Welcome back. We hope you enjoyed the brief break from Excel Hell and got to cool off a bit in spreadsheet purgatory. Let’s continue with our investigation as to how the Financial Planning and Analysis organization inside your company got themselves into such hot “water used loosely”. Simply, FP&A relied on Excel to do what an EPM system has been doing for over two decades. Does this seem familiar? Maybe it’s time to catch-up. Catch up on part 1 here.
The manipulation and validation of data related to roll-ups within a Reporting Hierarchy is difficult. Rollups change during a planning process almost as a by-product given the nature of planning in the first place, i.e. to align the business operations the right way. Keeping up with the changes of these rolled up accounts, departments, projects, etc. often makes presenting the best numbers, at the expected time, impossible. EPM Tools like Host Analytics store hierarchical rollup relationships as segment hierarchies apart from the budgeted, forecasted, or actual amount data. Hierarchies are merely a separate reference point for the data so there are no rows to insert or delete or move around when a hierarchy changes within ANY segment. When a rollup changes, you manipulate the change in one place and every template (input) and report (output) are updated instantly.
There’s certain to be several consumers of budgeting and planning information. The various consumers along with various segments require several separate spreadsheets to produce all of the required reports. The FP&A organization is most likely opening and saving, updating a header or footer and saving and printing. Sometimes updates address the needs of 10-plus people throughout 20 different report types (sales, operations, manufacturing, R&D.) Within top analytics modules of EPM software are the capability to produce adhoc reports in minutes. Those reports can be pivoted, parsed, and summed on any hierarchical level within any dimension or segment needed for reporting. Further, there is the opportunity to place substitution variables in a report specification so that you can quickly execute the report for a slew of time periods, scenarios, or segment values. Finally, you can stack all of your report requests into a report collection in order to schedule and package your report distribution via a hands free process.
Getting the buy-in of individuals involved in the planning process is difficult because the mission is fractured and often modestly coordinated. Most participants are limited in scope and visibility and trust in the process and the underlying data is often suspect. Couple that with the fact that participants in the process find it time consuming and a veritable PITA. Once again, EPMs riding on a common architecture with the ability to offer the same construct to many participants simultaneously, establish a greater level of trust than spreadsheets. And from trust emerges buy-in not only to the process of collaboration to promote data input but also to the value of the data itself once it is produced.
Spreadsheets provide a perfect backdrop for performing analysis. Lots of what-if scenarios can emerge but the question always lies in the background as to whether or not the numbers in the spreadsheets are themselves the right ones. After all, some studies out of Harvard have reported that up to 88% of all spreadsheets contain errors. Just having an EPM won’t guarantee error-free computing but you will still have all of the what-if capabilities of spreadsheets. And with an EPM you only enter the data required for the overall model in one place. Therefore, there is a much greater chance that the numbers you play around with at the end are the best representation of the data you can get.
With spreadsheets FP&A folks sometimes struggle to find discrepancies resulting from incorrect input or formula calculations. The discrepancies could potentially be in an infinite number of places. EPM Systems, like most enterprise applications, contain audit trails, security, and data input logs that can be used to verify the data loaded into it. Whether the data was loaded manually or through an automated routine it’s in a self-contained system. There are a finite number of places for errors to hide whenever there are items that do not total or calculate exactly as expected.
In conclusion, Corporate Performance Measurement systems aka (EPM, CPM, FPM) have been in use for twenty plus years. I did come to find out that some organizations have done a bang-up job emulating a system with their usage of Excel. Inevitably, however, it was that desire to “systematize” excel that lead to the hell in the first place. Maybe it was the ‘cheaper alternative’ at the time. Perhaps it was ‘the time’ to implement. Most likely, it’s where ‘the current expertise’ laid. Fortunately all of that has been dealt with via subscription models, pay as you go, and three month EPM implementations, all just in time for the budget season to begin. If you want to see the first entry in this two-part series then click here: OMG, Excel Hell is Real, Part 1.