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A KeyOn research report

Planning and budgeting systems

The use, the do’s and the don’ts

The roadmap for effective financial planning

Planning and Budgeting SystemsThe use, the do’s and the don’tsThe Roadmap for Effective Financial Planning

Martin Daudey, KeyOn Partner

Fabien Lennertz, KeyOn Consultant

September 2008

A KeyOn research report

32

Contents ManagementSummary 3

1 Introduction 4

2 PlanningandBudgetingSolutions 62.1 Planning and budgeting systems in use 62.2 Planning and budgeting systems support 72.3 Best-of-breed or unless solutions 8

3 CostsandBenefitsofPlanningandBudgetingSystems 10

4 TheChallengeofCustomization,RedesignandIntegration 114.1 Extension and integration 114.2 Horizontal and vertical integration 12

5 BridgingtheGapbyAvoidingPitfalls 14

6 TenGoldenRules 16

References 18

Abbreviations 19

Management SummaryMany organizations struggle with the implementation of their planning and budgeting systems. Even when the implementation is completed, organizations seem to have difficulties in using their systems in an effective and efficient way. This paper describes the characteristics and the use of planning and budgeting systems in large organizations. It is based on key findings of research that was conducted amongst the members of the Planning and Budgeting Systems Network, and on the broad experience of the KeyOn consultants. It provides an answer to the following research question:

Despite the increase in the use of dedicated planning and budgeting software, like Hyperion Planning, Cognos Planning and SAP planning modules, spreadsheets still play an important role in most organizations. It seems unthinkable that spreadsheets will completely vanish, at least within the next decades. CPM vendors continue to offer planning and budgeting solutions with a high degree of Excel integration.The support of planning and budgeting systems can be provided by different parties: IT department (internal), consultants (external) and software vendor (external). A lot of organizations are quite happy to use a combination of different forms of system support, but their own IT department must be involved in one way or another.

The main sources of planning and budgeting costs are project man-hours and time spent on the planning process. Data integration is another high cost factor in the total planning and budgeting costs. The respondents are strongly convinced that the benefits of planning and budgeting tools outweigh the costs: one number planning, one way of working and clear insight in planning activities.

Furthermore, the survey indicated the companies involved are mainly focused on customizing their planning and budgeting system rather than redesigning their business processes to fit the planning and budgeting system into their organization. The integration challenges of a planning and budgeting system largely depend on the extent of diversification. The use of an appropriate parenting style can help tackling the horizontal and vertical integration issues. The survey pointed out that there is still enough room for improvements regarding the integration of planning and budgeting systems within their organization.

Pitfalls when using planning and budgeting systems mostly involve master data management (MDM) issues. The four most common pitfalls are: incorrect translation of system model into data model, no centralized master data, a lack of data integrity and unclean data.

The ten golden rules – described in Chapter 6 – can be summarized as follows: Assign an experienced project leader who communicates success. Create multidisciplinary project teams. Build in sufficient flexibility in order to handle unavoidable organizational changes. The planning processes must be clear before selecting, designing and implementing the system incrementally. The new systems must be compatible and integrated to your current systems to increase consistency, speed and communication. Both horizontal and vertical integration will improve your overall business performance. The quality of the process cycle can be improved by early user involvement. Recent research stresses that inefficient systems should be perceived as an opportunity to improve instead of a weakness (Lemmens, Tullemans & Rüling, 2006). In many organizations planning and budgeting systems do not provide the competitive edge that is planned for. Planning and budgeting is often regarded as time consuming and often does not produce the added value as expected. In addition, all the time spent on planning and budgeting, is not spent on

Which recommendations can be given to improve the implementation and the use of planning and budgeting systems in large organizations?

44

directly running the business. Does this mean that planning and budgeting should not be prioritized? This paper will outline the characteristics, benefits, costs and pitfalls concerning planning and budgeting systems. It will conclude with ten golden rules that can help you improve the implementation and optimal use of successful planning and budgeting systems.

Objectivesandresearchquestion

This research has been executed to accomplish a number of objectives. The objectives of this research can be formulated as follows:

• To give a broad overview of the use of planning and budgeting systems – as a result of the interview findings – within leading organizations;

• To identify the factors that affect the performance and profitability of planning and budgeting systems;

• To formulate and substantiate recommendations to make the implementation and exploitation of planning and budgeting systems in organizations more effective and efficient.

The research question, which is deducted from the objectives, is the following:

Scopeoftheresearch

The scope of the research consists of the systems that support the financial planning processes, the budget and financial forecasting. This paper will identify how organizations use and implement their planning and budgeting systems. Furthermore, the focus is on their integration with other systems, the factors which affect the performance and profitability of planning and budgeting systems, and the ten golden rules.

5

1 IntroductionResearchprocessThis research is based upon a survey that was conducted amongst the members of the Planning and Budgeting Systems Network, which is facilitated by KeyOn Planning. The members of the Planning & Budgeting Systems Network are large-sized, for-profit organizations realizing a minimum of 200 million Euro in sales revenue annually. Most organizations are active in the industrial, food and high-tech sectors, but organizations active in the services and building industry have also been included in the survey. The survey questions were based on scientific research and the experience of the KeyOn Planning consultants. The survey consisted of several structured face-to-face interviews. The complete overview of network members can be found on the next page.

StructureofthispaperThe structure of this research paper is as follows. Chapters 2-5 contain the most important interview findings. Chapter 2 discusses the use and support of planning and budgeting systems, and the total solution of which the planning and budgeting system is a part. Accordingly, the costs and benefits of planning and budgeting systems are elaborated in Chapter 3. In Chapter 4 the challenge of customization, redesign, integration and alignment is outlined: organizations have to make decisions regarding customizing the software or redesigning business processes. Both influence the integration and alignment of the planning and budgeting system with the other systems in use. Chapter 5 discusses the pitfalls with which organizations have to cope when implementing and using planning and budgeting systems. Based on the experience of the KeyOn Planning consultants and the outcome of the survey, the paper presents recommendations and guidelines – in the form of ten golden rules – for the successful implementation and use of your financial planning and budgeting system in your organization.

The complete Planning and Budgeting Systems Network consists of the following companies:

Which recommendations can be given to improve the implementation and the use of planning and budgeting systems in organizations?

6 76

In this chapter the planning and budgeting solutions, which are used across different organizations, will be outlined. System support and optimization play an important role in making improvements. Since the type of system solution can affect the performance of the planning and budgeting solution, we will determine the type of system solution (ERP, best-of-breed or in-between).

2.1 Planningandbudgetingsystemsinuse

As we all know Excel is an important tool which is used throughout every single company. In Figure 1 we can see that 95% of the respondents mentioned Excel as a tool being used for planning and budgeting activities. One company uses Excel as the main tool for planning and budgeting (and is extremely satisfied with its current way of planning and analyzing). However, most companies use Excel to support their planning and budgeting system. Cognos Planning is the most frequently used best-of-breed software for planning and budgeting activities. Among the ERP vendors, SAP is the most popular vendor of planning and budgeting solutions. Especially the modules SAP BPS (Business Planning Solution) and SAP BW (Business Warehousing) are used in planning and budgeting.

Research indicates that many company spreadsheets contain errors, but most spreadsheets often still hold important financial data.

Why do companies still use Excel for their planning and budgeting activities when sophisticated planning and budgeting solutions are out there?“Spreadsheets, like Microsoft’s Excel, are a great tool for manipulation and analysis and at some point spreadsheets have grown, often unnoticed, from simple analysis tools into complex spreadsheets that are used as a complete planning system” (Uiterlinden, 2008).

Excel offers more flexibility than most of the planning and budgeting software from large software suppliers. The functionality offered by the latter is often so inflexible that companies are unable to rely completely on an advanced planning and budgeting system.

Figure 1: Planning & budgeting systems in use

Although spreadsheets have significant disadvantages regarding version control, authorizations, decentralization, and built-in checks, the benefits seem to outweigh the shortcomings. Spreadsheets are known for their flexibility, usability, what-if analysis and presentation graphics. Moreover, spreadsheets are often used in informal organizational environments; spreadsheets can easily be completed, validated, corrected and emailed across business and IT users throughout the entire organization.

However, the survey indicated that today’s planning and budgeting systems are also known for their increased flexibility and their ease-of-use (see Figure 2). In addition to these, planning and budgeting systems have an edge on spreadsheets in terms of version management and data integrity. Whereas business users often create multiple workbooks with their own version of reality, planning and budgeting systems have one version of reality which applies to the whole organization.

Figure 2: Characteristics of planning and budgeting solutions

Integration with Excel is the characteristic with the highest score, which highlights the fact that most organizations only use planning and budgeting solutions in combination with a spreadsheet. Analyses, reports and charts made with planning and budgeting systems still do not satisfy business users. That clarifies why the planning and budgeting systems are strongly linked to Excel.

2.2 Planningandbudgetingsystemssupport

Organizations prefer their planning and budgeting systems to be supported by their own IT department to their being supported from outside the company’s environment: consultant support and system vendor support (Figures 3, 4). However, Figure 3 shows that it is very common that organizations are not reluctant to use different forms of system support. Consultant support and system vendor support for planning systems are often indispensable, since most companies do not have sufficient knowledge and experience of system support. This means that support from outside the organization is encouraged as long as internal IT people are involved in one way or another.

Figure 4: Single or multiple system support

(current status)

Most planning and budgeting systems are being optimized continuously or on a yearly basis (Figure 5). The frequency of optimizations depends to a large extent on the context or environment in which an organization operates. Organizations in dynamic environments are characterized by goal diversity and flexibility. Goal diversity increases the output categories for which information needs to be collected and processed by the organization, thereby increasing both complexity and uncertainty (Peterson, 2001). Organizations with a dynamic and complex strategic context generally need to optimize their systems at a higher pace than organizations in stable and non-complex environments.

2 Planning and Budgeting Solutions

1 SAP has decided to keep developing the product from OutlookSoft, which is now integrated with SAP Business Planning and Consolidation (SAP-BPC).

Excel

Hyperion Planning

Hyperion Fin. Mt.

Cognos Planning

SAP BPS

SAP BW

Infor MPC

BO Planning

Outlooksoft

JDEdwards

0% 20% 40% 60% 80% 100%

Integration with Excel

Version control

Flexibility

Data integrity

User friendliness

Consolidations

Formulas

Analyses & Reporting

Low error prone

Clear and useful charts

1 2 3 4 5

Internal support of IT peopleConsultant supportIT people from system supplier

25%

39%

36%

Figure 3: Forms of planning and budget-

ing systems support (current status)

All forms of supportInternal support onlyInternal & consultant supportConsultant & supplier support

47%

13%

33%

7%

8 9

Figure 5: Frequency of system optimization

2.3 Best-of-breedorunlesssolutions

Most companies have implemented an ERP solution. Figure 6 shows that 65% of the respondents use SAP as their enterprise-wide solution. Keep in mind that some companies use more than one ERP solution.

Figure 6: Current use of ERP systems

The next chart (see Figure 7) shows the distribution of planning and budgeting solution approach found in the survey, i.e. whether it is a best-of-breed solution, part of an enterprise-wide implementation (i.e. a module as part of a total solution) or a combination of both. The largest slice of the pie is known as an in-between solution, which means that companies prefer to use a company-wide solution in combination with a best-of-breed planning and budgeting solution.

Figure 7: Approached of planning and budgeting solution

Second best is the total solution. Companies that make use of an enterprise-wide solution tend to complement their solution with modules (e.g., a planning and budgeting module) from their own software supplier.Many companies use an unless strategy (e.g., SAP unless…, Oracle unless…) which means that they use all the standard software that is available from their main software supplier, unless there is a solution from another vendor that meets the company’s requirements in a much better way.A lot of research has been performed about what kind of approach is preferable. In this research we will not valuate the different approaches.

Oracle

SAP

JDEdwards

Navision

Other

0% 10% 20% 30% 40% 50% 60% 70% 80%

best-of-breedtotal solutionin-between

25%

37%

38%

yearlyquarterlycontinuous

8%

46%

46%

10 11

4 The Challenge of Customization, Redesign and IntegrationWhere there is a gap between business processes (or business goals) and planning and budgeting systems, companies must choose between either aligning the software with the business process or redesigning the business process itself. A lack of flexibility in redesigning business processes often results in the modification or extension of business planning solutions, resulting in either customization or integration challenges (Aberdeen Group, 2007).The survey indicates that organizations mainly focus on customization of their planning and budgeting system rather than redesigning the business processes in order to have the planning and budgeting system fit in their organization (see Figure 10).

Figure 10: The extent of customizations and redesigns

(1 = not necessary, 5 = definitely necessary)

4.1Extensionandintegration

Companies are having trouble integrating different systems solutions. This cannot come as a surprise due to the complex nature of IT departments that are catering for the needs of various business units, and the proliferation of enterprise applications. Large companies often have more than one ERP solution and small companies running a single ERP solution are likely to have additional applications which ideally would be integrated with ERP. Where an ERP solution does not completely satisfy these needs, companies choose to implement best-of-breed or an enterprise-wide solution. Thus, instead of customization issues, these companies create a new challenge: integration.

Most of the companies that participated in this research have plans for changing or extending their planning and budgeting systems in the near future. This also results in new integration and interoperability challenges. The complexity of integration that comes along with the extension of the planning and budgeting solution depends on the answers to the following questions:

• Which approach to solution (best-of-breed or unless) is currently used?

• How tightly must the functions and processes be integrated?

• How much data must be shared or replicated?

• How much duplication exists between the current planning and budgeting solution and the extensions?

• If data must be shared and replicated by two or more applications, which application is the main source of the data?

• Do the architectures of your planning and budgeting solution and possible extensions easily support integration and interoperability?

Let’s have a closer look at the integration of the planning and budgeting systems of our respondents. Generally speaking the respondents are reasonably satisfied with the integration and interoperability of their planning and budgeting systems within the business (rated 3 on a 5-point scale). Each company’s information system should support both proprietary and shared data. Since it is needed to manage the company, the proprietary data would be accessible only to those employees who have legitimate internal business needs. The shared data should be available through appropriate information interfaces to customers, logistics suppliers, or any other party needing access, through a contract or standard to which all

Customization

Business process redesigns

1 2 3 4 5

The origin of most of the planning and budgeting costs consists of project man-hours and time spent on the planning process. Data integration is another important cost factor when determining the total planning and budgeting costs (Figure 8).

Figure 8: Cost perception

Hardware and software have a relatively low cost perception which could mean that companies are initially inclined to purchase sophisticated planning and budgeting solutions without taking into account that other factors (e.g., maintenance fees and license costs) play an important role in making the planning and budgeting solution profitable in the long run.

Planning and budgeting systems should give benefits as well. The top benefit that almost every respondent of the survey agrees upon when using a planning and budgeting solution is looking at the same number (See figure 9). Information is often scattered throughout the organization, especially when you are using multiple spreadsheets with a lack of centralization, it is inevitable that you are not always looking at the same number. When more than one system is used, the danger lies in the different ways calculations are made. Regarding decentralized systems it frequently

occurs that not every business unit applies the same definitions and formulas. Different systems can lead to different numbers. In this case data is often not clean enough for analysis, making it difficult to produce valid analyses and optimize the decision-making processes.

Figure 9: Benefit perception

The more accurate your data is the more precise your planning and budgeting figures will be. You will actually be able to improve the prognosis for the future.

The second most appreciated benefit is one way of working. Most of the respondents have indicated that the use of a planning and budgeting system leads to a standard way of working. Authorizations, rules, restricted functionality and guidelines can make planning and budgeting systems more effective and can help to avoid problems. The third benefit that companies acquire is that of getting clear insight into planning activities.

Finally, the research indicates that 65% of the respondents were strongly convinced that the benefits of their current solutions outperform the costs of planning and budgeting systems.

3 Costs and Benefits of Planning and Budgeting Systems

Man hours (project)

People’s time

Data integration: Initial Set-up

Functional Application Support

Technical Application Support

Data integration: Keep Up-to-date

Software costs: Initial

Hardware

Software costs: Maintenance fee

1 2 3 4 5

Looking at the same number

One way of working

Clear insight in planning

Clarify Corporate goals

KPI Reporting

Lower business risk

Focus on Key Value Drivers (KVD)

1 2 3 4 5

12 13

Looking at decision-making in terms of planning and budgeting systems, most of the companies involved in this research focus on departmental (or business unit) integration instead of centralized integration (see Figure 12). Organizations are often fractured by independent actions of the business units. This can be clarified by the fact that the organization has a number of separate business units which have systems that have been integrated specifically for the benefit of their own business. On the other hand, business units are aligned and working towards the same business. Centralized integration promotes systems that are integrated throughout the entire organization, which forms a coherent solution.

Figure 12: Centralized vs. decentralized system integration

Centralized integrationDepartmental/BU integration

44%38%

parties agree. By using advanced technology that supports system integration between companies and data sharing, one can increase the resource utilization and thus reduce costs.

Figure 11 shows that most companies do not have planning and budgeting systems that are integrated with the systems of their clients and suppliers.

Figure 11: Inter-organizational system integration

4.2Horizontalandverticalintegration

At operational level, sales plans, logistic plans and production plans lead to insight and alignment in short and mid-term activities. This is called horizontal or functional plan integration. This operational planning is the basis for financial planning (budget or forecast) on tactical level, which provides input for validating the strategic plans for the next year. The alignment described here can be defined as vertical plan integration. Planning activities can be found at every single level. Who the responsible person or echelon is, depends on the parenting style of an organization (Geelen, Tullemans & Aertsen, 2006). The parenting style defines the way of cooperation between the different management levels and the way in which the planning processes must be integrated, either vertically or horizontally. The following parenting styles can be distinguished:

•Strategicdevelopment;

•Strategiccontrol;

•Financialcontrol.

The choice of a specific style depends on the extent of diversification. When there is no or hardly any diversification, the strategic development style can be applied. Corporate headquarters are able to oversee the complete operating field and have sufficient insight into the activities of all the different divisions. Whenever an organization is characterized by a high level of diversification and major internal differences regarding the divisional activities, financial control or strategic control should be chosen.

The parenting style also sets the differentiation of decision-making. Conflicts between business and IT managers are not uncommon in IT decision-making. When all the authority for decision-making rests at a single point in the organization – and is ultimately in the hands of one person or one group -, the structure is centralized. When decision-making is dispersed throughout the organization, the structure is decentralized.

Lawrence and Lorsch (Lawrence & Lorsch, 1969) were among the first to recognize the simultaneous and complementary nature of rationality and politicality in strategic decision-making:

A hybrid model of decision-making is the dominant form in many organizations; the IT infrastructure is directed by corporate IT management, and local business applications are managed by business or IT management. The differentiation of IT decision-making is about the actual place of IT decision-making. Lawrence and Lorsch (according to Peterson, 2001) define differentiation of IT decision-making as:

“We view strategic decision-making as a social process in

which conflicting viewpoints and information about the market,

technological and economic issues are brought together and

discussed until a decision is reached.”

“The state of segmentation of the organizational system

into subsystems, each of which tends to develop particular

attributes in relation to the requirements posed by the relevant

environment. This includes both the formal division, as well

as, behavioural attributes of the members of organizational

subsystems.”

NoYes

38%

62%

14 15

4.Uncleandata

The usefulness of data is often hampered by the existence of entities that are no longer used by the organization. Think of phased-down products that still continue to be present in most of the systems. This also happens the other way around: systems are not updated with the latest data, definitions or formulas, although they are already available. Unclean data can best be tackled by the use of extract, transform and load (ETL) and cleansing software. ETL enables companies to import data from multiple sources, reformat and cleanse the information, and accordingly load the information into another database, data warehouse or other operational system. A disadvantage of ETL is that your customer records are only as accurate and current as the last batch load.

According to Ian Ahern (Ahern, 2006) the ETL process would be the solution when business users maintain all the information that the company needs in an enterprise-wide software system. It would be sufficient to move the data around and run cleansing processes to ensure that all the data is clean and consistent. In the real world, the data that is needed for CPM may not solely reside in the company’s operational systems. A lot of it is in the heads of the business users, in spreadsheets, and in departmental (decentralized) business solutions.

It is remarkable that three of the top four pitfalls involve master data management (MDM) related issues. MDM allows data from various sources to be analyzed as if it existed in a single system. MDM makes sure that master data is validated, matched, corrected, enhanced, and cleaned in accordance with standard corporate policies. The voting round of the first Planning and Budgeting Systems network emphasized the importance of MDM and the corresponding issues.

Planning and budgeting systems serve business organizations by providing information for decision-making. In order to progress from unstructured data to useful information, companies need to bridge the gaps in between. One way to ‘bridge’ the gap is by avoiding it.

Along with the benefits of using planning and budgeting systems there are pitfalls with which companies have to cope. The survey asked the respondents about their most important pitfalls. Here is the top 4 of the most common pitfalls to avoid:

1.Incorrecttranslationofthebusinessmodelintothesystemsolutionanddatamodel

A common problem is the translation of the business model into the data model.

Figure 13: The V-model

This problem can best be explained with Figure 13. The V-model (V for verification and validation) is a systems development model designed to facilitate the understanding of the complexity associated with developing systems. The development process progresses from the top left of the V towards the right, ending at the top right. On the left, moving down along the V-shape, the business analyst defines business requirements, application design parameters and design processes. At the base point of the V the code is written. On the right, testing and debugging is done. Unit testing is carried out first, followed by bottom-up integration testing. The extreme top right of the V represents product release and ongoing support.

You can imagine that incorrect or incomplete business requirements affect the rest of the flow. The sooner inaccuracies and misunderstandings are cleared away the more time and effort will be saved when the new solution is finally released. One of the barriers which undermine a correct translation is the fact that that the actual translation remains in the hands of the IT department, which implies that the business is regularly underrepresented. The misalignment between business and IT recurs in every single organization. After all, which business has not side-stepped the IT department in order to set up its own spreadsheets to manage and report on the real business (not the one the IT department seem to imagine is out there)?

2.Nocentralizedmasterdata

Data from many resources is consolidated into central databases called data warehouses, data hubs, or data marts. These repositories feed enterprise applications in contact center management, sales and marketing, customer support, business intelligence, corporate performance management, governance risk compliance, and other key areas (Kobielus, 2007). However, that ideal has rarely worked out in reality. In most organizations master data is distributed among various applications and databases.

3.Lackofdataintegrity

Despite the advanced functionality of planning and budgeting systems, organizations often continue to have data integrity problems, mainly because of overlapping systems and various data marts. As we saw in Chapter 3 we are not always talking about the same number. The origin of the problem is encapsulated in the existence of different numbers that refer to the same situation but with different data definitions. The data integrity problem is exacerbated when data is managed across different software vendors. Also think of the use of an ERP solution where it is - in general - easier to acquire a higher level of integrity of data than when best-of-breed solutions are used.

5 Bridging the Gap by Avoiding Pitfalls

Code

Requirements

Logical Design

Project activity flow

Physical Design

Program Spec

Acceptance Test

System Test

Integration Test

Unit Test

Testing design baseline

16 17

6 Integrateplanningsystemshorizontallyandvertically

Make sure there is sufficient integration between the new system and the existing IT system and planning processes. As we explained in Section 4.2 there are 2 forms of integration.

HorizontalintegrationWithin any organization there should be one joint plan or at least different aligned business and IT plans. With this horizontal or functional integration the processes of different departments can be synchronized. Regarding horizontal plan integration, decisions are made which are in line with the company’s overall direction.

VerticalintegrationIn the strategic planning process targets are usually set. These targets are communicated top-down to lower levels of the organization. In the opposite way a so-called bottom-up budget is prepared. Combining top-down and bottom-up plans will lead to a final budget. The parenting style and organizational culture determine whether the top-down or bottom-up approach is dominant in the vertical plan integration.

7 IntegrateyourplanningsystemwithexistingIT

Data integration is a key aspect for the success of implementation and use of a planning and budgeting system. In many organizations complex situations appeared due to the numerous inter-connected systems. This is often the result of organizations over-focusing on the decentralization of decision-making. It is still better to have the systems connected than to leave them operating separately. The new system must be compatible and connected with the older systems on which it is based, in order to enable data integration. Data integration makes sure that various functions are consolidated into a unified hub that sits between – and works in conjunction with – a company’s current data quality systems and enterprise applications, querying and pulling data from enterprise systems. No data integration simply means a lack of performance. An audit of the present system and infrastructure can initiate the improvement of planning system integration.

8 Involveprocesssupportorganizationinanearlystage

Many planning and budgeting systems are suitable for internal process support and maintenance. Planning processes are subject to change, which results in regular optimizations and maintenance of planning and budgeting systems. The sooner the process support organization is involved in the implementation phase, the sooner it acquires skills and insight that enable it to support the planning and budgeting systems.

9 Communicatesuccess

Start communicating success even in the early stages of projects. Michael Hammer (Hammer, 2001) defines in The Agenda the 20-60-20 rule. This rule is based on 20% of the employees who encourage the upcoming changes, 60% who have no opinion, and 20% who are reluctant. There are numerous reasons why people discourage the introduction of a new system. Resistance against the adoption of a planning and budgeting system can be diminished when success is communicated step by step to all the interested parties. This can easily be combined with the step-by-step implementation which has been presented previously. Successes will encourage the project members and will increase the chance of succeeding.

10Selectaplanningandbudgetingsolutionthatsuitsyourbusiness

Selecting a planning and budgeting solution is growing in importance. Its success relies on correctly assessing the quality of the selected components. Buying a new planning and budgeting package or upgrading one is an expensive proposition under any circumstance. The real cost of buying such a package includes the annual maintenance fees, the training time, and the hassles of getting support; it is therefore much more than just the initial purchase price. Selecting the wrong planning and budgeting solution presents more than cost issues. It can negatively affect morale – resulting in resistance (golden rule 9) – and productivity, contributing to poor client service, poor planning results, low forecast accuracy, and lost business.

6 Ten Golden RulesIn this chapter the ten golden rules for successful implementation and use of planning and budgeting systems are outlined. Some are general guidelines for successful system implementation, others are specific rules that will guarantee quality, speed and efficiency for financial planning and budgeting systems.

1 Createmultidisciplinaryteams

To avoid misunderstandings and wrong interpretations between business and IT departments, we would strongly recommend setting up multidisciplinary project teams in order to increase functional integration. These teams often consist of a restricted number of participants. Some of these, preferably the project members, fulfill different roles and have knowledge of and experience in different fields, i.e. finance, marketing, sales, supply chain, manufacturing, research and development, and IT. Physical co-location stimulates interaction and coordinated actions, and affects the ability to achieve integration (Peterson, 2001). The mechanism enables you to link your knowledge with other employees that work throughout the entire organization. Furthermore it will increase the shared understanding within and between different departments.

2 Assignanexperiencedprojectleader

Assign a strong and experienced project leader. Many planning projects fail due to an inexperienced project manager. The project manager should have sufficient knowledge about the complexity of the problem and the related projects. The project leader must be the person responsible for a clear project plan which is agreed upon by all the parties involved. A solid project and action plan consists of clear deliverables, sub-projects, the responsible person(s) and time scheme. A clear plan will prevent endless discussions during and after the project about what should be finished within which timescale.

3 Useanincrementalapproach

Implement your planning and budgeting system incrementally. Pitfall 1 in chapter 5 indicated the importance of a step-by-step approach. Implement the planning system step by step towards the end goal. It will ensure that your system can be deployed quickly; allowing users to gain acceptance gradually as more functionality is added.

4 Buildflexibilityintoyoursystemsolution

Even if the business requirements are completely clear when starting to build in the systems solution, it is strongly advisable to build sufficient system flexibility. Changes in business requirements arise rather frequently and must therefore be expected. Due to acquisitions, divestments, changes in regulations and changes in strategic focus, the structure of the company will change. These changes will have an influence on the planning processes and consequently on the system. Your company and also the planning system must have the ability to quickly implement these changes.

5 Systemfollowsprocess

Do not start with the implementation of the system until your processes are sufficiently clear. Too often improvements in planning processes – in the form of system implementation projects – commence from a system perspective with the intention to induce organizational changes as well. First design and align your processes and afterwards choose and implement the appropriate system.

18 19

AbbreviationsCPM Corporate Performance ManagementERP Enterprise Resource PlanningETL Extract, Transform, LoadMDM Master Data ManagementRFI Request For InformationSMART Specific, Measurable, Achievable, Realistic, Timely

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