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Fix Your Forecast and Build Your Budget

Best Practices for Enterprise Performance Management

Emil Fernandez, General ManagerEPM National Practice

June 29, 2010

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About Perficient

Perficient is a leading information

technology consulting firm serving clients

throughout North America.

We help clients implement business-driven

technology solutions that integrate

business processes, improve worker

productivity, increase customer loyalty and

create a more agile enterprise to better

respond to new business opportunities.

View other Perficient on demand webinars at:

www.Perficient.com/webinars

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Fast Facts

Founded in 1997 Public, NASDAQ: PRFT 16 locations throughout the U.S. & Canada:

– Chicago, Cincinnati, Cleveland, Columbus, Dallas, Denver, Detroit, Fairfax, Houston, Indianapolis, Minneapolis, New Orleans, Philadelphia, San Jose, St. Louis and Toronto

1,100+ employees Dedicated solution practices Served 400+ clients in past 12 months Alliance partnerships with major technology vendors Multiple vendor/industry technology and growth

awards

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Our Solutions

Why do we Budget?

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Planning and Budgeting Challenges

Time – takes too long, results obsolete

Quality – political/negotiation, not reflective of business

Cost – many wasted resources, dubious benefits

Flexibility – lack of responsiveness to changes

FP&A Group

Dept A Dept B Dept C

Senior Management

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Reason #1:Spreadsheet driven

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Reason #2:Long Cycle Times

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Reason #3:Complexityof Business

Metrics

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Reason #4: Disconnected

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So whyis it

this way?

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Transactional Systems

vs.Management

Systems

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Transactional Systems Mature technology Over 50 years of development Pervasive (GL, AP, AR, HR, Supply Chain, etc.)

Management Systems Relatively new (10 years) 2nd or 3rd generation products Not well understood Requires a cultural change Not pervasive, but getting there

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How new?

Corporate Performance Management (CPM)Gartner 2001

Business Performance Management (BPM)Hyperion 2003

Enterprise Performance Management (EPM)Oracle 2007

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So what is EPManyway and

why should I care?

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EPM is the “connecting fabric” that allows management to link strategies to plans, continuously monitor execution against goals

and drive enterprise-wide performance improvement.

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ANALYZE PERFORMANCE

GOAL SETTING

SCORECARDS

FINANCIAL REPORTING

FINANCIAL MODELING

VARIANCE ANALYSIS

ROLLING FORECAST OPERATIONAL

PLANNING

MONITOR RESULTS

Management Processes Exist in Silos

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Results of Silos…

Lack of Alignment– Can’t Align Company Goals with Plans and Execution

Low Predictability– Not Able to Improve Accuracy in Forecasts and Plans

Inconsistency– Unable to Base Decisions on the Right Information

Lack of Transparency– Not Able to Meet Evolving Disclosure Requirements

Stale Data– Data is Out of Date and Irrelevant

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An EPM Strategy Can Eliminate Silos

Links strategic goals to operational decisions

Transforms financial management processes

Monitors execution in real-time

Delivers consistent, reliable insights to drive action

Lowers costs and reduce system complexity

Single version of the truth

InsightPerformance

Action

SetGoals

Plan

Monitor

Analyze

Report

Align

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Complexity

Basic Reports

Mgmt RptsAnalysis

FinancialReporting

Private Public Multi-National Multi-Division

Financial Modeling

PerformanceManagement

Small

Medium

Large

Size

EPM Favors More Complex Organizations

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Division 1 Division 2 Division 3

HQ

Large Domestic Company

Multiple Locations Multiple Products/Services Distributed Authority Multiple Operational Systems Frequent Reporting Accurate Forecasting Resource Management Critical Management System

Requirements:– Replace/Augment Spreadsheets– BI Query & Reporting Tools,

Dashboards – Packaged Budgeting and Planning

Application

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More Locations and Systems Reporting and Budgeting in

Multiple Currencies Intercompany Transactions Financial & Management

Consolidations & Reporting Local Tax and Statutory

Reporting Management System

Requirements:– BI Query & Reporting Tools– Multidimensional Analysis Platform– Packaged Budgeting & Planning

Apps.– Packaged Financial Consolidations

& Reporting System

EMEA NA APAC

HQ

UK East Japan

France Central China

Germany West ANZ

International Organization

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Time

CompetitiveAdvantage

OPERATIONAL EXCELLENCE

MANAGEMENT EXCELLENCE

Cost – Lean and MeanQuality – Six Sigma, TQMSpeed – Real-time, JIT

Cost – Lean and MeanQuality – Six Sigma, TQMSpeed – Real-time, JIT

Smart – Actionable Insights Across EnterpriseAgile – Adaptable to Changing Business ConditionsAligned – Consistent View of Performance

Smart – Actionable Insights Across EnterpriseAgile – Adaptable to Changing Business ConditionsAligned – Consistent View of Performance

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Enterprise Performance Management (EPM) World-class EPM organizations deliver 2.4 times the equity market returns of industry-peer companies

1.0

2.40

Peer Group World-Class

Source: CFO Challenges and Opportunities in the Flat world

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How do I apply EPM Principles to the

Budget process?

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Pulling it together – Budgeting the EPM way1. Link the budget to the corporate strategy2. Avoid excessive detail (this is not the GL!)3. Don’t sweat the small stuff (80/20 rule)4. Use targets (top down or bottom up)5. Capture the business drivers6. Focus on data quality7. Combine budget numbers with actuals8. Close the loop – enforce accountability9. USE A PURPOSE-BUILT PLANNING APPLICATION,

NOT A DESKTOP SPREADSHEET TOOL

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Question: What is a Planning Application?

Answer:A purpose-built software program designed to manage the input of budget data across the enterprise, enforce consistent calculation of business rules, and automate the aggregation of the budget.

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Planning Applications – Key Components

OLAP

ManagersWeb

FormsCentralized Database

Planning Manage

r

ApproveDeny

PromoteManage

Report

Analyze

Model

Actuals

GL

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Features & Benefits (continued)

Feature Benefit

Automated Reduces Errors, reduces cycle times

Web-based forms Gets away from e-mailing spreadsheets

Secure People see only what they need to see

Workflow Increases efficiency, reduces cycle times

Flexible Able to run multiple what-if scenarios

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Planning Applications – Features & Benefits

Feature Benefit

Centralized database Single version of the truth(raw data)

Calculation Engine Single version of the truth (business rules)

Summary-level data Ultra-fast performance,reduces cycle times

Easy-to-generate reports Facilitates analysis, reduces cycle times

Ability to load actuals Measure and improve enterprise performance

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Does it really work?

Yes.

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Texas Children’s Hospital

Texas Children's Hospital is an internationally recognized full-care pediatric hospital located in the Texas Medical Center in Houston. One of the largest pediatric hospitals in the United States, Texas Children's Hospital is dedicated to providing the finest possible pediatric patient care, education and research.

CHALLENGE Painfully inefficient (Excel-based) budget

process Budget cycle sometimes took 6-8 months Managers completed Excel worksheets which

were batch loaded to PeopleSoft for consolidation

Consolidated financial statements required 24-48 hours lead-time to produce

Operating target negotiations would begin after the budget was finalized

Lengthy and difficult process to make changes and provide updated forecasts

SOLUTION Texas Children’s selected Hyperion for its

powerful out-of-the box budgeting and forecasting capabilities, and for its ease of integration with PeopleSoft.

FEATURES & BENEFITS• Executive meetings were moved to the start

of the budget cycle to set goals and targets• Operating targets are loaded into Hyperion

Planning before the budget season opens• Drivers and business rules are reinforced by

the system• The system supports 230+ planners both

online and offline• Directors and Executives generate self-

service reports on demand• Now, real-time reporting to the Director level

is possible, providing immediate visibility into the numbers

• Actuals loaded directly from PeopleSoft for easy variance reporting

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 ”Since we implemented our EPM Planning application, we understand our business better and make quicker and smarter decisions. We have one integrated system for budgeting, planning, and forecasting. I can’t believe we ever lived without it.”

Steve Tuozzo, ControllerBenefits Realized:• Allows finance to spend more time on analysis by eliminating

manual effort for collection and reporting of budget and forecast data

• Managers now have access to more accurate and timely forecast data to make better business decisions

• Reduced errors and increased confidence in the numbers by automating roll-up of forecast/budget data

• Single system of record now provides increased predictability of revenue and expenses

• Improved collaboration by centrally tracking changes, annotations, and comments to plan data

Wyman Gordon

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Continental Airlines

Developed EPM Planning application for consolidated Income Statement reportingfor Actual, Forecast and Budget

Managerial and Clerical Budget/Forecast Replaced 1000’s of Excel spreadsheets Configured to allow multicurrency input Accounts dimension –> 6000 Accounts Company Dimension –> 6300 Cost Centers Over 400+ users submitting their

budget/forecast Near real-time aggregations utilizing 64-bit

servers Actuals loaded every 24 hours to base member Matching reports created to tie Planning Income

Statement to the GL Income Statement Rate, Volume, other variance reports created

using Financial Reporting and the qualitative analysis added using Annotation Server

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