VideoBut the greatest contribution of software packages is their automation capabilities — the ability to free up more time for financial analysis by speeding data-collection efforts, and moving the management of that data out of loosely controlled spreadsheet environments (though many still strive to look like spreadsheets). According to an APQC benchmarking survey, companies that rely heavily on spreadsheets typically take 30 days longer to complete their budgets than those that don't.
Nonetheless, spreadsheet use remains widespread. Some 67 percent of respondents to CFO's survey say that, apart from spreadsheets, their companies do not use any enterprise or budgeting software. Relying on spreadsheets, however, means that on average, CFOs spend a third of their time inputting, validating, and correcting plan or budget data, while those with enterprise B&P systems spend a quarter of their time on such tasks.
At AAA Life Insurance Co., the percentage was even worse. Says CFO Jay DuBose, "We were spending 80 to 85 percent of our time making sure the spreadsheets were in sync and 15 to 20 percent analyzing the data." DuBose is set to roll out a new Cognos system next month to fix the problem. And then you have to add in the wasted reconciliation time, says Clint Allen, Princess Cruises's manager of financial planning. "You'd send your files out, wait to get your data back, and then lose a week or two just to aggregate it in a form that was useful."
That time is now spent more productively since the company replaced spreadsheets with a new B&P system. Says Bozigian, "What has changed is the time we can spend on analysis. Qualitative analysis has definitely increased."
The Tie that Binds
The next goal: to increase companies' comfort with their B&P improvements, says Serven. Only then will they be able to tie compensation to the process, the ultimate test of accountability. "That was the final mile seven years ago, and it still is," he says. Companies want assurance that they have identified the right drivers, the targets they have set are attainable, and the projects they have developed to hit those targets will do so. Little wonder, he says, that tying B&P to compensation will take "a couple more years."
That's not to say no one has attempted it. John McMahan, who leads The Hackett Group's Finance Executive Advisory Program, points out that some 13 percent of companies have tied budgeting accuracy to compensation, and another 25 percent are either in the process of doing so or are planning to do so. This huge increase from years past doesn't surprise him. "Everyone is trying to integrate and align their goals," he says. "Tying B&P to compensation is just the next logical step in the process."
Still, making that link to pay or instituting any other process improvement requires firms to remain flexible. "Budgeting and planning can never be stagnant," says McMahan. "Because of the rate of competitive and global change, the process can no longer be tied to the calendar. It has to be continuous, iterative, and externally focused."
After all, he says, budgeting and planning "by definition is inaccurate."
Tim Reason is a senior writer at CFO. Research was provided by CFO research editor Don Durfee.
| The Final Frontier Coroporate performance management appears to be moving from buzzword to action item. Four out of five companies have identified nonfinancial measures that drive success, but fewer establish targets or regularly report on them. The acid test of basic CPM, says The Buttonwood Group's Lawrence Serven, is to accomplish all of those things. |
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| Have identified nonfinancial measures that drive company's success | 81% | |
| Have established short-term targets for those measures | 67% | |
| Have established long-term targets for those measures | 42% | |
| Have identified specific projects to achieve those targets | 62% | |
| Report on the progress of those projects at least as frequently as financial results | 51% | |
| Percent of companies that say they do all of the above | 17% | |
| Source: CFO survey | ||
Spreadsheet Nation
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