application requirements for rolling forecasts asmi 2

© 2010 Alight Planning Slide 1

Application Requirements for Rolling Forecasts

By Alight Planning

Ben Lamorte, VP Business DevelopmentRand Heer, CEO

Presented at ASMI ConferenceSan Diego, CA

April, 2010


2-Hour Video Workshop on Rolling Forecast Requirements Highlights of 4-Hour Conference Workshop

http://www.alightplanning.com/Workshop/Requirements-for-Rolling-Forecasts/Video.html

Books and Websites Managing with Rolling Forecasts

www.johnstretch.com/book/rollingForecast.html

Future Ready www.futurereadybook.com

Visit Our Website www.AlightPlanning.com

ASMI Private Demo Tuesday – Demo Room Reserved To Sign Up, Contact Ben Lamorte

Resources for Rolling Forecasts


Ben Lamorte Business Activities

Vice President, Business Development, Alight Planning Principal, Decision Consulting (Adobe, Kaiser) Manager, Business Development, planetrx.com Consultant, APM/CSC Healthcare

Today’s Speaker

Publications Author of 2 technical research papers, American Mathematics Society Co-author of planning white papers

Education BS Math & Mechanical Engineering, University of California, Davis MS degree Stanford University, Management Science and Engineering


Requirements for Rolling Forecasts

Today’s 45-Minute Agenda 30k Foot:

Why Rolling Forecasts? Budgeting Vs Rolling Forecasts

5k Foot View: Summarize Checklist #1: Scenario Analysis Special Case Study: Rand Heer on Budgeting & Forecasting at Clorox

Not doing the 100-Foot View Today: In-Depth Analysis of Application Requirements for Rolling Forecasts Requirement #1: Scenario Analysis Requirement #2: Driver-Based Modeling Requirement #3: Integrated Actuals


At what point do you expect your annual budget targets to become obsolete?

SOURCE: Business Finance Magazine


SOURCE: APQC / BBRT Research

How Much of Planning Adds Value?


Budgeting Rolling ForecastsTimingFrequency Once a year Often—event drivenCycle time Months/weeks Days/hours/near real timeTime horizon Fiscal year Rolling; beyond “The Wall”______________________________________________________________________________________________________________________

ProcessIteration cycles One version at a time Multiple scenarios at one timeParticipants Many—all managers Fewer—finance; key managersCollaboration Submission/approval Near real time as possibleDeliverables Reports in binders Decisions; action__________________________________________________________________________________________________________________________________

DataType Financial Financial & operationalInputs Many direct inputs Fewer direct; driver-basedMeasurement Variances Relative change; trendsLevel of detail Precision driven Relevant; what’s material

Budgeting Vs Rolling Forecasts


1. Robust Scenario Analysis You can’t predict the future, especially in today’s economy But you can construct scenarios that let see alternate futures You can evaluate best courses of action under different conditions

2. Driver Based Modeling Reduce direct input data volumes Increase ‘modeled elements’—operational/driver based planning

3. Integrating Actuals “Rolling over” actuals in plan files—apples to apples Using actuals to understand trends—focus on rates Using actuals as an activity driver/source for plan data

3 Key Requirements for Rolling Forecasts


Scenarios In Spreadsheets Separate workbooks is the principal mechanism A nightmare for maintenance & comparisons

Scenarios In Budgeting Applications Manage to budget versions– aka “version control” Process control: who changed that number? what’s approved? Compare versions at the product/cost center/account level

Scenarios In Planning Applications Reporting functionality Maintenance issues Performance [meeting the “need for speed”]

Requirement #1: Robust Scenario Analysis


Versions Are For Budgeting Create and approve one version at a time Version control: who changed that number? what’s approved? Once a new version is approved, prior versions are discarded

Budget Version A Budget Version B Budget Final

Scenarios Are Different from Versions

X X


Forecasts = Scenarios (lots of them!)1. Assessing risk—BE/Hi/Low ranges 2. Evaluating alternative strategies/programs3. Managing uncertainty— external events

Actionable knowledge/decisionsGo/no go decisions on programsReallocate resourcesChange underlying processesManage timing

What You Can Do with Scenarios


“Be Prepared”

“Develop Situational Awareness”

The Goal: Be Prepared


What are the three scenarios that your company needs to be analyzing now as part of your planning process?

What are the three most important decisions your company will be making over the next 12 months?

Questions about Scenarios


Reporting functionality checklist: Compare any two scenarios side by side with variances Compare any two scenarios with variances at all levels of detail Line up scenarios side by side at all levels of detail

Examples

Scenario Analysis: Reporting


Maintenance issues Cumbersome maintenance results in errors Time consuming maintenance kills the use of scenarios

Maintenance checklist Create a new scenario by copying any existing scenario Make value changes across scenarios in one operation Make structure changes across scenarios in one operation

Examples

Scenario Analysis: Maintenance


Communicating the model in real time

The new “collaboration”

The Excel PowerPoint Cycle

The Need for Real Time


The “need for speed” Everything refreshes in near real time The planning tool is the presentation tool The planning tool enables collaboration on-the-fly

Performance checklist Change values of a scenario with ripple through in real time Change dimension filters with ripple through in real time Toggle between scenarios in seconds Update scenarios for structure changes in seconds or minutes

Scenario Analysis: Performance


Scenario Analysis Checklist Scenarios have comparative reporting:

Compare any two scenarios side by side with variances Compare any two scenarios with variances at all levels of detail Line up scenarios side by side at all levels of detail

Scenarios are easy to create and maintain: Create a new scenario by copying any existing scenario Make value changes across scenarios in one operation Make structure changes across scenarios in one operation

Application meet “need for speed” for scenario analysis: Change values of a scenario with ripple through in real time Change dimension filters with ripple through in real time Toggle between scenarios in seconds Update scenarios for structure changes in seconds or minutes

Complete Checklist: Scenarios


Rand Heer Business Activities

CEO, Alight Planning (Planning software) Co-Founder, Aspirity (Microsoft BI consulting) Founder, FP&A Train (Essbase training) Founder, Pillar Corporation (Enterprise budgeting) CFO/Finance Director for 2 public companies

Today’s Special Speaker

Publications Coauthor: “Business Intelligence: Making Better Decisions Faster” Author of 10 white papers on planning/reporting topics

Education MBA degree Harvard Business School

application requirements for rolling forecasts asmi 2

Documents

alight planning slide

alight planning principal

forecasts requirement

forecasts todays

scenario analysis requirement

robust scenario analysis

foot view

business finance magazine