Bob Vesely had a vision several years back of what he wanted to be able to do with the planning and budgeting software he would purchase for Advantage Sales & Marketing LLC. Advantage is a sales and marketing agency that represents 1,200 manufacturers and moves about $35 billion worth of their products each year, and Vesely, as its CFO and executive vice president, was looking to do much more than just getting away from spreadsheets.
Vesely wanted a system that could give his executives a so-called real-time snapshot of how the company was performing. That meant using the Web to make the system and its information accessible to all of Advantage’s 100 offices across the country. In Vesely’s mind, it also required linking the software with other company data, and not necessarily financial data.
When Vesely had this vision, the scandals with Enron, WorldCom and Tyco had not happened yet, and Sarbanes and Oxley probably hadn’t even had their first conversation on corporate governance. On Vesely’s part, it was pure prescience.
Although a shockingly large number of companies are still slogging away on spreadsheets, Vesely is close to making the web-enabled Comshare MPC system, bought ostensibly for planning and budgeting, into a system that could go a long way towards satisfying compliance needs related to the Sarbanes-Oxley Act and the investment community’s demands for transparency. Ironically, Advantage is a private company and Vesely doesn’t have those worries.
Still, what he is accomplishing–developing a system that actually tells him and other executives how well the company is meeting its performance goals–makes a great deal of difference to Advantage and Vesely. “The reporting side is great, the budgeting side is great but the multi-dimensional analysis is the power of the system,” he says. “That allows someone in my seat to slice and dice data, understand performance and get a graphical representation of performance.”
In recent years, planning, budgeting and reporting software has been morphing into something more comprehensive, as is evident from the new monikers that such systems are sporting, like business performance management or enterprise performance management solution. Comshare Inc. now describes the system Vesely bought as a “corporate performance management application.” Separating this new generation from the old planning and budgeting software: the ability to access operational data like production numbers as well as financial data, Web-enabled to get input on budgets from many employees and alert systems that warn the right executives when the company is falling behind budget.
The concept of tying together financial and non-financial data isn’t really that new: In the early 1990s, the “balanced scorecard” approach was advocated by Robert Kaplan and David Norton. But without the Web, it was difficult for companies to get a picture across the organization. Now that many companies have in place back-end applications, such as customer relationship management systems and supply chain management systems, capturing that information and analyzing what it says about the company is finally possible. “A lot of organizations feel they’ve been driving blind,” says John Hagerty, vice president at AMR Research in Boston. Companies are beginning to “feel they’ve got a lot more insight captured in the systems, so let’s make it active.”
Vesely, for instance, started linking the software to Advantage’s order management system, once the budgeting and reporting process was in place. That let the company monitor the status of its orders on a daily basis. Vesely is also in the process of bringing in expense report data as well as select data from the pocket PCs that Advantage’s representatives carry into supermarkets and other stores as they restock shelves, add new items and check on displays.
So given the increased need to tie financial and non-financial data to get an accurate reading of performance, how many companies are implementing this kind of sophisticated software? Analysts estimate it’s still only about 10% of companies or less; 70% to 80%, some say, still rely on human-error-prone spreadsheets.
Saving Staff Time
Yet, with the tighter reporting deadlines mandated by Sarbanes-Oxley, its requirement that CEOs and CFOs sign off on their companies’ financial reports and higher accountability standards for auditors, most believe the pressures are mounting to give up spreadsheets. Add to that the intolerance the equity and credit markets show these days toward errors in financial data, even honest ones, and one can easily sketch out a scenario in which spreadsheets become as outmoded as adding machines within the next couple of years.
But it is not just the fear factor that will drive the rush from spreadsheets. Even for companies that aren’t feeling the heat from Sarbanes-Oxley, it’s clear that software systems make the process of consolidating data faster and more reliable and dramatically slash the amount of staff time it takes to budget and report. They also allow executives to drill down and give them, as Mark Stimpson, director of product management for Cognos Inc., puts it,”a greater degree of comfort about how the numbers have been made up.”
For instance, Joe Hunt, the manager of budgeting, analysis and systems at Washington Mutual Finance Corp., the consumer finance subsidiary of Washington Mutual Inc., cites the quicker turnaround on the company’s annual budget since it started using SRC Software Inc.’s Advisor Series. His unit, which has $4 billion in assets and more than 500 loan offices around the country, ran its finances off of 700 Excel spreadsheets before moving to SRC. It used to start working on the annual budget in June or July “and we didn’t finish until January,” Hunt says. “Now we kick it off in November, and we’re done before Christmas.” Hunt estimates the SRC software has saved close to 6,000 hours of staff time a year.
The speed-up extends to monthly reporting cycles. Hunt says Washington Mutual Finance has cut the time it takes to compile monthly reports on how its actual numbers varied from budget to three days from five days. And Advantage can now run daily instead of monthly reports showing how performance stacks up to budget, Vesely says.
Quicker budgeting comes in handy in the current volatile economic environment. Rod Radojevic, senior manager of product marketing at Comshare, says that after 9/11, some Comshare customers had to cope with “quick scenario changes” involving revisions that had to be translated down to the operational level. “With an integrated system, some people can change key drivers, shoot that through the system and have an updated version in a number of days, if not hours,” Radojevic says.
Planning and budgeting software also lets companies move to rolling forecasts. For example, Washington Mutual Finance now updates its budget at the end of every quarter with the actual numbers for the quarter. Hunt says eventually the company will get to a point where it updates the rolling forecast every month.
Some systems can even provide wake-up calls, alerting the appropriate people if tasks aren’t accomplished or if the company is falling behind on certain goals.
For example, Washington Mutual Finance has set eight “milestones” in its budgeting process and uses the SRC software to keep track of whether its 500-plus offices have completed each milestone. If they’re late, the system alerts them via their individual sign-on sheet, notifies the administrator, and automatically sends the delinquents an email reminding them of what they need to do.