Best Practices for Budgeting,

Forecasting and Reporting

TABLE OF CONTENTS

Budgeting as a Competitive Advantage . . . . . . . . . . . . . . . . . . . . . . . . . 1

Broken Processes & Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

The Solution: Best Practices and New Technologies . . . . . . . . . . . . . . . . . . 2

Best Practice #1: Make Planning Part of the Corporate Culture . . . . . . . . . . 2

Best Practice #2: Align the Strategic and Operating Plans . . . . . . . . . . . . . . 3

Best Practice #3: Start at the Top — and the Bottom . . . . . . . . . . . . . . . . . 3

Best Practice #4: Drive Collaboration between Functions . . . . . . . . . . . . . . 4

Best Practice #5: Adapt to Changing Business Conditions . . . . . . . . . . . . . . 4

Best Practice #6: Model Business Drivers . . . . . . . . . . . . . . . . . . . . . . . . 5

Best Practice #7: Manage Content That is Material to the Company . . . . . . . 6

Spreadsheets: Impeding Best Practices . . . . . . . . . . . . . . . . . . . . . . . . . 7

Alternative Technology Can Promote Best Practices . . . . . . . . . . . . . . . . . 8

The Adaptive Planning Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

 BUDGETING AS A COMPETITIVE ADVANTAGE

 Across the board, finance

executives…believe they spend
too much time on forecasting,
The corporate budgeting, forecasting, and reporting process presents a formidable
challenge to most companies, regardless of size or industry. Budgeting is often seen
as burdensome and time consuming. Yet budgeting is also a crucial element of
budgeting, and planning. Of these financial management, which in turn is a huge contributor to a company’s overall
executives, 73 percent rely
success or failure. As a result, companies that are able to address budgeting obstacles
primarily on spreadsheets and
and improve their process will not only be rewarded with more accurate budgets,
manual processes. When asked
more timely re-forecasts, and improved decision-making, but will also foster a
about the most acute problems
disciplined financial management culture that will deliver a true competitive
with their current planning
process, more than 60 percent
advantage. Companies can overcome planning challenges and achieve these goals
said it “takes too long.” Nearly 43 by applying budgeting and forecasting best practices and leveraging new technologies.
percent said “not enough time to
analyze data,” and more than a
third cited “lack of ownership by BROKEN PROCESSES & TECHNOLOGY


business units.”

— CFO Research Services

For most organizations, the annual planning process is broken. First off, the process
takes months to complete. In addition, because line managers see little benefit to the
effort, they are dragged through the process against their will. When finance does
much of the work themselves, managers refuse to buy in and the plan loses
credibility. What’s more, once the agonizing process is finally complete, the budget is
already outdated. Rather than being a useful decision-making tool, the budget is a
disconnected document that has little impact on the company’s business.

Compounding these broken processes are the underlying budgeting technologies,

which in many companies are simply spreadsheets and email. While these
technologies are ubiquitous and well-understood, they simply do not work well for
planning. Nearly everyone has felt the pain of planning’s “spreadsheet hell” — the
broken formulas, bug-ridden macros, manual consolidations, out-of-synch versions,
and related problems which contribute to a lengthy, frustrating, and error-prone process.

Best Practices for Budgeting, Forecasting and Reporting | 1

 THE SOLUTION: BEST PRACTICES AND NEW TECHNOLOGIES
Leading companies have learned to overcome these challenges and have gained a
competitive advantage by adopting best practices for budgeting, forecasting and
reporting. Furthermore, they know that the right technology can save time, reduce
errors, and promote company-wide collaboration in the planning process.

 Only 37 percent of respondents

said that the technology they use
to support planning, budgeting,
By combining best practices with technology, companies can:

> Consistently deliver a more timely, accurate, and flexible plan.

and forecasting processes makes
those processes either faster or > Strengthen the link between strategic objectives and operational and financial plans.
more effective. This means that 63
> Improve communication and collaboration among managers.
percent are giving a
thumbs-down to their BPM > Enhance strategic decision-making, enabling leaders to more quickly identify,
systems. One likely reason for this analyze, and forecast the impact of changes as they occur within and around
result is the prevalence of their business.
spreadsheet usage in corporate


budgeting processes. The result is a company with significantly improved financial management and
stronger, more competitive business management.
— APQC survey

This white paper outlines the budgeting, forecasting, and reporting best practices
and related technologies that have been adopted by leading companies.

BEST PRACTICE #1: MAKE PLANNING PART OF THE

CORPORATE CULTURE

First and foremost, it is critical that a company’s culture embraces and rewards
planning. Excellent business management requires excellent financial management,
which in turn requires a company-wide commitment to excellence in budgeting,
forecasting and reporting.

Most companies acknowledge the importance of corporate planning, and claim to be

actively participating in ongoing planning. But in reality senior management may be
engaged in strategic planning, with finance running the budgeting show, and
department managers viewing the annual planning process as an unwelcome chore.
This is not the picture of a company that truly embraces planning.

Instead, companies that desire excellence in planning set achievable strategic

objectives, demand that these goals be met, and reward those who do so. They
require department managers to produce their own plans and tie incentive
compensation to their ability to manage their business and achieve their goals. In
such an environment, finance can provide tools and support to the managers,
functioning as an important ally instead of an obstacle.

Best Practices for Budgeting, Forecasting and Reporting | 2

 BEST PRACTICE #2: ALIGN THE STRATEGIC AND OPERATING PLANS
Within the “excellent financial management equals excellent business management”
culture, the next step is to ensure the ongoing alignment of the strategic and
operating plans.

Because of their responsibility to engage department managers in the planning

 Today, the pace of business

change can be rapid, and thus a
sluggish planning and budgeting
process, finance has the unique opportunity to help clearly communicate the
corporate strategic plan to the individuals who run the business. Finance can help
translate strategic goals into specific departmental plans and related expense drivers,
process can be a competitive such as headcount and equipment.
disadvantage. …Companies that
can replan and rebudget more
By translating their strategic goals into operational plans, and by tracking and
nimbly are better able to keep
measuring performance against plan, leading companies are able to make
costs in line in difficult economic
meaningful progress in achieving their objectives.
times, and then are in a better
position themselves to take


advantage of a recovery.
BEST PRACTICE #3: START AT THE TOP — AND THE BOTTOM
— Business Performance
Management Magazine
An important ingredient in successful budgeting and forecasting lies in a company’s
ability to plan from the bottom-up and to meet top-down strategic objectives.
Some companies establish top-down targets and then turn the annual budget
process over to finance, with a mandate to meet the numbers. Other companies
require detailed bottom-up planning, and then “plug” the total company numbers at
the top so that the plan meets strategic targets. Neither of these approaches reflects
a commitment to planning excellence.

Instead, leading companies provide initial guidance from senior management — a

top-down perspective on strategic goals, objectives, and expectations. Next,
department managers build a plan from the bottom-up, showing how they intend to
meet those goals. This process will often require frequent iterations for the top-down
and bottom-up approaches to meet.

The result is a plan that:

> Is supported by department managers, because they helped create it and will be
rewarded for meeting it.

> Is supported by senior management, because the operational goals are aligned
with the strategic goals.

> Is supported by finance, because they added value to a productive, collaborative

effort, rather than demanding participation in an exercise with little added value.

Best Practices for Budgeting, Forecasting and Reporting | 3

 BEST PRACTICE #4: DRIVE COLLABORATION BETWEEN FUNCTIONS
Not only should strategic and operating plans be aligned, but plans between
functional areas should also dovetail. Best practices include direct involvement from
line-of-business managers and a collaborative approach to budgeting and forecasting.

In addition to understanding strategic goals, department managers also need to

know what other functions are planning. For example, in a company that is planning
a new product rollout, manufacturing needs to ramp up production, marketing
needs to produce new collateral, and sales needs to add new headcount. But the
marketing plan should also include programs timed to support the new sales reps.
The facilities department needs to plan for new headcount, equipment, and product

 Our study found that companies

that believe their budgets are
very accurate attribute this to
storage. And so forth.

This collaborative planning can be accomplished through an iterative process that

better collaboration more than provides managers with the opportunity to forecast and share different scenarios


any other factor. with each other. Finance can play a key role in facilitating the coordination of plans
across the company.
— Business Performance
Management Magazine

BEST PRACTICE #5: ADAPT TO CHANGING BUSINESS CONDITIONS

The preceding best practices establish a foundation for making better business
decisions. The next important steps are evaluating actual progress against budget

 In addition to the qualitative

benefits that… companies
achieve through improved
and re-forecasting in response to changing business conditions.

All businesses, particularly those in flux, are better served by a planning process that
planning outcomes, those that can quickly adapt to change in the company or in the market. The key elements of
use rolling forecasting save a such a process are:
median of 25 days on their annual


budgeting cycle.
Frequent Re-forecasting: Especially in fast-moving, quickly growing businesses with
— APQC survey multiple market pressures, forecasting may be needed on a monthly or even
biweekly basis. Ongoing re-forecasting will help managers to continually answer
critical questions such as “What did we expect?”, “How are we doing against our
plan?”, and even more importantly, “How should we adapt our plans as a result?”

Rolling Forecasts: A company engaged in ongoing rolling forecasts is always looking

forward to the immediate or near-term future. The forecast timeframe should extend
out two to eight quarters, depending on the volatility of the business.

Planning should be an ongoing process with frequent opportunities for managers to

view the latest internal and external data on how the company is doing. They should
be able to make alterations to their plans based on new information, which can come

Best Practices for Budgeting, Forecasting and Reporting | 4


 Significant, unforecastable
changes to the environment…can
happen anytime. Any company
can respond to events
haphazardly, but those that have
the right planning processes in
place can respond faster and in a

more coordinated fashion.
— Business Performance
Management Magazine
from many sources, including other managers, monthly actual data, and revisions to
top-down targets. Finance should be able to quickly consolidate plan data from all
areas of the company, and to disseminate new information in real time. This process
will facilitate more informed decision-making in areas such as pricing changes,
product line changes, capital allocations, organizational changes, and the like.
BEST PRACTICE #6: MODEL BUSINESS DRIVERS
An important feature of a first-rate budget or forecast is that it is based on a model
with formulas that are tied to fundamental business drivers. Simply importing and
manipulating past actuals does not reflect the underlying cause and effect
relationships in a business. Building modeling into plans provides a way to ensure
appropriate consistency across functions. It also provides a way to promote planning
coordination between functions. For example, future sales forecasts can be tied to the
marketing expenditure needed to generate the necessary number of leads.
Finance can provide managers with a useful model that includes information about
past actuals and current headcount, as well as formulas that are driven by
assumptions. This does not violate the best practice of requiring department
managers to be responsible for creating their own budgets. Instead, it saves them
time by providing a solid framework to flesh out — a starting point that contains
important information about their organizations’ relationships to other functions. It
also harmonizes with the best practice of collaboration across functions.
Best Practices for Budgeting, Forecasting and Reporting | 5
 BEST PRACTICE #7: MANAGE CONTENT THAT IS MATERIAL TO
THE COMPANY

A focus on material content in budgeting will free managers from unnecessary detail,
enabling them to produce better plans. While supporting detail can provide audit
trail and insight into managers’ thinking, more detail does not necessarily make for a
better plan.

 In a typical planning environment,

more than half of all time is spent
gathering and re-keying data,
According to a Hackett Group study of planning best practices, the fewer the number
of line items, the better the planning practices. Hackett found that world-class
companies average 15 to 40 line items in their budgets, compared to highly
which leaves little time for
inefficient companies that averaged 2,000 line items.
analysis. The average company
spends only 16% of their time in
Managing material content means that a company pays attention to whatever has a real
the value added activities of
and significant impact on expenses, revenues, capital or cash flow. This company will:
explaining the “why,” and


exploring the “what if.”
> Avoid false precision. A complex model might not have any more precision than a
— Hackett Group simpler model. More detail and intricate calculations can lure managers into the
trap of thinking their plan is therefore more accurate.

> Monitor volatile — not stable — accounts. Efforts are best spent on fluid expenses
such as headcount and compensation.

> Aggregate accounts. The budget does not need to reflect the same level of detail
as that in the general ledger. Even if the GL has 15 different travel accounts,

 …decreased cycle times in managers can often plan in one.

planning, budgeting, and
forecasting processes lead to
better business BEST PRACTICE #8: BE TIMELY AND ACCURATE
outcomes…Assumptions about
the business environment or The final best practice is to ensure that the planning process is timely and accurate.
market behavior made 90 days
before a budget is completed are Many companies have an inefficient and inflexible planning process, at the center of
much more likely to be incorrect which is the annual budget. These companies’ time-consuming distribution and
than assumptions made only 30
consolidation processes practically guarantee that the plan data is irrelevant before it


days in advance.
is even shared. And plans based on stale data and assumptions are of no value.
— APQC survey According to the Hackett Group, the average annual planning and budgeting process
is three to five months long. A plan that takes this long to prepare is out of date by
the time it is completed. The Hackett Group reports that world-class organizations, on
the other hand, spend less than two months preparing the annual plan.

World-class organizations have been able to shorten their planning cycles by

implementing the best practices described here. They have also leveraged technology
so that they can manage budget consolidation and aggregations in real time.

Best Practices for Budgeting, Forecasting and Reporting | 6


 …heavy spreadsheet usage
substantially increases the
budgeting and planning cycle time.
Those who use spreadsheets
extensively take a median of 30
more days to complete their annual
budget than do the people who

rely less on Excel.
— APQC survey
 The spreadsheet’s defects are
behind the difficulties
organizations have with the
[budgeting and planning] process.
We therefore advise organizations
to eliminate spreadsheets if they
want to budget and plan more

effectively.
— Business Performance
Management Magazine
Technology can especially help improve timeliness and accuracy in the area of
consolidations. Real-time consolidation removes the necessity to manually process
results, leading to a smoother, more consistent, and more accurate planning process.
Variance reports delivered within two to four days from the period close allow
managers to immediately evaluate their performance against plan, and then
effectively adjust their businesses as a result.
At an operational level, this type of planning will be less costly and will produce more
accurate results than the processes followed by most companies today. At a strategic
level, a company’s ability to make timely and sound financial plans will allow it to
provide more credible guidance to stakeholders, and to make better, more informed
and faster business decisions.
SPREADSHEETS: IMPEDING BEST PRACTICES
In addition to adopting budgeting, forecasting and reporting best practices, leading
companies have also made changes to the technologies used to support the process.
Spreadsheets are still the predominant corporate planning tool. In a CFO Magazine
research study, 73 percent of finance executives said they use spreadsheets and
manual processes for forecasting, budgeting, and planning. Not surprisingly, more
than 60 percent of these executives said that the process takes too long. Most would
agree it is also riddled with errors.
While spreadsheets are good personal productivity tools, they are not collaborative
planning applications. Spreadsheets are fundamentally unsuited for a complex,
dynamic, shared financial planning process for several reasons, including:
> Data distribution and consolidation is time-consuming, rendering frequent
re-forecasting unfeasible.
> Spreadsheets are incapable of supporting the kind of iterative planning needed in
a changing business environment.
> There is little or no security or audit trail.
> Plan accuracy is always in question, since:
o Most data is editable, despite password protection
o Links are easily broken
o Formulas can be changed, both intentionally and inadvertently
o Version control is nearly impossible
o Consolidation is manual.
Best Practices for Budgeting, Forecasting and Reporting | 7
 These inherent weaknesses undermine the accuracy of the entire planning process.
This erodes line managers’ confidence in the process, and reduces their level of
engagement. Finance is viewed as pushing a bad product, and the plan loses
credibility. Spreadsheets are clearly not the best way to manage a top-notch
budgeting and forecasting process.

ALTERNATIVE TECHNOLOGY CAN PROMOTE BEST PRACTICES

 On-demand [dedicated budgeting

and planning] solutions need
minimal IT resources, are quick to
Leading companies have recognized that spreadsheet-based planning impedes their
implementation of these budgeting and forecasting best practices. They have moved
to a purpose-built application with lean infrastructure requirements. This type of
implement, and can have a low planning software enables them to accurately plan and re-plan quickly, using the
total cost of ownership. They enable
same or fewer resources than they formerly devoted to the process.
corporations to focus IT assets and
staff on their core business activities
Streamlining the planning process demands technological tools capable of


and outsource everything else.
supporting a faster, more flexible, and adaptive approach to planning. By using an
— Ventana Research on-demand, dedicated budgeting and planning application that is delivered over the
web, organizations are able to implement the best practices outlined in this paper.

With such software, the planning process can be:

> Integrated: Strategic, operating and financial plans reside in one system. Managers
do not need to keep their own planning systems on the side.

> Collaborative: Web-based, distributed planning enables anytime, anywhere

participation. The ability to use a secure web connection allows everyone to access
the budget information at anytime from anywhere there is Internet connectivity.

> Adaptive: Simplified version control and the ability to frequently reforecast allow
companies to respond to business changes with “what if” scenarios as often as
necessary.

> Timely: Information is always current because departmental users contribute

directly to a central planning database. Deadlines are more easily met because
consolidations and rollups are done automatically.

> Efficient: Finance managers and department managers spend less time managing
data, and more time managing the business.

> Relevant: Customized views for managers increase adoption and ownership.
Formula capabilities enable modeling business drivers.

> Accurate: Plans contain fewer errors, since broken links, stale data, improper
rollups, and missing components have been eliminated.

Best Practices for Budgeting, Forecasting and Reporting | 8

 THE ADAPTIVE PLANNING SOLUTION
Adaptive Planning is the leading provider of on-demand, web-based budgeting,
forecasting, reporting and analytical applications. The company helps corporations
conquer budgeting inefficiencies and gain greater visibility into their own financial
and business performance by:

> Providing affordable, full-featured modeling software that automates the ongoing
cycle of budgeting, forecasting and reporting, so that managers can quickly and
easily formulate coordinated plans.

> Enabling companies to use timely and accurate information to analyze and
respond in real time to changes in their business environments.

> Reducing the requirement for corporate IT, with a hosted, web-based software
solution that is instantly available and requires no new IT infrastructure or resources.

For more information on Adaptive Planning, call 650-528-7520 or

visit www.adaptiveplanning.com.

800 W. El Camino Real, Suite 260

Mountain View, CA 94040
T 650 528 7500 ■ F 650 528 7501
www.adaptiveplanning.com

Copyright © 2005, Adaptive Planning Best Practices for Budgeting, Forecasting and Reporting | 9
Spreadsheets: An Inadequate Solution for
Budgeting, Forecasting and Reporting
TABLE OF CONTENTS

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

What’s Wrong with Spreadsheets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Data distribution and consolidation is time-consuming and error-prone . . . . . . 2
Analyzing complex business trends is difficult and results are latent . . . . . . . . . 3
Ensuring compliance is impossible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
With spreadsheets, there is never just one set of facts . . . . . . . . . . . . . . . . . . 4
Re-forecasting is infrequent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

The Spreadsheet Alternative: What to Look for in a Budgeting,

Forecasting, and Reporting Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The Adaptive Planning Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Making the Switch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

EXECUTIVE SUMMARY
For years, large companies have reaped the benefits of purpose-built budgeting,
forecasting and reporting applications. Unfortunately, because such applications are
costly and complex to implement, deploy and maintain, mid-sized organizations have
not been able to reap the same benefits.

Instead, these organizations have conducted the budgeting and forecasting

process through a readily-available, inexpensive and easy-to-use application —
the spreadsheet.

While spreadsheets are good desktop personal productivity tools, they are not
collaborative planning applications. As the planning process extends beyond a single
user, spreadsheets fail to support a complex planning process. They were never
designed for multiple users. They were not intended to be the foundation of a
dynamic, shared function like financial planning. And they certainly weren’t designed
to provide the security required for financial information.

All companies — large and small — have complex financial planning processes.
Mid-market organizations should not settle for the limited functionality of simple
spreadsheets when their financial planning process involves multiple people,
requires real-time access to data and demands comprehensive security.

The good news is that there are excellent alternatives available today. Finance managers
should look for a purpose built application, such as Adaptive Planning, that is:

> Easy to use

> Requires no IT resources for implementation or maintenance

> Consolidates budgets in real time, automatically

> Enables powerful driver-based modeling and scenario analysis

> Facilitates compliance with regulatory requirements

> Creates a single data repository for all financial plans, forecasts, and reports

> Scales and expands to the needs of the business

> Affordable

Spreadsheets: An Inadequate Solution for Budgeting, Forecasting and Reporting | 1

 WHAT’S WRONG WITH SPREADSHEETS?

 Across the board, finance

executives at midsize companies
believe they spend too much time
Spreadsheets are fine for what they were designed to do — provide individual users
with a robust tool for data analysis. But many financial professionals still choose to
use spreadsheets as the foundation for their company’s budgeting and planning
on forecasting, budgeting, and process simply because they are inexpensive and familiar.
planning. Of these executives, 73
percent rely primarily on
Using a spreadsheet as the backbone of the planning process is complex,
spreadsheets and manual
time-consuming and error-prone, focusing the majority of the effort around low
processes. When asked about the
value data management and not on high value business analysis and evaluation.
most acute problems with their
current planning process, more
And, as organizations grow to incorporate budgeting and forecasting best practices,
than 60 percent said it “takes too spreadsheets become untenable.
long.” Nearly 43 percent said “not
enough time to analyze data,” and There are many shortcomings of using spreadsheets for the budgeting process. Five
more than a third cited “lack of primary shortcomings include:


ownership by business units.”

— CFO Research Services

1. Data distribution and consolidation is time-consuming and error-prone.

Distributing and consolidating the data needed during the budgeting and
forecasting process is difficult, involving multiple steps, each with its own

 Companies that rely heavily on

spreadsheets typically take 30
days longer to complete their
opportunity to introduce errors:

> First, the finance manager puts together a master budget spreadsheet.


budgets than those that don't.
> Next, the finance manager manually segments the master budget spreadsheet
— APQC benchmarking survey into pieces by department, creating multiple smaller spreadsheets for each
department manager to view and update. For some organizations, this can mean
tens or even hundreds of spreadsheets that must be manually distributed. Links
between spreadsheets are easily broken in this process resulting in missed
information, inaccurate numbers and wasted time correcting the links.

> Third, the finance manager must email the spreadsheet segments to each
department manager. As is often the case in a manual process, departments can
be missed or a spreadsheet can be mistakenly sent to the wrong department,
leading to security breaches, regulatory non-compliance, and time wasted
resending the right files.

> Next, the finance manager must manually follow up with each department
manager to collect the spreadsheets. Inevitably, not all the spreadsheets will be
returned on time or the data will be incomplete.
> Finally, the finance manager must consolidate each of the spreadsheets back into
the master spreadsheet, spending a significant amount of time ensuring that
departmental finance managers use the latest version of the spreadsheets, enter
the right data at the right level of detail, and do not break formulas or otherwise
alter the spreadsheets.

Spreadsheets: An Inadequate Solution for Budgeting, Forecasting and Reporting | 2


 More than half (54%) of
companies would like to
re-forecast monthly or more, and
48% have the need to re-forecast
on demand to react to changes in

their business.
— Business Finance Magazine
 In a typical planning environment,
more than half of all time is spent
gathering and re-keying data,
which leaves little time for
analysis. The average company
spends only 16% of their time in
the value added activities of
explaining the “why,” and

exploring the “what if.”
— Hackett Bench-Marking
This process not only diverts valuable time that should be spent on higher value
analysis of the budget and the business, it adds a great deal of risk. And it reduces
financial professionals to data entry clerks.
In addition, there is the likelihood that the data is old before it has even been shared.
It’s not real-time, and therefore, impossible to trust with real certainty.
2. Analyzing complex business trends is difficult and results are latent.
Budgeting and forecasting is not just about collecting data, it is also about
understanding how the business is running and being prepared for change. When
businesses are in flux — due to growth, cutbacks, new product introduction,
acquisition or divestiture — conducting careful scenario analysis becomes critical.
But using spreadsheets for such complex analysis quickly escalates from difficult
to intractable.
Changes in the business mean changes to the structure of the model. This can mean
creating new sheets, updating formulas within all financial statements, modifying
reports, and so on. Each structural change takes time and risks introducing errors into
the model. And if the change requires input from department managers, it can take
days, or even weeks, to develop the new model structure, collect the relevant data,
and then analyze it once it has been collected. Such delays make it difficult for
businesses to react quickly to changes or to take advantage of business opportunities.
The finance department should be empowered to use the financial model to plan for
and react to changes in the company or marketplace. They need to quickly make
structural changes to their model. They need access to real-time data so they can
quickly act upon trusted, accurate information. Because the spreadsheet-based
budgeting and planning process is so time consuming and exhausting, finance
managers miss the real information in their efforts to manage the data. The simply
can’t see the forest from the trees.
3. Ensuring compliance is impossible.
In the post-Sarbanes-Oxley world, companies of all sizes are facing strict
requirements for transparency and data security. Public companies must ensure
that they have strong controls around financial processes. And even private
companies are under increased scrutiny from lenders, auditors and investors. A
meticulous budgeting and forecasting process is central to the good governance
of every company.
Spreadsheets: An Inadequate Solution for Budgeting, Forecasting and Reporting | 3

 30 to 90 percent of all
spreadsheets suffer from at least
one major user error. The range in
error rates depends on the
complexity of the spreadsheet
being tested. In addition, none of
the tests included spreadsheets
with more than 200 line items
where the probability of error

approaches 100 percent.
— The Journal of
Property Management
 In a survey of 168 finance
executives, 33 percent of
respondents with revenue under
$100 million say that “spreadsheet
hell” is a fair description of what
goes on in their departments. That
figure jumps to 59 percent for

larger companies.
— CFO IT
Spreadsheet tools were simply not designed for rigorous financial controls. The
limited retrofitting that has been done — such as adding passwords to spreadsheets
or attempting to limit which portions of a spreadsheet are editable — are the worst
kind of half-measure. They do not accurately address compliance issues, but rather
make the entire process more cumbersome and difficult for everyone involved.
With spreadsheets, organizations face numerous compliance-related risks, including:
> Data security — Because there is little to no security inherent in a spreadsheet
model, they make it virtually impossible to ensure that the data has not been
tampered with, viewed by unauthorized individuals within the company — or
worse — forwarded to others outside the company.
> Data inconsistency — Multiple versions of spreadsheets floating around in email
make it difficult to ensure that analyses are performed on the most up to date
financial plan or forecast.
> Audit trails — Spreadsheets lack audit trail capabilities that allow financial
managers to see who made changes and when.
4. With spreadsheets, there is never just one set of facts.
Getting everyone in the organization “on the same page” is not just a good idea; it is a
financial best practice. Operating with critical information scattered around the
organization in spreadsheets is a virtual guarantee that at least some key members of
the management team will be working from old, out-of-date numbers.
Does everyone have the latest headcount forecast? Are they hiring to the current
targets? Ordering the correct amounts of raw materials? Planning to support the
agreed to number of sales representatives?
Looking at a budget spreadsheet in an email inbox, or on a hard drive, does not allow
a departmental finance manager to tell whether a spreadsheet is the latest and
greatest — or the one from last week. It is only a matter of time before someone
generates a plan based on the wrong set of numbers. And only a matter of time
before the impact of that mistake is material.
Spreadsheets: An Inadequate Solution for Budgeting, Forecasting and Reporting | 4

 Despite its ubiquitous nature and
popularity as a planning and
budgeting tool, spreadsheet
software alone has proven to be
poorly suited for enterprise

planning processes.
— Forrester Research
5. Re-forecasting is infrequent.
Annual budgets are no longer enough. In today’s competitive, dynamic market,
rolling forecasts — revised monthly, quarterly or at least semi-annually — are key
not only to understanding the company’s current financial situation, but also its
future. The market, competitors and economy change constantly. Companies must
have a plan to anticipate these changes, which are an undeniable part of the
budgeting process.
But clearly the process with spreadsheets is just too time consuming. Finance
must be able to quickly reforecast and engage department managers in that
process. Surveys consistently show that financial managers would like to reforecast
more frequently but fail to due to the time and effort associated with a
spreadsheet-based process.
It’s clear that spreadsheets — a 30-year-old technology — are not up to the task of
budgeting in today’s dynamic companies. Large companies have known this for years
and have standardized on a number of enterprise solutions — Hyperion, Cognos, and
Cartesis to name a few. But the lengthy implementation times, high costs and large
staffs required by these solutions make them ill-suited to mid-sized companies.
What alternatives do these organizations have?
Spreadsheets: An Inadequate Solution for Budgeting, Forecasting and Reporting | 5
THE SPREADSHEET ALTERNATIVE: WHAT TO LOOK FOR IN A
BUDGETING, FORECASTING, AND REPORTING SOLUTION
While it is clear that spreadsheets are not the right way to manage the budgeting and
forecasting process, there is a confusing array of new purpose-built solutions
targeted at the mid-sized company.

These organizations should evaluate several criteria in their efforts to replace

spreadsheets and select an application that best fits their needs. These criteria include:

1. Easy to use

2. Requires no IT resources for implementation or maintenance

3. Consolidates budgets in real time, automatically

4. Enables powerful driver-based modeling and scenario analysis

5. Facilitates compliance with regulatory requirements

6. Creates a single version of all financial plans, forecasts, and reports

7. Scales and expands to the needs of the business

Spreadsheets: An Inadequate Solution for Budgeting, Forecasting and Reporting | 6

THE ADAPTIVE PLANNING SOLUTION
By eliminating spreadsheets for budgeting and planning, organizations can simplify
and streamline this complex and error-prone process, while ensuring quality and
accuracy — improving efficiency and meeting today’s stringent compliance
requirements for financial information.

Adaptive Planning delivers an easy and intuitive system that brings the power of
large-scale enterprise financial planning systems to mid-market organizations. Unlike
other mid-market solutions, Adaptive Planning requires no installation because it is a
hosted solution — making it fast and easy to migrate from spreadsheet-based
planning. And it’s easy to use — eliminating the need for extensive training and
ensuring adoption.

Reasons to choose Adaptive Planning include:

1. Adaptive Planning is easy to use

Working in Adaptive Planning feels like a familiar spreadsheet. Department
managers provide information in a grid view that looks and feels just like a
spreadsheet, so there’s nothing new to learn. And, since Adaptive Planning is a true
web-native budgeting, forecasting and reporting system, it’s as easy to navigate as
the web.

With customized secure access, each user can see only what they’re responsible for.
There’s no learning how to navigate to the right place, and users can’t make a
mistake and fill out the wrong information.

2. Adaptive Planning requires no IT resources.

Some organizations have a large IT staff. They have a culture of implementing,
customizing and configuring software and doing all of the required maintenance
and systems work. But most mid-sized companies don’t have this luxury.

Adaptive Planning is so easy, there is literally nothing to install. All budgeting,

forecasting, analysis and reporting tools are immediately available through a
standard browser. Updates to the software are handled by our staff, not yours, so
you are always up to date with the latest software release. And our world-class
hosting facilities ensure that your data is secure and constantly backed up

3. Adaptive Planning consolidates budgets in real-time.

Spreadsheets are never up to date until the master budget spreadsheet is created
— which is a manual and extremely time-consuming task. Things aren’t much
better with a lot of budgeting and forecasting software packages — finance
managers still typically end up with numerous budgets that must then be rolled
up and reconciled to a single version.

Spreadsheets: An Inadequate Solution for Budgeting, Forecasting and Reporting | 7

 With Adaptive Planning, departmental users contribute their input to the central
budget. There aren’t separate spreadsheets and subsets of data scattered around.
And there’s no “button” to push to consolidate — the system does it automatically
and continuously.

4. Adaptive Planning provides powerful, scenario-based analysis.

Growing businesses — those that are introducing new products, expanding
geographically and through acquisitions, and being driven to change by
competitors — need to be able to design business financial models based on key
drivers and create scenario analyses on a moment’s notice.

Adaptive Planning gives mid-sized companies the most powerful scenario

planning tools available, with the ability to create and modify scenarios
dynamically, quickly compare scenarios against each other, and lock scenarios and
create baselines for later reference and variance reporting.

5. Adaptive Planning ensures compliance.

Adaptive Planning was built with compliance in mind. Adaptive Planning
inherently protects companies against the issues that spreadsheets can often
complicate, like data security, version control and audit trails.

In addition, Adaptive Planning provides a critical compliance capability that simply

doesn’t exist with spreadsheets — the ability to drill down into specific numbers to
find the root data and ensure its accuracy.

6. Adaptive Planning delivers a single version of the truth.

A centralized, database-driven system inherently eliminates the need for multiple
versions and confusing data. With Adaptive Planning, everyone across the
company — from department level managers to the executives — always have
instant access to the most current information. They will never need to verify
numbers or compare versions, and most importantly, they will never plan and
execute based on inaccurate information, an outdated strategy or a rejected budget.

7. Adaptive Planning is expandable and scalable

Businesses change rapidly, and the budgeting, forecasting, analysis and reporting
solution must be able to keep up. Adaptive Planning protects organizations from
change. Model structures are managed centrally, making it easy to react to changes
in the business or the underlying assumptions. Departments can be added on the fly
and users can be added as the organization grows, all within an easy to use
administration interface.

Spreadsheets: An Inadequate Solution for Budgeting, Forecasting and Reporting | 8

 MAKING THE SWITCH
Large companies will likely find their best solution in the big, enterprise class
packages available for planning, budgeting, forecasting and reporting. Tiny
companies will be best served by a spreadsheet-driven process. But companies in the
middle can’t afford the cost and complexity of the heavy enterprise software
packages, and they need capabilities that go far beyond spreadsheets.

For mid-size companies, the fastest to implement, easiest to use and most cost
effective approach is to use a hosted solution like Adaptive Planning. Adaptive
Planning delivers the powerful financial planning and analysis capabilities that
mid-sized organizations need — affordably and with zero IT impact.

Make the switch to Adaptive Planning. Visit www.adaptiveplanning.com for

more information.

800 W. El Camino Real, Suite 260

Mountain View, CA 94040
T 650 528 7500 ■ F 650 528 7501
www.adaptiveplanning.com

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