November 19, 2014

Now that budget season is over, it’s time to reflect on the effort taken to complete the task and to challenge the status quo. For many financial planning and analysis (FP&A) professionals, it can be a grueling and rote activity as described in my previous blog post, Avoid the Budget Season Blues.  If your company still has a spreadsheet-based budgeting process, your FP&A team likely spent a lot of time on the following:

  • reconciling data to prior period reports such as P&L by cost center
  • keying in or copying/pasting data for analysis
  • writing formulas in Excel
  • using pivot tables
  • reviewing and testing to eliminate errors and validate results
  • consolidating multiple spreadsheets from various cost centers (watch out for those formula errors!)


There is significant
opportunity cost
associated with
spreadsheet planning
not only in the time
it takes to budget
but also in not fully
leveraging the
business acumen and
capabilities of the
FP&A staff.

All of these skills are required in the majority of FP&A positions but it begs the question, “Do they add value to the organization?”  Generally speaking, they do not.  In my previous roles in corporate FP&A, I found the process to be a time drain that diverted me from more fully impacting the business for the better.  There is significant opportunity cost associated with spreadsheet planning not only in the time it takes to budget but also in not fully leveraging the business acumen and capabilities of the FP&A staff. In my experience, finance professionals would prefer to focus on analyzing the numbers and providing answers to more strategic issues.

Having implemented Adaptive Insights corporate performance management (CPM) software to replace spreadsheet budgeting in numerous organizations, I’ve found that the software not only adds value to the company but offers an opportunity to add value to the financial analyst.  By speeding up planning and consolidations by up to 70%, analysts have considerably more time to interact with other areas of the business to develop both internal and industry expertise.  They can begin to understand the objectives and language of non-finance budget stakeholders and, in turn, educate them in the importance and goals of the budget process.  These interactions and cross-sharing of knowledge are hallmarks of a world-class FP&A team.  Furthermore, analysts are freed up to manage the drivers and key performance indicators of the business. These drivers are the things that make or break a business.  With a manufacturer, for example, the drivers could include material costs, labor, sales volume, and contracts, to name a few.  With a manageable number of drivers, analysts are better able to ensure that the budget aligns with the overarching strategic plan.

How is this done?  With Adaptive, analysts start with a baseline budget, which is based on assumptions and trends.  From there, the analyst can go directly to analyzing that data and presenting the findings.  Every time a new version is created, a complete budget is available to analyze and make necessary adjustments.  This is a huge time savings and mitigates the potential that the budget becomes obsolete.  Indeed, with spreadsheet budgeting, studies have shown that up to 60% of budgets are already out of date by the time they are completed.

Adaptive allows the analyst to identify accounts and drivers that will have a material impact on financial results and create in-depth sheets for analysis when appropriate.  Analysts no longer need to spend time on numerous accounts that, in general, do not have a material impact on results. Instead, more simplistic drivers such as past trends multiplied by an escalation percentage can be used globally throughout the model; thus, allowing Adaptive to do the work.  They merely check the numbers to validate that they are reasonable.

Technology has the proven ability to free FP&A teams from the monotony of spreadsheet-based budgeting and allow them to spend time on the value-added activities that contribute to the success of their organization.  By enabling these teams to be agents for transforming and improving the business, rather than being spreadsheet experts, companies can not only improve their competitiveness but also have more empowered, contented finance teams.