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Automated systems can work for small companies, too: all the focus on sophisticated BPM systems with dashboards and scorecards has some smaller organizations concerned about costs and the ability to handle complexity. But new, simpler systems can allow them to cost-effectively move beyond spreadsheets for managing the business.

As competition grows ever fiercer in today's business environment, so does the attention to detail that savvy business managers must pay toward every piece of their organizational performance. They want immediate access to key performance indicators (KPIs) and related data that will help them better understand what's driving the health of their business.


From revenues and capital expenditures to lease and payroll outlays, much of this information is housed in their organization's finance department. This is also the group of employees who best know how to analyze that data and assess how it influences business performance. Thus, for businesses aspiring to more proactively manage business performance, unlocking greater insights within their financial data is almost certainly the ideal place to start.

A growing number of companies, particularly those with at least 500 employees, are starting to adopt Web-based, dashboard- and scorecard-oriented software to help business decision-makers gain a unified view of their organizational KPIs in real time. Dashboards are gaining popularity because they simply and graphically convey what's going on across various points of the business: If the arrow is pointing up and the light is green, performance is good; if the light is yellow and the arrow is pointing down, it's time to start paying closer attention.

As good as such dashboards are at providing this snapshot view, though, organizations require more extensive tools in order to achieve true business performance management (BPM). Gathering and consolidating the numbers is only step one: from there, executives need to determine what's influencing those figures, share those findings across departments or teams, and enable divisional managers to effectively shift course as needed. When organizations struggle or fail with efforts to implement dashboards and scorecards, the cause is often an inability to turn raw data into business intelligence and turn that intelligence into action.

A new generation of financial analysis software applications has emerged in recent years to address these needs. Yet many small and midsized businesses remain hesitant about adopting such technology, often because they're concerned about the costs and complexity of a full-fledged BPM software suite.

They've heard others lament the time and money it takes to install and configure a robust solution, the intensive IT resources needed to manage it, the extensive data marts that must be built for the BPM software to draw up-on, the security and user-access issues involved and the lengthy process of training end users on a new system.

As a result, many continue to rely on spreadsheets and piecemeal reporting tools to perform budget analysis and forecasting. In the process of manually compiling and consolidating budget figures in increasingly complex spreadsheets, organizations often become resigned to dealing with lengthy and labor-intensive budget-building cycles, inaccurate financial forecasts, lost data, limited visibility into the stories behind the numbers and other painful experiences.

After months of compiling a budget in this way, managers often find that the underlying assumptions within the document have grown stale and largely irrelevant. At the same time, they are reluctant to update the budget forecasts because of the time and complexity involved.

What they may not realize is that there are more manageable, modestly scaled applications available that can help move them beyond spreadsheet-based management of financial data into a more flexible and transparent environment, but without the steep costs of adopting an enterprise-scale application. Success comes from choosing a financial analysis software package that fits the profile of a small to midsized business, as opposed to one that compels the business to fit the software.

Bearing a few key considerations in mind during this evaluation process will help guide an organization toward the right solution.

* Centralized data storage and access. One of the main deterrents to adopting BPM technology is that many smaller organizations don't have a central location to store their financial data and draw upon it for reporting and analysis. Having found a BPM solution it likes, the organization gets derailed by the time and costs involved in building the necessary data schemas and other supporting infrastructure. This roadblock can be readily overcome with a financial analysis system expressly designed to host the requisite data in a centralized location and enable it to be automatically pulled into other environments without extensive customization.

* Customization vs. a more guided approach. While some of the more full-featured BPM applications are designed to be highly adaptable to different corporate environments and business processes, the associated time and resource investments may outweigh the benefits of such extensive customization for a smaller company.

A better alternative may be to look for software that offers clearer guidance in establishing basic budgeting models and can be deployed cost-effectively, while still allowing flexibility for finance personnel to customize where needed. This could include predefined templates built around specific vertical-industry characteristics or based on horizontal budget categories such as revenue streams, expense models, human resource allocation and capital expenditure requirements.

* Minimizing the need to learn new tools and skills. Typically, finance managers in smaller organizations have more than enough on their plates without the added burden of becoming technology experts. Therefore, software that provides step-by-step, wizard-based guidance through key financial processes can prove invaluable in freeing people to focus on what the data means, rather than how to get it into the system.

Another way an application can help promote simplicity is by eliminating the need for financial administrators to grasp the complexities of the software's underlying technology building blocks--such as different databases, interrelational tables, star schemas and online analytical processing (OLAP) cubes--by instead providing a user interface that lets people deal with business and finance terms they're familiar with.

* Ability to incorporate spreadsheets where useful. Choosing to adopt automated and Web-based financial management technology does not necessarily mean that an organization has to forsake its current budgeting and planning tools, such as traditional spreadsheets. Companies that find value in spreadsheet-based data analysis and charting should look for software that can easily integrate spreadsheets as both a data source and an output mechanism for further analysis.

* Impact on IT resources and requirements. Beyond the up-front costs of licensing, implementing and customizing a financial analysis software package, companies also must factor in hardware, support, training and maintenance expenses. There are inherent advantages to adopting an application that works with the organization's current server infrastructure, can be installed rapidly, requires minimal end-user training and allows the finance team to build out its first budget models and reports in a matter of days rather than weeks or months (which can happen with larger applications).

Benefits of a BPM Approach To Financial Processes

Establishing a more collaborative, broadly inclusive approach to budget planning and other financial processes can lay crucial groundwork for effective BPM across an organization's operations.

As they start to include more people outside the finance area in the budgeting process, executives gain broader and stronger buy-in from all levels. Financial analysis software enables participants to clearly see how assumptions have an impact in other areas that they may never have thought about before; it's also easier for them to get a handle on hidden costs. And, by contributing their own numbers rather than being handed those figures, everyone becomes more accountable and better informed about the assumptions going into the budget.

Making this information easier to distribute and view collectively via a Web-based financial performance management system also opens greater opportunities for collaboration. Instead of emailing spreadsheets and other documents to each other, managers can convene via a conference call and log into the financial management Web portal to view all the latest documents online and make real-time changes. So, if the chief operating officer is making assumptions about next year's production capacities and sales projections, the affected managers can view that data directly and have the opportunity to make adjustments or recommendations much earlier in the process. This enhanced involvement helps improve the validity of and confidence behind the numbers.

Another strength of such solutions is their ability to reduce complexity. They not only help business managers view KPI trends at a summary level, but also allow individuals to drill down to discover what's driving those trends. For example, if a CFO is looking at telephone expenses at the corporate level with an eye toward reducing these costs, delving one level deeper into regional costs can help reveal that one region's expenses are higher than the others'. Further scrutiny of the "problem" region may show that one business unit is actually paying for two phone systems.

Financial analysis software that provides this drill-down capability out of the box, rather than requiring the organization to model the process ahead of time, can help managers cut through the clutter of their financial data to reach the most telling details faster. With more powerful, flexible and easy-to-use software capabilities at their command, budget participants also can readily adjust their forecasted financial data on a quarterly or even a monthly basis.

Also, because the majority of the budgeting mechanics are now handled by software instead of the finance team, employees have more time to tackle other tasks that really provide value to the organization--such as analysis of business performance to guide future planning.

Chris Scherpenseel is President of FRx Software Corp., a Microsoft company and a part of Microsoft Business Solutions. He can be reached at 303.741.8000 or

Greater Budget Clarity, Accuracy Help Stahls'

Stahls' Inc., which manufactures complete graphic systems, equipment and apparel for creating athletic jerseys and other related merchandise, is a prime example of a midsized company that has harnessed the power of automated financial management software to gain rapid business benefits.

Stahls', which employs about 300 people and operates globally, previously relied on a lengthy and convoluted budgeting process that involved hiring an outside consultant for two months each year. This person collected sales numbers, expenses and projections from various business units, entered the data into a multi-layered spreadsheet and fed the results back to each division--an exercise that was neither efficient nor particularly informative for those involved. "No one was really sure how the numbers came about," says Jeff Coates, financial applications specialist for Stahls', "and there was really no ownership by the individual business units when we were done."

Coates and his finance colleagues say that replacing this work-intensive ritual with automated budgeting and forecasting software has saved Stahls' more than $5,000 a year in extra staffing expenses and shortened its budget cycle by several weeks. It also has improved the overall quality of the budget and given contributors a greater say in how their cost centers are managed. For example, housing the budget data in one location allows Stahls' managers who oversee multiple divisions and accounts to track their progress almost effortlessly.

"Today, our managers have more accurate information and a clear view of where expenses, profits and budgets are going," Coates says. The software also helps Stahls' precisely manage ongoing budget changes by automatically calculating any updates made to line items at the divisional level. On a monthly basis, the finance team uses this application suite to compare each office's and department's budget alongside its actual numbers.

"Before, we'd see a change to the numbers and not know where it came from," Coates adds. "Now, we can drill down to see who made the change and how it impacts each division, as well as potentially the entire company."


* A growing number of larger companies are adopting dashboard- and scorecard-oriented software to help business decision-makers gain a unified view of their key indicators in real time.

* However, smaller organizations are often put off by the cost and complexity of such systems and the technical support they sense is needed to maintain them.

* Automated financial performance systems have been created that allow smaller businesses to do robust budgeting and planning, and to avoid complicated technology architecture by storing data in a central Web-based repository.
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Author:Scherpenseel, Chris
Publication:Financial Executive
Geographic Code:1USA
Date:Jan 1, 2006
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