Simplifying Financial Performance Management

Geoff Noble 25th June 2014 at 6.30pm

Prepared by CFO Group for CIMA members

Agenda

1.  What is Financial Performance Management? –  Relationship to other “hot” topics

–  Why we think it’s important to you as CIMA members

2.  Performing a self-assessment health check –  Effectiveness and efficiency scores

–  Solution roadmap and business case

3.  Implementing a solution –  Critical success factors

–  How-to guide for projects

4.  Summary and Q&A

1. What is Financial Performance Management?

Outcome: Be on the same page in terms of what financial performance management is and why it is important to you

Financial Performance Management (FPM)

§  Planning

§  Budgeting

§  Forecasting

§  Closing

§  Consolidation

§  Management Reporting

§  Statutory Reporting

§  Regulatory Reporting

§  Scenario Modeling

Corporate / Group

Operations / Divisions

We often find these processes supported by:

•  Multiple systems requiring data transfers •  Manual intervention and adjustment •  Big spreadsheets with Macros that sometimes fail •  Word and PowerPoint for presentations •  Lots of copy / paste •  Lots of checking and re-checking •  Key person dependencies when failure occurs

But the complexity in these multi-step fragile processes is often “unseen”, with bottlenecks and failure points costing an enormous amount of time and effort.

Great potential opportunity by simplifying FPM

Add more value

Free up time

Reduce costs

Reduce effort

Streamline processes

Relationship with other “hot” topics •  Business Intelligence (BI)

–  Focused on reporting and analysis and can be seen as a solution to FPM –  Not designed for managing the processes of planning, budgeting, forecasting,

scenario modeling, closing, financial consolidation, and disclosure –  Can inform the planning processes of financial performance management –  BI tools are used in financial performance management for analytics

•  Big Data –  New type of software and technology to handle massive data volumes –  Can inform the planning processes of financial performance management

•  Integrated Reporting (IR) –  IR is about concise report content focused on value creation over time –  Financial and non-financial measures –  Financial performance management software capable of handling IR –  IR can be part of your financial performance management initiative

We think FPM is particularly important for CIMA members because…

CFOs are telling us: -  Want Finance to become business partner / advisor / catalyst / strategist

-  make time available for analysing information -  proactively bring opportunities to the business

-  Need to reduce the cost of Finance -  streamline processes -  off-shore the mundane -  beat the top performer benchmarks for finance costs % revenue

-  Improve quality and timeliness of performance information -  Deliver the right information to the right people at the right time

… automating and simplifying FPM supports all the above and CIMA members have the right qualifications to make this happen

2. Performing a self-assessment health check

Outcome: Know how to assess your FPM health and create an FPM roadmap and compelling business case

If you don’t do this, a terrible thing will happen

NOTHING!

“I get all the information I ask for”

“They don’t realise I was up to 2am preparing that forecast” “But it’s OK, we get by”

“Finance seems very responsive”

“With all the copying and pasting, checking and re-checking, every iteration of the budget nearly kills us and

there is absolutely no time for analysis.” “But it’s OK, we get by. We have to.”

“IT thinks we should have a dashboard. Sounds good.”

How to self-assess your FPM processes

•  Interview the key stakeholders of each FPM process –  Recipients of the output –  Contributors in the process

•  Assess current situation by scoring processes out of 10 for: –  Content effectiveness

•  Relevance •  Accuracy •  Timeliness •  Alignment (e.g. Budget to Strategic Plan)

–  Process efficiency •  Time (benchmarks are available) •  Effort •  Cost •  Satisfaction

•  Rank the processes in order of importance to fix

FPM Scorecard ! Effectiveness!of!output!(0010)! Efficiency!of!process!(0010)! Importance!

FPM!Process! Relevant! Accurate! Timely! Aligned! Time! Effort! Cost! Satisfaction! Priority!Strategic!Planning!

! ! ! ! ! ! ! ! !

Budgeting! ! ! ! ! ! ! ! ! !Forecasting! ! ! ! ! ! ! ! ! !Closing! ! ! ! ! ! ! ! ! !Financial!Consolidation!

! ! ! ! ! ! ! ! !

Management!Reporting!

! ! ! ! ! ! ! ! !

Statutory!Reporting!

! ! ! ! ! ! ! ! !

Regulatory!Reporting!

! ! ! ! ! ! ! ! !

External!Reporting!

! ! ! ! ! ! ! ! !

Board!Reporting!

! ! ! ! ! ! ! ! !

Scenario!Modeling!

! ! ! ! ! ! ! ! !

Operational!Planning!

! ! ! ! ! ! ! ! !

Operational!Reporting!

! ! ! ! ! ! ! ! !

!

What is required to score a 10?

•  For each process, identify what could be done to get a 10: –  Identify the existing reports, usage and the issues with them –  Outline what new reports are required and rationalise existing –  Map out the steps of the existing process identifying bottlenecks

•  Look for copy / paste to Excel, Word and PowerPoint •  Look for manual intervention and manual adjustment •  Look for failure points and duplication of effort

–  Design a new streamlined and ideal process in outline –  Estimate the existing effort and future effort (75% saving)

•  Document a FPM roadmap –  Quick wins: that can be implemented now within existing “business as

usual” budget or other available budget for this financial year –  High priority: Next financial year priorities and budget required –  Future: Roll-outs in future years based on priority

Create a compelling Business Case for the implementation of FPM

•  Quantify the hard $ benefits of getting a score of 10 –  Effort savings (FTE) –  Cost savings ($ calculated from the effort savings in FTE)

•  Note the opportunity to re-deploy staff to value-adding activities

•  Quantify the soft benefits of getting a score of 10 –  Better quality plans, budgets, forecasts, actuals

•  More iterations of plans, budgets, and forecasts •  Relevant, accurate, timely, consistent information

–  Less risk of reporting the wrong numbers –  Higher staff satisfaction

•  Quantify the costs and return on investment –  FPM software fees and hardware costs or SaaS costs –  Training and implementation services –  Demonstrate return on investment is good based only on cost savings

Add more value

Free up time

Reduce costs

Reduce effort

Streamline processes

3. Implementing a solution

Outcome: Know what we have found the critical success factors to be and how best to approach the project

Critical Success Factors for a FPM project

Critical Success Factors

What are you currently using?

…and no, the solution is not Excel!

…alone.

Financial Performance Management software

•  The software industry calls it xPM

FPM

CPM

BPM

PM

EPM

Large software vendors

Most software vendors have bought multiple products for FPM

Disclosure Management tools

Planning tools Consolidation tools

Strategy Management tools

Analytical tools

Closing tools

Forecasting tools

Data Integration tools

Pitfalls using multiple products

•  Multiple specialists

•  Too many cooks

•  Cost é

•  Time é

•  Complexity é

•  Value ê

Use a single software product not many

Planning

Budgeting

Forecasting

Closing

Consolidation

Management Reporting

Statutory Reporting

Regulatory Reporting

Scenario Modeling

Group / Corporate

Operations / Divisions

Critical Success Factors

Typical approach to projects

•  The traditional project team: –  Project manager

–  Business analysts

–  Technical specialists

•  This approach falters when: X  The project manager is generic and not experienced in financial

performance management and can’t allocate the required tasks

X  The business analysts are generic and do not understand FPM or consider the natural built-in financial intelligence and capabilities of the software

X  Technical specialists build the system based on documented requirements, leading to poor use of software, protracted development and customisation

It doesn’t have to be this complicated…

It is easy with a qualified Solution Designer Central and key project role. They define and design the solution.

Their qualifications include: –  Understand finance and management accounting –  Understand financial systems –  Strong analytical and problem solving skills –  Can communicate in a visible, logical and persuasive way –  Can see the big picture and also have an attention to the detail –  Interested in software and how to get the best from it –  Collaborative work style

CIMA members are ideal to take on this role…

Critical Success Factors

Business logic and financial rules

4. Data Model: 5. Processes: 6. Data Sources: 3. Outputs: 2.Goals:

1. Vision: Deliver a unified system for financial performance management across the organisation providing an single accessible source for all financial performance information

•  Less effort and pain to produce the information

•  More relevant information

•  More accurate and consistent information

•  Transparent rules and assumptions

•  More timely delivery of information

•  Less costs to own, maintain, run and use

•  Flexible platform to meet future needs

Statutory Reports

Management Reports

Scenarios and Analyses

Ad Hoc and other outputs

Dimensions: •  Periods •  Scenarios •  Categories •  Currencies •  Accounts •  Entities •  Products •  Customers •  Other

Operational systems

Manual Input

Financial systems / GL

Other sources

Plans

Management Actuals

Scenario Modeling

Plans, Budgets and Forecasts

Dimensions and logic to support outputs

Statutory Actuals

Forecasts

Budgets

Timetables

Workflows

Approvals

Build a prototype in the software during design

Dimensions, elements and hierarchies

Data Model: Processes: Data Sources: Outputs:

Statutory Reports

Management Reports

Scenarios and Analyses

Ad Hoc and other outputs

Dimensions: •  Periods •  Scenarios •  Categories •  Currencies •  Accounts •  Entities •  Products •  Customers •  Other

Simple Manual Input

Plans, Budgets and Forecasts

Dimensions to support outputs

… then add: •  calculation logic •  process workflows •  data entry forms, and •  automatic data loading •  additional reports and analytics

in process priority order over time according to the roadmap.

Complete the: •  data model dimensions •  dimension elements •  dimension hierarchies •  data entry form for test data •  selection of final reports

Critical Success Factors in Summary

1.  Right software 2.  Right people 3.  Right approach

Take any away and the project will likely fall over.

Benefits we have seen from applying this simple top-down methodology

ü  Successful implementations of FPM systems –  On time, on budget, on scope

ü  Get the right numbers out faster to the people that need them –  With less pain and effort –  With reduced costs

ü  Happy users –  High staff satisfaction in both Finance and the business

ü  Provide far more time for analysis… –  Finance to become the partner as intended proactively introducing

opportunities to the business

4. Summary and Q&A

Financial Performance Management

Financial Performance Management

Approach to simplifying FPM…

•  Perform a self assessment scoring each process for effectiveness and efficiency out of 10 and rank them

•  Prepare roadmap and business case to get to 10s

•  Implement the unified vision in stages

•  Combine three ingredients for a successful project:

•  Right technology – Pick unified to keep it simple •  Right people – CIMA members ideal to design solution •  Right approach – Top down from outcomes and outputs

Case Studies…please email me for copies

Opinion Leader Lunch Series…www.cfogrp.com/events/

Benchmarks…please email me for details

10

Questions?

Thank You!

geoff@cfogrp.com

Simplifying Financial Performance Management

Geoff Noble 25th June 2014 at 6.30pm

Prepared by CFO Group for CIMA members