It’s no secret that business and finance professionals are spending too much time on mundane tasks, and not enough on delivering insight and other value-added activities. A new survey has found that the problem is only getting worse, driven in part by overreliance on tools such as spreadsheets that are quick to set up, but extraordinarily time-consuming to manipulate in order to get reliable information.
In 2011, Quantrix surveyed business and finance professionals about their budgeting, forecasting and planning processes, toolsets used, and people involved. We repeated the survey in 2012, and gathered the results from business-to-business and business-to-consumer organizations ranging from 50 to more than 5,000 employees. Respondents were CEOs, CFOs, controllers, CIO/IT management, and departmental or other business managers.
The results of the 2012 Budgeting, Forecasting and Planning Survey show that while the process of generating budgets, plans and forecasts has stayed relatively static, business professionals are spending increasing amounts of time wrangling data and manipulating inadequate toolsets to deliver the budgets, forecasts and strategic plans that drive company decision making.
Where Does All the Time Go?
Recasting budgets:
Business and finance professionals spend a significant amount of time recasting budgets. According to the Quantrix survey, 19 percent of companies are recasting budgets monthly and 58 percent quarterly. The larger the company, the more time spent re-doing work: of the companies with more than 1,000 employees, 33 percent report recasting budgets monthly.
Developing What-Ifs:
Companies also spend a significant amount of time developing ad-hoc or “what-if” scenarios. Large companies and B-to-B companies prepare the most ad-hoc scenarios, with 16 percent of the former and 15 percent of the latter developing more than 12 scenarios per year. Across the board, one third of companies develop between four and six scenarios per year. Respondents to the survey report that new competitors, new markets and new products drive requests for ad-hoc scenarios, along with changing commodity prices and currency rates. Yet the single largest factor prompting the need for a scenario, with 63 percent of companies across all sizes and markets, is variance from the forecast.
These scenarios are valuable, particularly for companies in industries that must factor in a large number of variables such as currency fluctuations and raw material price changes. Yet in order to be useful, they must be developed in a timely fashion: 44 percent of companies report they must deliver them within one week, and 17 percent require a 24-hour turnaround.
Developing these ad-hoc scenarios and forecasts is extremely time consuming. Business and finance professionals must seek data from numerous sources and about multiple business factors and dimensions. They report problems with replication of errors in legacy databases, pinpointing data sources and deciphering formulas within a planning model, and lack of multidimensional views as technical challenges in developing plans, forecasts and models. But the biggest logjam occurs when business professionals must “roll up” data from multiple sources into a comprehensive model that delivers accurate and insightful information.
Data Collection:
Companies need views of multiple dimensions — by product, by market, by region, or by line of business — in order to gain a holistic picture of the business, which is a challenge with “flat” tools like spreadsheets. It also means collecting data from multiple sources. And much of that data today is contained in siloed spreadsheets scattered throughout the enterprise.
“Each spreadsheet represents a single dimension of a business, and enterprises have a high level of dimensionality,” says Robert Kugel, SVP & research director — business research at Ventana Research. “When you try to roll up many dimensions into a single view using a tool that only handles two dimensions well, you have to do all kinds of workarounds.”
Unproductive Time
It is no surprise that survey respondents ranked challenges with rolling up data as the most difficult. “Even people with many years of experience have a hard time rolling up spreadsheets into a consolidated view,” says Kugel. “It is a time-consuming and error-prone process, and people have to spend a lot of unproductive time overcoming the inherent defects of spreadsheets.”
The amount of time is staggering: Respondents to last year’s survey report that 64 percent of their time was spent on routine activities such as collecting and validating data and administering the overall process. Only 31 percent of their time was devoted toward conducting the value-added analysis needed to drive business decisions.
And the problem is only getting worse: Respondents to the 2012 survey report that the amount of their time spent on routine tasks has risen to 72 percent, leaving less than one-third of their time available for the insightful analysis that they are hired to deliver.
Companies have been following roughly the same processes and using spreadsheets for decades to develop their financial models, so why is the problem getting worse?
One theory is that the workforce downsizing driven by the global recession is significantly impacting performance. “Companies are still using the same manual processes, but have laid off many people,” says Kugel. “There are fewer hands to do all of that manual work.” Ventana Research is seeing a similar scenario in its recent surveys: on average, companies need an extra half day to perform a financial close than five years ago. “Companies are relying too heavily on manual processes, including using spreadsheets,” says Kugel.
Why Rely on Outdated Technology?
If manual processes driven by the use of legacy technologies such as spreadsheets are such an issue on today’s business environment, then why do so many companies rely on them? The answer is part habit and part fear.
Spreadsheets are the most widely used tool for financial planning and analysis, report the respondents to the Quantrix survey. Use of the inexpensive tool goes beyond just small and mid-sized firms: more than 90 percent of companies with more than 5,000 employees use spreadsheets.
“Spreadsheets are simple for people to set up, and it’s easy for people to translate their business knowledge into a model,” says Kugel. They also are ubiquitous, and therefore have been part of the process throughout the entire careers of just about every business or finance professional. “In essence, many use spreadsheets because ‘we have always done it this way,'” says Kugel.
Yet companies are starting to show signs that they plan to overcome this inertia: more than 60 percent of the respondents to the Quantrix survey report that reducing reliance on spreadsheets was a strategic initiative for 2012.
This may prove challenging, as companies fear the changes that come with using new tool sets. Just about every new hire has basic knowledge of spreadsheets; most other tools require training. Companies are worried about training costs, but are even more concerned about losing trained employees after they have switched budgets and forecasts to a new toolset.
These concerns are colliding with the realities of business in a downsized world: with CFOs and other highly paid professionals spending three-quarters of their time on the administrative activities required to get value from spreadsheet-based data, companies may find they can no longer afford these “low-cost” tools. While it may be quick and easy to set up a spreadsheet model, that is just the beginning of the work involved, not the end. “People end up spending many multiples of that initial set-up time manipulating a technology that was never capable of doing the job they are asking it to do,” says Kugel.
When “Free” Becomes Expensive
As businesses struggle to compete and succeed in an economy recovering from a global recession, they need solid information now more than ever. But the combination of a downsized workforce and an overreliance on manual processes driven by inadequate tools can force a potential sea change for business and finance. “People are spending too much unproductive time overcoming the inherent defects of spreadsheets,” says Kugel. “There is real value in automating with tools that can handle multiple dimensions and create scenarios quickly and easily.”
In order for that to happen, attitudes need to change from the top down. “CFOs and controllers have to give more than lip service to change,” says Kugel. “They need to commit to training people, and to reward them for developing skills on new toolsets, including providing a path for advancement.”
While companies tend to view spreadsheets as being “free,” the reality is that relying on this technology is growing more costly every day. New technologies and toolsets, combined with training and commitment from the top to change, will enable companies to make huge strides toward improving the financial planning and analysis process.
By Dave Phillips, from: http://businessfinancemag.com/article/overcoming-unproductive-time-budgeting-forecasting-and-planning-0620