Features : Planning and Forecasting In A Topsy-Turvy World

Financial Software

As the financial planners job becomes more complex, the tools available to help are becoming ever more sophisticated

To say that the corporate business cycle is volatile and competitive these days is an understatement. Many companies, large and small, are struggling to deal with sudden and rapid swings in product lifecycles, market demand, competitive pressures, revenue, profit and investment.

Chief financial officers, controllers and department heads are increasingly turning to dynamic budget planning and forecasting software applications. They want more accurate data and to be able to make, manage and change budgets and forecasts on the fly.

One area that is getting a lot of attention is the rapidly emerging category of business performance management (BPM), also called business process management. BPM ties together financial planning, business intelligence, financial reporting and analytics to create a single, automated and updatable view of a companys financial performance. The idea is to increase the efficiency, adaptability and management effectiveness of the organization.The BPM market generated $1.1 billion in sales in 2003, up 15% from 2002, according to the Meta Group, a Stamford, Connecticut- based IT research firm. Meta is forecasting another 15% to 20% growth in the BPM marketplace this year as 85% of companies say they are planning a BPM project in 2004 or 2005.

To further speed adoption of BPM, big industry playersincluding IBM, SAP, Hyperion Solutions and Meta Groupformed a standards group in March. It will establish standards for software vendors, service providers, consultants and, ultimately, users.

Business planning solutions have gained ground as companies seek to supplement spreadsheet-based tools with Web-enabled products and bundled database-based solutions. With spreadsheets, theres quite a bit of rigidity, and you cant react as quickly when your business changes, says Jack Davidson, vice president of product development at Centage, a Houston-based maker of budgeting, financial forecasting and financial reporting software.The corporate customers he works withgenerally mid-size businesses with between $25 million and $250 million in annual salesare looking for all-in-one solutions such as BPM systems.

As business cycles seemingly change more quickly, companies need to be more nimble and able to spot and adapt to changes in their businesses.Traditionally, people have budgeted once a year with a spreadsheet. But now, with how quickly things are changing, people are going with rolling forecasts on a monthly basis, says Davidson, whose companys software enables users to build in what-if scenarios and be automatically alerted if forecasts have run askew. They dont have to wait a whole year to make the changes and save the company from going under, he adds. But spreadsheets continue to be popular.Ventana Research, a Belmont, California-based technology and performance management research and advisory firm, estimates that 64% of businesses worldwide continue to use spreadsheets for budgeting and planning. Customers often tell budgeting and forecasting software vendors,Dont take away my spreadsheet.


Davidson: People are going with

rolling forecasts on a monthly basis

Perhaps nobody is more sensitive to the corporate financial professionals love affair with the spreadsheet than FRx Software, a Denver-based financial software maker that is a unit of Microsoft, which makes the vaunted Excel software. Excel is a financial pros best friend, says Andy Kamlet, vice president of marketing at FRx Software, which has 115,000 customers worldwide. A lot of companies continue to look at spreadsheets as something theyre used to and something that works for them.

More Hands on Deck

A key trend in business budgeting is the move toward a more participatory approach to budgeting and planning. Whether it is to avoid the accounting scandals of the recent past or to increase employee accountability for financial results or to make the budget process less opaque, companies are involving more people in budgeting and planning.

Youre going to get the most reliable information from people closer to the action, says Centages Davidson. His companys flagship software product, Budget Maestro, allows for collaborative budgeting. One customer is Waterman Broadcasting, a private company with $50 million in annual revenue and employees spread across the Southeast United States.

Waterman uses Budget Maestro for enterprise-wide budgeting.Waterman utilized the product to build a soupedup spreadsheet, allowing managers and other employees to create customized folders that link to the main budget database. What were now doing is pushing the accountability for budgets back to the individuals who should be held accountable, says Gerald Poppe, chief financial officer at Fort Myers, Florida-based Waterman Broadcasting.

Alan Knoll, a financial analyst with Blue Cross Blue Shield of Montana, says he has reduced his budgeting process by two weeks since adopting enterprisewide budgeting and forecasting software and giving people across the office direct access to the data.


Kamlet: Access is based on an

employees information rights

Software makers are expanding and updating their products to meet the trend. FRx Software, whose Forecaster product is already accessible over the Internet and via email, recently added a new module, called Report Manager. It automates the distribution of sensitive budget information and differentiates the information the user will see based on who they are. Users higher up in the company generally get access to more data while those lower down see only what pertains to their department or job.

The trend definitely is to make financial information available to more users across the organization, says Kamlet. We build security into the application. Access is based on an employees information rights.

The software is also flexible enough to adapt to a companys increased focus on tighter financial controls. The automated process helps corporate officials in doing better verification and certification of the data, Kamlet adds.

Thats important because the Sarbanes- Oxley Act requires firms to ratchet up their internal controls over financial data and disclosure of changes in financial conditions.The increased regulatory scrutiny of corporate reporting, budgeting and planning is yet another factor helping to fuel increased corporate interest in software, say vendors, users and analysts.

Double-digit growth in sales of these systems is probably here to stay as companies seek to stay on top of increasingly volatile business cycles, get more people involved in the budgeting process, and implement more stringent and effective financial controls.