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Application Requirements For Rolling Forecasts Asmi 2

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Ben Lamorte
Ben Lamorte

The document summarizes the keynote presentation by Alight Planning at the ASMI conference on the application requirements for rolling forecasts. The presentation covers the benefits of rolling forecasts over traditional budgeting and highlights three key requirements for effective rolling forecasts: 1) robust scenario analysis capabilities to plan for different futures, 2) driver-based modeling to reduce direct inputs, and 3) integration of actuals to continually update the plan based on performance. A special guest speaker, Rand Heer, also shared his experiences with budgeting and forecasting at Clorox.

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Application Requirements for Rolling Forecasts By Alight Planning Ben Lamorte, VP Business Development Rand Heer, CEO Presented at ASMI Conference San Diego, CA April, 2010
2-Hour Video Workshop on Rolling Forecast Requirements Highlights of 4-Hour Conference Workshop http://www.alightplanning.com/Workshop/Requirements-for-Rolling-Forecasts/Video.html Books and Websites Managing with Rolling Forecasts www.johnstretch.com/book/rollingForecast.html Future Ready www.futurereadybook.com Visit Our Website www.AlightPlanning.com ASMI Private Demo Tuesday Demo Room Reserved To Sign Up, Contact Ben Lamorte Resources for Rolling Forecasts
Ben Lamorte Business Activities Vice President, Business Development, Alight Planning Principal, Decision Consulting (Adobe, Kaiser) Manager, Business Development, planetrx.com Consultant, APM/CSC Healthcare Todays Speaker Publications Author of 2 technical research papers, American Mathematics Society Co-author of planning white papers Education BS Math & Mechanical Engineering, University of California, Davis MS degree Stanford University, Management Science and Engineering
Requirements for Rolling Forecasts Todays 45-Minute Agenda 30k Foot: Why Rolling Forecasts? Budgeting Vs Rolling Forecasts 5k Foot View: Summarize Checklist #1: Scenario Analysis Special Case Study: Rand Heer on Budgeting & Forecasting at Clorox Not doing the 100-Foot View Today: In-Depth Analysis of Application Requirements for Rolling Forecasts Requirement #1: Scenario Analysis Requirement #2: Driver-Based Modeling Requirement #3: Integrated Actuals
At what point do you expect your annual budget targets to become obsolete? SOURCE: Business Finance Magazine
SOURCE: APQC / BBRT Research How Much of Planning Adds Value?
Budgeting Rolling Forecasts Timing Frequency Once a year Oftenevent driven Cycle time Months/weeks Days/hours/near real time Time horizon Fiscal year Rolling; beyond The Wall ______________________________________________________________________________________________________________________ Process Iteration cycles One version at a time Multiple scenarios at one time Participants Manyall managers Fewerfinance; key managers Collaboration Submission/approval Near real time as possible Deliverables Reports in binders Decisions; action __________________________________________________________________________________________________________________________________ Data Type Financial Financial & operational Inputs Many direct inputs Fewer direct; driver-based Measurement Variances Relative change; trends Level of detail Precision driven Relevant; whats material Budgeting Vs Rolling Forecasts
Robust Scenario Analysis You cant predict the future, especially in todays economy But you can construct scenarios that let see alternate futures You can evaluate best courses of action under different conditions Driver Based Modeling Reduce direct input data volumes Increase modeled elementsoperational/driver based planning Integrating Actuals Rolling over actuals in plan filesapples to apples Using actuals to understand trendsfocus on rates Using actuals as an activity driver/source for plan data 3 Key Requirements for Rolling Forecasts
Scenarios In Spreadsheets Separate workbooks is the principal mechanism A nightmare for maintenance & comparisons Scenarios In Budgeting Applications Manage to budget versions aka version control Process control: who changed that number? whats approved? Compare versions at the product/cost center/account level Scenarios In Planning Applications Reporting functionality Maintenance issues Performance [meeting the need for speed] Requirement #1: Robust Scenario Analysis
Versions Are For Budgeting Create and approve one version at a time Version control: who changed that number? whats approved? Once a new version is approved, prior versions are discarded Scenarios Are Different from Versions X X Budget Version A Budget Version B Budget Final
Forecasts = Scenarios (lots of them!) Assessing riskBE/Hi/Low ranges Evaluating alternative strategies/programs Managing uncertainty external events Actionable knowledge/decisions Go/no go decisions on programs Reallocate resources Change underlying processes Manage timing What You Can Do with Scenarios
Be Prepared Develop Situational Awareness The Goal: Be Prepared
What are the three scenarios that your company needs to be analyzing now as part of your planning process? What are the three most important decisions your company will be making over the next 12 months? Questions about Scenarios
Reporting functionality checklist: Compare any two scenarios side by side with variances Compare any two scenarios with variances at all levels of detail Line up scenarios side by side at all levels of detail Examples Scenario Analysis: Reporting
Maintenance issues Cumbersome maintenance results in errors Time consuming maintenance kills the use of scenarios Maintenance checklist Create a new scenario by copying any existing scenario Make value changes across scenarios in one operation Make structure changes across scenarios in one operation Examples Scenario Analysis: Maintenance
Communicating the model in real time The new collaboration The Excel PowerPoint Cycle The Need for Real Time
The need for speed Everything refreshes in near real time The planning tool is the presentation tool The planning tool enables collaboration on-the-fly Performance checklist Change values of a scenario with ripple through in real time Change dimension filters with ripple through in real time Toggle between scenarios in seconds Update scenarios for structure changes in seconds or minutes Scenario Analysis: Performance
Scenario Analysis Checklist Scenarios have comparative reporting: Compare any two scenarios side by side with variances Compare any two scenarios with variances at all levels of detail Line up scenarios side by side at all levels of detail Scenarios are easy to create and maintain: Create a new scenario by copying any existing scenario Make value changes across scenarios in one operation Make structure changes across scenarios in one operation Application meet need for speed for scenario analysis: Change values of a scenario with ripple through in real time Change dimension filters with ripple through in real time Toggle between scenarios in seconds Update scenarios for structure changes in seconds or minutes Complete Checklist: Scenarios
Rand Heer Business Activities CEO, Alight Planning (Planning software) Co-Founder, Aspirity (Microsoft BI consulting) Founder, FP&A Train (Essbase training) Founder, Pillar Corporation (Enterprise budgeting) CFO/Finance Director for 2 public companies Todays Special Speaker Publications Coauthor: Business Intelligence: Making Better Decisions Faster Author of 10 white papers on planning/reporting topics Education MBA degree Harvard Business School

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Application Requirements For Rolling Forecasts Asmi 2

  • 1. Application Requirements for Rolling Forecasts By Alight Planning Ben Lamorte, VP Business Development Rand Heer, CEO Presented at ASMI Conference San Diego, CA April, 2010
  • 2. 2-Hour Video Workshop on Rolling Forecast Requirements Highlights of 4-Hour Conference Workshop http://www.alightplanning.com/Workshop/Requirements-for-Rolling-Forecasts/Video.html Books and Websites Managing with Rolling Forecasts www.johnstretch.com/book/rollingForecast.html Future Ready www.futurereadybook.com Visit Our Website www.AlightPlanning.com ASMI Private Demo Tuesday Demo Room Reserved To Sign Up, Contact Ben Lamorte Resources for Rolling Forecasts
  • 3. Ben Lamorte Business Activities Vice President, Business Development, Alight Planning Principal, Decision Consulting (Adobe, Kaiser) Manager, Business Development, planetrx.com Consultant, APM/CSC Healthcare Todays Speaker Publications Author of 2 technical research papers, American Mathematics Society Co-author of planning white papers Education BS Math & Mechanical Engineering, University of California, Davis MS degree Stanford University, Management Science and Engineering
  • 4. Requirements for Rolling Forecasts Todays 45-Minute Agenda 30k Foot: Why Rolling Forecasts? Budgeting Vs Rolling Forecasts 5k Foot View: Summarize Checklist #1: Scenario Analysis Special Case Study: Rand Heer on Budgeting & Forecasting at Clorox Not doing the 100-Foot View Today: In-Depth Analysis of Application Requirements for Rolling Forecasts Requirement #1: Scenario Analysis Requirement #2: Driver-Based Modeling Requirement #3: Integrated Actuals
  • 5. At what point do you expect your annual budget targets to become obsolete? SOURCE: Business Finance Magazine
  • 6. SOURCE: APQC / BBRT Research How Much of Planning Adds Value?
  • 7. Budgeting Rolling Forecasts Timing Frequency Once a year Oftenevent driven Cycle time Months/weeks Days/hours/near real time Time horizon Fiscal year Rolling; beyond The Wall ______________________________________________________________________________________________________________________ Process Iteration cycles One version at a time Multiple scenarios at one time Participants Manyall managers Fewerfinance; key managers Collaboration Submission/approval Near real time as possible Deliverables Reports in binders Decisions; action __________________________________________________________________________________________________________________________________ Data Type Financial Financial & operational Inputs Many direct inputs Fewer direct; driver-based Measurement Variances Relative change; trends Level of detail Precision driven Relevant; whats material Budgeting Vs Rolling Forecasts
  • 8. Robust Scenario Analysis You cant predict the future, especially in todays economy But you can construct scenarios that let see alternate futures You can evaluate best courses of action under different conditions Driver Based Modeling Reduce direct input data volumes Increase modeled elementsoperational/driver based planning Integrating Actuals Rolling over actuals in plan filesapples to apples Using actuals to understand trendsfocus on rates Using actuals as an activity driver/source for plan data 3 Key Requirements for Rolling Forecasts
  • 9. Scenarios In Spreadsheets Separate workbooks is the principal mechanism A nightmare for maintenance & comparisons Scenarios In Budgeting Applications Manage to budget versions aka version control Process control: who changed that number? whats approved? Compare versions at the product/cost center/account level Scenarios In Planning Applications Reporting functionality Maintenance issues Performance [meeting the need for speed] Requirement #1: Robust Scenario Analysis
  • 10. Versions Are For Budgeting Create and approve one version at a time Version control: who changed that number? whats approved? Once a new version is approved, prior versions are discarded Scenarios Are Different from Versions X X Budget Version A Budget Version B Budget Final
  • 11. Forecasts = Scenarios (lots of them!) Assessing riskBE/Hi/Low ranges Evaluating alternative strategies/programs Managing uncertainty external events Actionable knowledge/decisions Go/no go decisions on programs Reallocate resources Change underlying processes Manage timing What You Can Do with Scenarios
  • 12. Be Prepared Develop Situational Awareness The Goal: Be Prepared
  • 13. What are the three scenarios that your company needs to be analyzing now as part of your planning process? What are the three most important decisions your company will be making over the next 12 months? Questions about Scenarios
  • 14. Reporting functionality checklist: Compare any two scenarios side by side with variances Compare any two scenarios with variances at all levels of detail Line up scenarios side by side at all levels of detail Examples Scenario Analysis: Reporting
  • 15. Maintenance issues Cumbersome maintenance results in errors Time consuming maintenance kills the use of scenarios Maintenance checklist Create a new scenario by copying any existing scenario Make value changes across scenarios in one operation Make structure changes across scenarios in one operation Examples Scenario Analysis: Maintenance
  • 16. Communicating the model in real time The new collaboration The Excel PowerPoint Cycle The Need for Real Time
  • 17. The need for speed Everything refreshes in near real time The planning tool is the presentation tool The planning tool enables collaboration on-the-fly Performance checklist Change values of a scenario with ripple through in real time Change dimension filters with ripple through in real time Toggle between scenarios in seconds Update scenarios for structure changes in seconds or minutes Scenario Analysis: Performance
  • 18. Scenario Analysis Checklist Scenarios have comparative reporting: Compare any two scenarios side by side with variances Compare any two scenarios with variances at all levels of detail Line up scenarios side by side at all levels of detail Scenarios are easy to create and maintain: Create a new scenario by copying any existing scenario Make value changes across scenarios in one operation Make structure changes across scenarios in one operation Application meet need for speed for scenario analysis: Change values of a scenario with ripple through in real time Change dimension filters with ripple through in real time Toggle between scenarios in seconds Update scenarios for structure changes in seconds or minutes Complete Checklist: Scenarios
  • 19. Rand Heer Business Activities CEO, Alight Planning (Planning software) Co-Founder, Aspirity (Microsoft BI consulting) Founder, FP&A Train (Essbase training) Founder, Pillar Corporation (Enterprise budgeting) CFO/Finance Director for 2 public companies Todays Special Speaker Publications Coauthor: Business Intelligence: Making Better Decisions Faster Author of 10 white papers on planning/reporting topics Education MBA degree Harvard Business School

Editor's Notes

  1. Application Requirements for Rolling Forecasts THANKS ANDREW!
  2. Application Requirements for Rolling Forecasts LOOK FOR DEMO SIGN UPS!
  3. Alight Planning Presentation Ben to do the intro. Self then partners. Then Rand. INTRODUCE RAND, Jeanette, Rhiannon, Al
  4. Application Requirements for Rolling Forecasts We only have 45 minutes, but in fact, we have a 4-hour workshop on the topic of application requirements for rolling forecasts. So, the plan is to talk at a 30k foot view and get a bit closer to the topic, but were going to cover the 1 of the 3 core requirements in some detail so as to make this presentation somewhat concrete. However, the good new is: well start with a Why are we here kind of message and hopefully get motivated to learn more since we will have plenty of follow-up materials available. Please ask questions, but not about Alight software. Catch us later for that. Lets have some fun!
  5. Ask the questions of the audience. When do you find your budget targets become obsolete? Unpredictability of the economy and competition: Need systems for making fast, well informed decisions: The old way to run a company budgetingisnt working Need more immediate and responsive planning systems Need continuous planning to see patterns, trends, reality checks Companies moving toward making forecasting the primary management tool In fact, a survey by The Economist, 70% of financial directors of companies in Europe ranked planning and budgeting reform as their top priority. Planning needs to be: Event drivene.g. new product launch; competitive threat Flexibleowned by local teams Updated based on the latest and best info More frequent and tighter updates to the plan Application Requirements for Rolling Forecasts
  6. Budgeting is the primary problem with this slide which is that the process inherently takes too much time, has too much data and does not get the financial analyst leveraged so as to add value. Application Requirements for Rolling Forecasts
  7. Application Requirements for Rolling Forecasts Talk to this slide
  8. Application Requirements for Rolling Forecasts MOVE FAST ON THIS SLIDE
  9. Application Requirements for Rolling Forecasts The framework we look at in the analysis of requirements for rolling forecasts is to start by analyzing how these requirements are met in spreadsheets, then with budgeting-only software packages, and the applications that are designed for planning. I get lots of calls from people looking for a budgeting software package and they say oh by the way it needs to work for forecasting. But perhaps the better question is I need a forecasting/planning package and it also needs to work for budgeting or Ive even seen we have a budgeting solution up and running, but now we need a tool for forecasting
  10. Application Requirements for Rolling Forecasts Everybody talks about locking down the budget. Forecast is more fluent, changing things.
  11. Application Requirements for Rolling Forecasts Scenarios Address a Range of Forecasting Issues Strategy development: testing alternate courses of action Address risk: test hi/lo ranges from a current trend Interventions: test new/different courses of action Address uncertainty: test the impact of specific events Understanding sensitivity: whats important/actionable knowledge
  12. Application Requirements for Rolling Forecasts What are the key scenarios that you need to evaluate in the short or longer term? What are the three most important decisions you need to make in the next twelve months.
  13. Application Requirements for Rolling Forecasts Show any 2 scenarios not just Forecast versus BUDGET but Forecast 1 vs Forecast 2 Or even show 4 Forecasts SIDE BY SIDE Be able to show all levels of detail drill down into multiple scenarios all at the same time to compare in real time
  14. Application Requirements for Rolling Forecasts Change the price to $200 CEO says do it for all scenarios The Kaiser Membership story Alight didnt do it but now it does
  15. Application Requirements for Rolling Forecasts The NEW COLLABORATION: Not IT Collaboration but real management collaboration to make decisions TALK PLANET RX.COM DO THE KAISER CFO STORY
  16. Application Requirements for Rolling Forecasts SKIP THIS SLIDE
  17. Application Requirements for Rolling Forecasts NOTE THAT THIS IS THE FULL CHECKLIST BUT WE DID NOT COVER IT ALL
  18. Alight Planning Presentation Ben to do the intro. Position as the high tech entrepreneur with finance credentials. Hit Pillar hard. Industry guru.