Adaptive Planning Benefits versus Excel
Overview
Every member of the Finance Team and the organization’s Management and Executive community
understand the issues with utilizing Excel as a Budgeting, Forecasting and Reporting tool.
•
Excel is NOT a business management application. It is a personal productivity tool. Excel was
never designed to provide a collaborative system for financial management. The many issues arising from
Excel’s use include errors, lack of control, lack of security, lack of expertise, poor value and wasted organization
time. Organizations today use consistent systems to manage Sales (CRM), Human Resource (HRMS), Invoicing
(SOP/AR), Inventory (MRP, Demand Management), Expense (Purchasing, Expense Control, AP) and
Transactions/Actual (GL). Arguably planning the future is the most important task of management. Yet, despite
the acceptance of the need for systems elsewhere, the organization is comfortable managing the mission critical
(“how will we manage and measure our business performance”) budgeting and forecasting process using Excel.
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Excel is managed by Finance which lacks the training and skills to design, develop and
maintain an organization wide system. HM Customs & Excise describes the Excel risk as: “They are
often designed and developed by employees who are rarely qualified to do so and are seldom checked to make
sure they do what was actually intended, not realizing that creating a spreadsheet is akin to programming and
the untested spreadsheet is as dangerous and untrustworthy as an untested program”.
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The process is simply broken. “Not to beat around the bush, but the budgeting process at most
companies has to be the most ineffective process in management. It sucks the energy, time, fun and big dreams
out of an organization. It hides opportunity and stunts growth. It brings out the most unproductive behaviors in
an organization, from sandbagging to settling for mediocrity.” Jack Welch
Using Excel, in summary, causes significant issues to the organization and denies the organization a
collaborative, connected and productive planning process. The impact is under appreciated and under
estimated. Organizations continue to operate “in denial” refusing to attempt to improve the process and
preferring to remain with spreadsheets, dismissing obvious benefits documented in case studies.
Why Adaptive Planning?
The purpose of this document is to describe the expected benefits of using Adaptive Planning. These can be
split into the “hard” benefits calculated by replacing Excel and the many potential “soft” benefits derived from
using a purpose built planning solution.
Excel Issues that are immediately Replaced
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Manual Replication of Templates and Business Rules now happens Automatically: Time invested
in individually copying and maintaining spreadsheets for business units, profit and cost centers are removed.
Template creation, maintenance and replication will now be automatic.
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Manual Manipulation for Alternative View/Reporting: Your performance information is stored in a
database – there is no longer a need for spreadsheets to be created for alternative views/reports, additional
scenario analysis, storage of history or planning iterations.
•
Manual Aggregation and “real time” Results: Aggregation, including allocation routines, transfers,
consolidations and other roll-ups occurs automatically. Spreadsheets that were created and maintained to link
and consolidate sub-spreadsheets are now irrelevant. There is no wait for the results.
•
Manual Distribution and Control: All users now use their web-based template for access. Purpose built
workflow controls interaction and progress through each planning cycle. There is no need for emailing
spreadsheets, manual logging of progress. Concerns regarding “which spreadsheet is right?” are removed.
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Manual Reconciliation and Validation: The use of Adaptive Planning removes the need for reconciling
spreadsheet links and internal formulae as you change. Administration of the process, security and business
rules are centralized. The complexity of spreadsheets often prevents audit and validation of assumptions, inputs,
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calculations and outputs. Over 92% of spreadsheets have calculation errors (source: KPMG) and this risk is
removed.
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Security: Spreadsheets have no inherent or centrally maintained security. Proprietary and valuable business
planning and performance management information is unprotected in this environment. Adaptive Planning is
completely secure.
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Confidence and “one version of the truth”: Use of a purpose built planning application builds confidence
in the quality and accuracy of the data presented. Unlike spreadsheets, there is “one place” for all financial and
operational planning and performance information.
Benefits received from implementing a Purpose Built System
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Participation and Frequency: The systematic approach where the existing manual processes are replaced
allows greater participation and/or frequency. This may mean planning can be extended to more users deeper
into the company. It may mean greater participation during the planning iterations (initial submission, fine tuning,
agreement cycles). You can also now increase the frequency of planning (rolling monthly updated, “on demand”
or event based forecasting, etc.).
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Accountability: A systematic approach with participation by the business managers drives accountability into
the business.
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Flexibility: Business operations and planning processes require great flexibility to adapt to new circumstances
and demands and provide what if? modeling. Changing processes, data views, metrics or assumptions quickly
and without disrupting existing data or the business users is an integral part of Adaptive Planning.
Versions/Scenarios: You can now conduct multi-version planning for different business conditions in one
integrated system.
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System Integration: Adaptive Planning integrates data with your other systems using an easy to manage and
reliable process.
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Web Deployment: The users are managed via their web browser to ease the distribution and data collection
and reporting processes. There is less network traffic and overhead.
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Time Savings (opportunity costs): The time saved in replacing a spreadsheet-based system and the
associated manual processes can be significant. Finance, Executive and Business Managers can use this time
for true “value add” activities:
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Increase Finance’s time for analytical tasks, supporting the business operations and examining opportunities
for increasing revenues, cost efficiencies and continued process improvement. Adaptive has examples of
customers who, through us of Adaptive Planning, were able to dedicate finance and business time to
analysis resulting in substantial savings. Typical areas such as product and customer profitability, marketing
spend effectiveness, standardization and control of capital and operating expenses, increased scrutiny and
business case demands for justification of new projects.
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Executive and Business Managers increase productive time on planning and performance discussion,
preparation, review and agreement versus the actual planning process itself. Time can be reallocated to
other business management tasks.
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Planning Multi-dimensionality: Businesses are multi-dimensional with key dimensions of products,
customers, personnel, channels all requiring integration for planning and performance measurement. A purpose
built system deals with these relationship complexities and planning process demands as standard.
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Control: Adaptive Planning provides for centralized and controlled assumptions, drivers and KPIs. All planning
can be based on using these corporate standards to ensure a consistent approach, the ability to truly measure
and compare performance “apples to apples” and also drive out discretionary expenses (such as travel,
temporary personnel) with greater detail and control.
Strategic Business and Personnel Benefits
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Adoption of “Best Practice” and High Participation Planning: Best Practice systems and
methodology approach drives considerable benefit through accountability, participation and increasing
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manager’s responsibility for performance. Manage and measure business performance on driver basis, KPIs,
impact points and focus attention to mission critical data while avoiding information overload.
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Confidence: Decision-making is based on proven, accurate and valid planning data.
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Personnel: Use of enhanced systems and increased in time to “value add” activity improves morale, drives a
performance based culture and ensures all management is driving towards same business goals and objectives.
Focus expensive resources upon performance prediction and analysis versus mechanics and data integrity
resolution.
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Invest in Technology and Leverage existing Technology Investment: Investment in technology and
enhanced productivity versus increased labor costs. Adaptive Planning leverages existing Excel, GL, other
systems and your financial expertise to promote adoption.
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Align to Corporate Strategy with Operational Efficiency: Drive corporate strategy down within the
Adaptive Planning system for guidance, validation and control purposes. Improve planning cycle times (months
to weeks, weeks to days, plan recomputation/realignment within hours).
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Deliver Competitive Advantages to the Company: The ultimate objective is to nurture and enhance a
performance driven culture. planning input, accountability and measurement in the hands of all stakeholders.
You will need to ask key questions such as what is the tangible benefit of:
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Having one single integrated system for all performance planning?
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Identifying a revenue or cost trend and acting to exploit that opportunity or prevent a continuation of
inefficiency?
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Being able to plan continuously and in real time through the planning cycle?
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Having increased accountability and management responsibility throughout the organization?
Cost/Benefit Analysis
Excel, combined with Finance and Management attitude, is the inhibitor to an organization developing an
effective and valuable planning process. The option to “do nothing” is the most common choice despite
acceptance of the need to change.
Despite the potential value and operational benefits organizations will cite the cost of change as a reason to
remain with Excel. Spreadsheets are so inefficient and costly to maintain it is easy to estimate the financial
benefit of replacing Excel as a system without needing to include any “soft” benefits.
The example included here describes a typical planning process.
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Adaptive Planning v Excel – Return on Investment
This simple example is based upon a company of 3 Sales Channels, 25 Cost Centers, 2 Divisions and a
Corporate Consolidation. The company has an Annual Budget process and prepares 3 Quarterly Forecasts
totalling 4 planning cycles. Each planning cycle has 4 iterations. Involved in the process are 2 Finance
personnel and 30 Executives and Line of Business Managers.
Total
Time
81 hours
x4
planning
cycles
Unit
Cost*
$36.06
Extended
Cost
$11,683
3 hours per Sales Channel
1 hour per Cost Center
4 hours for each consolidation process
to Division
6 hours for each consolidation process
to Corporate
2 hours reconciliation to Actual
and/or Prior Version
50 hours x
4 planning
cycles
x4
iterations
$36.06
$28,846
Reporting and Analysis: Finance time
for updating spreadsheets month to
month for latest actuals and new analysis
20 hours per month importing/rekeying
and reconciling actuals
20 hours per month manually
maintaining existing spreadsheets and
meeting new reporting needs with new
spreadsheets
480 hours
$36.06
$17,308
Executive and Management Time:
Access, viewing and using the
spreadsheet based system. Participation
in the Budget and Forecast processes.
15 hours per Manager per cycle
participating in spreadsheet distribution
and data entry process
10 hours per Manager per month using
spreadsheet system for business
analysis and decision making
5,400
hours
$36.06
$194,712
Phase
Preparation: Finance time for
spreadsheet preparation and
maintenance for new assumptions, new
business rules, import/key in updated
actuals and roll ups from detail through to
consolidated Financial Statements.
Time
5 hours per Sales Channel
1 hour per Cost Center
8 hours per Division
15 hours for Corporate
10 hours for Reports
Process Management: Finance time for
spreadsheet distribution to department
Managers. Includes each iteration and
consolidation process. Reconcile to prior
iteration. Update for new assumptions,
business rules, structures and roll ups as
needed during planning cycle.
TOTAL COST OF CURRENT PROCESS
ESTIMATED ANNUAL SAVING
$252,548
Finance Time
Executive and Management Time
67%
15%
TOTAL ANNUAL SAVING*
$38,558
$29,207
$67,764
ADAPTIVE PLANNING ANNUAL COST
**
$19,970
ESTIMATED 3-YEAR RETURN ON
INVESTMENT*
ESTIMATED PAYBACK PERIOD
239%
11 months
ESTIMATED ANNUAL SAVING AFTER
IMPLMENTATION
*
**
$52,764
Annual cost of Staff including benefits and other costs = $75,000 ($36.06 per hour using 2,080 hours per year). Excludes “hidden
costs” such as Excel storage, network impact of distributing large spreadsheets, opportunity cost of time, value of single source of
planning/reporting information, value of accuracy, value of improved decision making, etc.
Assumes 3-Year Subscription and Average Professional Services Cost
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