Choosing The Right Biz Planning Software

“Do you know of any CFOs who provided their bosses with an accurate and timely forecast of the economy’s cliff dive at the end of ’08 and beginning of ’09?” That eye-catching (or perhaps heart-stopping) question appears at the beginning of the “Ask the Experts” column in the May/June issue of MFM’s The Financial Manager.

Since most of our industry is or will be embroiled in some form of the budgeting process in the coming months, I thought it might be timely to pass along some of Bill Keenan and Don McLellan’s advice on what to look for when evaluating business planning software. 

Keenan, an incoming member of the 2011-12 MFM board of directors, is the managing partner of Keen CFOs, which provides interim CFOs for media and entertainment companies. McLellan is CFO of the public relations firm MPRM Communications.

Their column in the conference issue of TFM coincided with a presentation on the importance of strategic planning in overcoming performance management challenges provided by experts from Oracle and The Hackett Group at our annual conference, Media Finance Focus 2011. 

Having the right business planning tools won’t just make the budgeting process easier and more integral to your business plan, it will also help you become a  “world class” organization, said Don Baribeau, senior director of strategy and insight for Oracle, and Jason Fitzgerald, principal of enterprise management systems for The Hackett Group. The gap between world-class and median performance represents a 20% cost savings ($137 million) in a typical Global 1000 organization, they said.

Clearly, this type of thinking takes the notion of business planning to a whole new level. “World class companies view enterprise performance management as an integrated end-to-end process supported by a common architecture,” Fitzgerald explained. 

This holistic approach encompasses not just planning and budgeting. In a world class organization, it must also integrate the systems used for financial reporting, outlook/forecasting and decision support, as well as the common processes used for gathering and analyzing company/industry metrics, other data used for performance analysis, the applications required by a company’s IT systems, IT infrastructure and for meeting governance requirements.

These insights track with the specific advice for business planning and evaluating new business-planning software provided by Bill Keenan and Don McLellan. While many of us may be working on our 2012 budgets right now, the days when these numbers would be used for forecasting the next year are long gone for most businesses. In today’s world, the planning/forecasting process must be timely, flexible and more comprehensive. Keenan and McLellan recommend working with stakeholders to develop a minimum of three different scenarios:

• The optimistic version with the usual hockey stick revenue graph.
• The “realistic” version that admits not everything will play out perfectly.
• The “Q1-09” or “meltdown” version of things.

Behind that last scenario is what they describe as a situation where “new business dries up; old clients depart; cash doesn’t flow; ‘burn rate’ is a cuss phrase, and it’s either layoff notices or senior staff dips into home equity lines to keep operating.”

Once the scenarios are fleshed out, our authors suggest that the organization’s financial planners depend upon others outside the finance department to make the decision on which, if any, scenarios to eliminate.

Given today’s need for flexibility and ability to answer a lot of “what if” questions, it’s crucial to select business-planning software that is up to the task. Keenan and McLellan recommend asking the following questions before selecting a new software package:

Is the impact (good or bad) to cash flow obvious?  “If you can’t project cash flow, do not pass go and do not show your face to your board or to potential investors,” they warn. While “EBITDA (earnings before interest, taxes, depreciation and amortization) and ‘growth’ previously ruled, cash is king now.”

Can it handle changes? Does it allow for modularity? Data integrity can be lost with multiple changes. Keenan and McLellan say, “The new software must seamlessly ripple the impact of changed assumptions throughout all facets of the data.” In addition, these changes must be visible in real time, allowing you to respond to the “what if’s” as they are being asked.

Modularity gives you or others the flexibility to make offline revisions and hold them until they are ready for inclusion in the larger program. In addition our authors recommend that, “The program should have automatic checking features for footing and cross-footing, and its key calculation areas should be protected.”

Can you get to your data? “Data mining should apply to your own business plan. Be sure the capability exists to slice and dice the info as you need it to answer those pesky questions that always arise,” our experts recommend.

How does it handle/capture online, digital and other revenue opportunities and the costs associated with developing those revenues? It’s no longer a luxury; it’s a necessity that companies expand their sources of revenue. You need planning software that can easily handle these requirements.