understand their theories — and their concerns."
John Goff is technology editor of CFO.
It Don't Come Easy
When asked, finance executives will generally tell you that better communication makes for better budgets. In fact, in one recent survey of corporate planners, improved collaboration was cited as the most important factor in creating accurate budgets. But the bid to boost budget collaboration requires some nifty collaboration of its own.
Experts warn that the purchase of a dedicated budgeting-and-planning program won't solve budgeting woes if companies funnel conflicting data into the system. The hard truth: if a business's back-office systems aren't nailed down (including single instances of the general ledger and chartered accounts), bad numbers will propagate through the system. That, in turn, eliminates any hope of attaining one version of the truth, the finance department equivalent of free cake. Bringing in a data-integration expert from IT can help prevent this disaster, particularly if the engineer is well versed in ETL (extract, transform, load) systems and data architecture. Cautions one consultant: "B&P vendors won't really help you with this."
Sometimes, however, the problem isn't the data, but the network it runs on. United Dominion Realty Trust Inc., a Denver-based real estate investment trust, began using a B&P program from SRC Software a few years ago. Assistant vice president Mike Holland, a backer of the move, describes the software as "spreadsheets on steroids." But the initial rollout was hardly a home run. The glitch: United Dominion purchased a browser-based version of the software, a decision that resulted in pokey processing and some glacier-like screen repaints. "We had vastly overestimated our infrastructure," grants Holland. Now the company runs its SRC system on a thin-client architecture.
Beyond technical considerations, consultants also advise potential purchasers of B&P tools to consider who's going to be using the stuff. CFOs may blanch at the prospects, but getting human resources involved may help with the rollout, particularly in setting up training sessions for employees inside the budgeting loop. In addition, finance managers need to bear in mind that the switch from Excel to dedicated budgeting software is a huge departure for many workers, some of whom started using spreadsheets right about the time the Wright Brothers opened their first bicycle shop. The lesson: deploying a new B&P tool is best done slowly. "When we first launched the software," says Holland, "we tried to change our prior years' spreadsheet as little as we could. We knew so many other things would be changing."
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