What’s holding you back? Common obstacles and how to overcome them

Here are four issues that are holding back many finance organizations and possible solutions.

Problem 1

You rely too much on spreadsheets.

Spreadsheets are a popular tool with finance and business professionals. But although they’re useful for individual analysis, they have major shortcomings when it comes to large-scale planning, budgeting, and forecasting and manipulating large data sets.

Version control is one major challenge. While collaboration is essential to good planning, emailing spreadsheets back and forth almost guarantees that errors will be introduced. Historically, 88% of spreadsheets have been found to contain some type of error, leading to unreliable plans and conflicting versions of the truth.⁷ Many management meetings have spent more time debating whose numbers are correct than deciding what course of action is best.

Manual work can add hours or even days of additional work, leading to unnecessarily long planning cycles. In fact, many finance and operations teams spend as much as 60–70 percent of their time on data collection and validation instead of on value—added analysis to support the business.⁸

Recommendations:

• Automate routine processes in order to minimize errors and increase the timeliness and reliability of plans, budgets, and forecasts.
• Use automation and built-in workflws to enable better collaboration across departments and geographies in real time.
• Adopt a complete planning and analytics solution capable of providing a single version of truth.
• Reduce the time spent on data collection and validation, and devote more time to value-added analysis.

Problem 2

You lack adequate insight into what’s driving your business.

“Many finance chiefs find themselves data-rich and information-poor, with relevant information residing in disparate systems.”⁹ Sound familiar? It probably does, whether you’re in finance, operations, or almost any area of the business. When business drivers aren’t modeled consistently across the organization, the result is an inability to gain strong insights into business drivers and the critical connections between operational and financial data.

Siloed planning processes, characterized by a lack of collaboration and established workflows, can lead to a disconnect between financial and operational plans. There’s an inability to drill down to determine the root causes of problems or to understand the full story behind the data.

Recommendations:

• Coordinate planning across business functions to show how changes ripple through the organization, e.g. how sales affect production, production affects headcount, headcount affects HR training budgets, etc.
• Incorporate multi—dimensional analysis of financial and operational data to uncover insights into the drivers of revenue, profit and cash flow.
• Include non—financial data in your financial planning and analysis (FP&A) process to identify the underlying business and operational factors behind the numbers on the balance sheet.

Figure 2. Planning occurs in every business function — not just Finance. Integrating business plans across the organization increases agility and drives faster, more informed decisions.

Problem 3

Your forecasts are based more on “gut instinct” than on concrete data.

Experience and “gut instinct” will always have a place in decision making. But when the stakes are high, you want that hard-won instinct and experience to be informed by as much concrete data as possible. Just as “fortune favors the prepared mind” in science, good fortune in business favors the well-informed decision-maker.

Today, many decision-makers rely too much upon disconnected spreadsheets, simple extrapolation forecasting methods and rules of thumb. The decision-making process suffers from a lack of integration with modern business intelligence (BI) and predictive analytics tools. Forecast accuracy suffers, and with it, the ability to anticipate market trends and take action with confidence.

Recommendations:

• Incorporate predictive demand planning directly into the planning process to improve forecast accuracy.
• Adopt BI and predictive analytical tools that use advanced statistical modeling and predictive algorithms based on large, historical datasets to create more reliable forecasts.
• Use multidimensional “what-if” scenario modeling to test assumptions, understand root causes and compare alternative courses of action.

Problem 4

You can't react quickly enough to rapidly changing business conditions.

Many organizations still rely on an annual budgeting process, even though research and experience have shown that this practice outlived its usefulness long ago.

Annual budgets are fraught with politics and efforts to “game the system.” Modifications aren’t quick or easy, so your planning system often can’t keep up with changing market conditions and shifting customer demand. Lack of real—time insight into performance metrics leads to reactive instead of proactive decision making.

Recommendations:

• Institute continuous planning and rolling forecasts so you can adapt readily to market trends and respond appropriately ahead of your competitors.
• Introduce agile planning methods that enable organizations to experiment, fail fast and develop a culture of innovation.
• Build dynamic, real-time forecasts that are flexible enough to be modified quickly as business needs change.
• Connect operational tactics with financial strategies so you can allocate resources effectively in response to competitive threats and market opportunities.

Figure 3. Rolling forecasts enable organizations to adapt to business conditions as they evolve, rather than relying on out-of-date assumptions. This diagram shows a typical 5-quarter rolling forecast.

IBM Planning Analytics: Redefining what’s possible in planning

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How can you put these recommendations into action? With IBM Planning Analytics. Deployable on cloud or on premises, IBM Planning Analytics redefines what your organization can accomplish. It automates manual processes for planning, budgeting, forecasting, and reporting. Yet it goes beyond just improving process efficiency by providing the speed, agility and foresight you really need to compete — and succeed — in today’s constantly changing business environment.

IBM Planning Analytics helps you optimize your approach to business decision making. It can help you answer questions such as, “How can I meet my revenue targets and grow market share while keeping costs in line?” “What are my key business drivers, and how are they connected to each other?” “What financial impact will this decision make?” IBM Planning Analytics provides an integrated view of performance so you can create more accurate forecasts, identify potential performance gaps before they occur, and make resource allocation decisions quickly and intelligently. Using multidimensional modeling and scenario analysis, you can drill down into your data to examine the ripple effects of alternative courses of action and understand how your decision will ultimately impact the bottom line.

IBM Planning Analytics offers all areas of your business — finance, operations, HR, sales, marketing, supply chain, and more — the ability to solve problems today and respond to competitive pressures with agility tomorrow.