May the Field Be with You

Cloud-based applications are pushing out planning and forecasting to workers in the farthest reaches of the company.
Russ BanhamOctober 9, 2013

Simplifying the decision-making process is a fundamental goal for CFOs, given the competitive necessities of agility and speed. Unfortunately, many traditional planning, budgeting and forecasting systems see the business world as local and linear, not global and cooperative, frustrating this imperative.

New mobile, cloud-based technologies that connect wide-ranging business signals and voluminous data seek to alter the paradigm. While organizations are awash in data, finance chiefs by and large cannot capture it, make sense of it and base timely decisions on it. Through the cloud, however, data from across the enterprise can pulse toward finance, where it can be turned into information for decision-making purposes.

“If prosperity is saved time, then this is the pot of gold,” declares Steve Player, North American program director at the Beyond Budgeting Round Table, a learning network with more than 50 corporate members. Player is referring to the ability to marry Big Data, mobility and the cloud to provide nimbler assessments of performance versus the forecast. This, in turn, permits faster adjustments in resource allocation, project priorities and other budgeted initiatives.

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In some cases, the new tools are part and parcel of the underlying enterprise resource planning system, which is tethered to other IT systems and the fast-growing network of business apps. But a growing number of cloud-based vendors like Adaptive Planning, Host Analytics and Tidemark have upped the ante with laser-focused data analytics for planning, budgeting and forecasting needs. Other providers marketing more earthbound, on-premises tools include Centage and Prophix Software, each with their own value propositions.

They’ve all taken on the big ERP/business intelligence players like Oracle Hyperion, SAP OutlookSoft and IBM Cognos. Christian Gheorghe, Tidemark founder and CEO, claims that the technology upstarts are better at “getting the right people involved in managing business processes.” By the “right people,” Gheorghe is referring to employees in the field, at the perimeter of the enterprise.

“These people are your generals at the front lines, the ones who can provide a real-time view of what’s actually going on in the business,” says Player. “Arm them with mobile devices to report their findings to cloud-based systems, and then beam it up to FP&A [financial planning and analysis] for their analysis and insight.”

Think of it this way: Who knows best how to quickly move the line of customers through a supermarket checkout aisle—the checker at the cash register or the owner? “Planning, budgeting and forecasting is collaborative and cross-functional,” says John Herr, CEO of Adaptive Planning. “It used to be that five or six people in a large organization put together the forecast and analyzed the actuals. Why not thousands of users across the company weighing in on their iPhones?”

That’s the power of “rank marginality,” a term describing people at the middle and lower rungs of the organizational ladder who often know more about business performance than those in the C-suite. Get them to type in a few operational measures on their smartphones or tablets, and the future becomes clearer for finance, loosening more-confident, bolder decisions.

Big Leagues and Burgers
Such is the case at the Boston Red Sox. Following the implementation of a new back-end accounting system, “we wanted to institute a more collaborative environment for our forecasting processes,” says Steve Fitch, senior vice president and CFO of the major league baseball team. Managers now “review their operating costs and provide a forecast for their respective areas on a routine basis,” he adds. “We then leverage the information captured in Host Analytics and other tools [MS Dynamics, Microstrategy and ProVenue] to perform detailed performance analyses and prepare a forecast package, which we present to the ownership group each month. This information serves as a key component in the making of business decisions.”

Among these decisions are innovative marketing and cost-cutting strategies. “The morning following each game, we generate a dashboard and a few other key reports that outline how many tickets were sold in each area of the ballpark, how many fans came through the turnstile, a breakdown of ticket revenue and the estimated concession revenue for the day,” says Ryan Scafidi, manager of financial planning and operations. Using the reporting and BI tools, finance also runs projections on existing sales for future games, to better gauge and thereby boost future sales through targeted marketing campaigns and sales promotions. “The tools we have implemented over the past few years have dramatically changed the way we manage our business today,” says Scafidi.

Fast-food giant McDonald’s is analyzing the number of cars that drive into its parking lots and then comparing the figure with the total number of burgers sold, says Joe Pucciarelli, IT executive adviser at research firm IDC. The company can then better forecast how much ground beef it needs at a particular site, how many burgers to put on the grill at a given hour (to serve them up faster and reduce waste) and how many cooks are needed at different times of the day.

“Wendy’s [the fast food restaurant chain] analyzes baked-potato sales in five-minute intervals based on the time of the year, whether school is in session, if it’s a holiday and what the weather is like,” Pucciarelli adds. “Both companies are catching consumer spontaneity to drive bigger margins.”

The goal across all these companies is greater accuracy in financial forecasting. While 100% accuracy is impossible, organizations that continuously update their forecasts to reflect current business conditions—so-called rolling forecasts—are besting those that don’t, according to Aberdeen Group. “Companies that perform rolling forecasts experienced 10% growth in revenue over the past 24 months, compared to 7% growth by companies that didn’t perform them,” says Nick Castellina, Aberdeen senior research analyst, business planning and execution.

“Right now, 69% of what we consider to be best-in-class organizations are leveraging cloud-based forecasting and business analytics tools to perform what-if scenarios, and then make quick changes based on this insight,” Castellina adds. “Many more should.”

Field Notes from All Over
Like the Red Sox, ServiceSource International, a provider of recurring-revenue applications and services, is obtaining insight at the edges of the company. “The general ledger is not a forecasting tool,” says CFO Ashley Johnson from the company’s San Francisco headquarters. “In our business, there are a lot of metrics for management to track to make informed decisions—close rates by account, productivity level by head count, booking achievements by head count, all of which has nothing to do with GAAP financials.”

Leveraging Tidemark’s planning and forecasting tool and Workday’s financial systems technology (both in the cloud), these management-specific metrics are pushed to FP&A for analysis. It’s where this data comes from that is atypical—the field force using the vendors’ apps on their mobile devices. “I want my FP&A people doing analyses, figuring out what the roll-up of these metrics tells us about the business,” Johnson says. “I don’t want them wasting time with spreadsheets.”

Rather, this time is profitably expended by the field force. “If they see something that would be a smart investment decision for us, a way to outperform competitors, I want to know it that day,” says Johnson. “I don’t want them wasting time on sandbagging their forecasts and budgets. I want and ask for business outcomes that can help me make better investment decisions. If I can spend money more profitably elsewhere or save it, I need to know that now.”

Worldwide Clinical Trials CFO Everett Truitt also is acquiring this vital knowledge from the field. The midsize company provides full-service drug development services to the pharmaceutical and biotechnology industries. “Our budgeting, planning and forecasting suffered from being too dependent on Excel,” Truitt says. “We’ve switched to having people in the field, our project managers, do all the forecasting on all our projects, entering data on their mobile devices using an app from Anaplan [a cloud-based business planning and modeling tool for finance and operations]. Wherever they are at any time, they are providing data that allows us to update the forecast every month.”

Truitt illustrates the forecasting system in play: “We design and execute clinical trials, and have hundreds of projects under way at any time on three continents. If we’re testing the efficacy of a new cardiovascular drug, we need to match people with the proper skill sets, language capabilities and logistics to perform the trial—matching supply with demand. Each project manager enters data we call ‘work units’ describing the work to be performed in future months, and the work that is actually being performed. An algorithm turns these units into a dollar value.”

For example, a clinical trial in Russia might entail 50 units of work that was performed in the past month generating $100,000 of revenue. This gives Truitt a metric to recognize actual revenue during the month, and the project manager the means to reevaluate and update the project going forward. Why is this financially important? “The revenue recognition reduces the backlog of future work to be performed,” says Truitt. “Our primary risk of not being reimbursed is reduced by more accurately knowing where we are on the budget, so we don’t go out of scope. We’ve filtered out all the noise and get to the strategic analysis far quicker.”

The algorithmic capabilities of these new tool sets offer sophisticated predictive forecasting, potentially helping organizations manage through uncertainty, says Paul Hamerman, vice president and principal analyst at Forrester Research. “Right now, companies can measure how the business is performing today, but we are moving toward a point where systems will tell them how the business is likely to be performing in the future,” he says.

“This requires constant analysis of the freshest information in an integrated, coordinated fashion, which requires collaboration,” Hamerman continues. “That’s why people at the front lines are so critical, feeding information on various aspects of the business to effect continuous updates to the forecast. These incremental modifications continuously give you an up-to-date forecast all the time. This is a pretty profound change.”

Clearer Crystal Balls
Up-to-date forecasts also give finance chiefs the confidence to make the kind of big decisions that might frighten their competitive peers. For example, Ed Schaffer, CFO at Rimini Street, a third-party provider of enterprise software support, extrapolated unexpected information from the firm’s Adaptive Planning tool that led him to make a reasonably big bet. “We plan an expected product mix each year, but then early into this year we were incredibly surprised by the level of demand for one particular product,” Schaffer says. “It blew away all expectations.”

While Schaffer is mum on the particular product, he says the insight led him to substantially increase the marketing dollars budgeted for the line, as well as rapidly beef up the sales force to take advantage of the hot opportunity before it cooled. “We couldn’t scale them quickly enough,” he says.

Some CFOs are finding value in lower-priced planning, budgeting and forecasting tools, such as Budget Maestro, sold by Centage. An on-premises system that integrates with most ERP systems, Budget Maestro is helping B&W Quality Growers CFO Bruce Barquist acquire the deep-dive analytical capabilities that the company’s ERP system does not provide. “I needed something that could analyze transactions by type and other data from a financial reporting system, be it budgets, actuals or variances,” Barquist explains. “I was spending more time making sure the data in the spreadsheets was accurate than actually analyzing our business.”

B&W, a privately held produce company based in Fellsmere, Florida, is one of the country’s largest producers of watercress and other leafy green vegetables. Since integrating the tool with its ERP system last year, B&W can compare transactional data on a daily basis with the current budget and forecast, giving Barquist the short-term performance insight to adjust future forecasts. “If volume is up X percent for a particular SKU [stock-keeping unit], or revenues are up or costs are higher, in a couple of quick clicks I can see the financial impact on our assumptions,” he says. “I’m now able to forecast cash flow on a monthly basis, and we’re closing our books more than twice as fast as before.”

In Praise of ERP Vendors
Not to be outdone, the big ERP players also have their share of forecasting fans in finance. One of them is Scott Scheirman, CFO at Englewood, Colo.-based Western Union ($5.5 billion in 2012 revenue), who touts his Oracle Hyperion BI platform for providing visibility into the previous day’s transactions.

“We move 28 transactions a second, which is a lot,” says Scheirman. “In India alone, we have 100,000 locations serving more than one billion people.”

The BI tool tallies a scorecard of different key performance indicators, such as revenue, profit and expenses by location, as well as more customer-centric metrics. The benefits are similar to those cited by other finance leaders. “I’m able to see pockets of really strong growth, which then compels a decision such as allocating more resources to grow even faster or adjusting the pricing,” Scheirman says. “This recently occurred with regard to our digital business, which enjoyed 68% transactional growth in the second quarter, compared to the previous year’s second quarter.”

These advances sit well with Steve Player at Beyond Budgeting, an organization that promotes plans based on timely performance data and not a static budget. “The various vendors are offering tools geared towards different levels of investment and approaches, but they all seek to solve the same problems,” Player says. “They all share the ethos of constructing communications pipelines across the enterprise, working backward through the stream of business activities to the beginning—where you’re bombarding customers with advertising to get leads to start the sales process.”

In this culture, command and control is at the cash register.

Big Data, Big Decisions

Sifting through torrents of information can provide unexpected insights into a business.

Big Data is big news these days, that seemingly amorphous sea of structured and unstructured data offering finance chiefs a treasure chest of decision-empowering information. Small wonder that finance is glomming on to its promise: 15 of the top 19 business processes that CFOs identify as needing improved technology support are addressed by business intelligence, data analytics and performance-management technologies, the stuff aimed right at Big Data, according to a joint study by Gartner and the Financial Executives Research Foundation.

The objective is to sift through millions of transactions, voluminous market information and other historic data to discern patterns that provide glimpses of the future. These insights can ultimately help companies better manage cash flow, comply with new regulations, address credit issues and posit labor needs.

These goals were on the radar screen at Mueller, a Ballinger, Tex.-based retailer and manufacturer of pre-engineered metal buildings and metal roofing products, serving customers across the southwestern United States from 35 locations. CFO Phillip Arp marshaled a platoon of integrated technology solutions, including an ERP system from JD Edwards and two IBM tools—SPSS for statistical analyses and Cognos for BI and a balanced scorecard—to more assuredly steer the company into tomorrow.

“We don’t put any stock into forecasts of sales or expenses,” says Arp. “Instead, we take this massive amount of information across the organization and say. ‘This is what should be happening, and if it isn’t, then why is this the case?’”

An actual case in point was a major customer that complained continually to the sales representative about a damaged piece of metal trim, threatening potential sales with this company. The customer ordered a high volume of the trim product, and significant numbers were slightly bent upon their arrival from the Mueller facility 300 miles away. “The sales rep brought the issue up with manufacturing, arguing they weren’t making the trim exactly to spec,” Arp says. “We figured we needed to buy expensive new equipment to right the wrong.”

Before plunking down the dollars to do just that, Mueller’s CEO had a novel idea: why not tap the suite of technology solutions to dig through other transactions involving the same piece of trim? “We analyzed hundreds of thousands of transactions and learned that the bending was statistically insignificant, which told us that manufacturing was not the cause,” Arp says. “The SPSS software engine popped out this information in a matter of seconds. I would have had to hire a full-time person for a year to sift through this volume of data.”

So what was the cause? In a word, wind. The long truck haul took a toll on the tenuous trim. The solution cost a lot less money than new machinery. Says Arp, “We secure the metal more securely now.” —R.B.