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Rob Harag

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Integrated Budgeting for Balance Sheet and Cash Flow

Posted by Rob Harag on Mon, Jan, 27, 2020 @ 07:10 AM

The primary focus of budgeting and forecasting at a majority of companies is the Income Statement and associated KPIs (Revenue, EBITDA, Net Income). Significant investments are often made to increase the accuracy of the budget and forecast via driver based modeling for key P&L line items such as Compensation, CAPEX, etc. Planning for the P&L is distributed across the enterprise to collect assumptions that drive business performance. Budgeting and forecasting of Balance Sheet and Cash position is often times done offline by a smaller group in finance.

Meanwhile - Balance Sheet and, more specifically, Cash are critical business variables that need to be understood and closely managed. This is even more important in fast growing companies that may rely on limited sources of funding to help fuel their growth before they achieve break-even point. Any economic growth that is modeled in the Income Statement can only be achieved if there are adequate sources of funding in the long term and cash balance can be sustained. A number of our customers expressed that understanding their cash balance over the medium term was one of their top priorities when installing a new finance system.

An Integrated Financial Budgeting solution that connects the dots across the financials can create a lot of efficiency and increase insight. A simplified example of a model that we used with a number of customers can be seen in this video. Using an interconnected set of inputs and assumptions that are driven by the end user, every financial assumption automatically translates to the P&L and balance sheet and shows the resulting impact on cash. An actual model will support much more depth with a much larger variety of assumptions, some of the sample transactions shown here are the following:

  • Modeling of revenue and how that automatically translates into Accounts Receivable
  • Relationship between account receivable and cash based on user-driven assumptions for cash collection
  • Budgeting for individual line items such as Insurance Prepayments and the related impact of amortizing the balance into expenses over time
  • Purchases of individual assets with impact on cash as well as P&L and retained earnings based on user driven payment and depreciation assumptions
  • A Balance Sheet walk-forward to explain the changes in balances month-over-month by showing additions and reductions in balances by account line item.

This model is powered by IBM Planning Analytics (TM1), which is uniquely positioned to support such integrated financial modeling. Among many advantages, the key benefits when using IBM Planning Analytics (TM1) are the following

  • Real time (in-memory) calculations of results that facilitates effective modeling with changes reflected and aggregated for immediate review and analysis
  • Scalability – the model will scale to a significant volume of data and relationships and will support complex modeling needs without any performance impact
  • Ability to configure the assumptions and account inter-relationships by the end user to arrive at the desired model without relying on IT for development and system changes
  • Scenario planning – IBM PA provides unlimited number of versions and scenarios that can be run in parallel to test various scenarios of assumptions and their respective impact on cash in the short or long term
  • Intuitive and friendly user interface with XLS and Web options for analysis, reporting, dashboarding and visualization

Learn more about about ACG's integrated budgeting solutions by clicking the button below.

Integated Budgeting Solutions

Topics: IBM Cognos TM1, IBM Planning Analytics

IBM PAX - The 4 Report Types and How to Use Them

Posted by Rob Harag on Thu, Dec, 19, 2019 @ 11:05 AM

IBM Planning Analytics for Excel (PAX) gives users four different report types to choose from depending on the type of report or analysis they would like to create. Some of the report types are new and represent a change from the former Perspectives of CAFE formats. This post is a high level overview and consideration - for a more detailed discussion download our free 4-page guide that includes descriptions of the reports, pros and cons, and so on. 

The four basic views or report types in IBM Planning Analytics for Excel (PAX) are the following:

Exploration

This is the most free-form type of report that is best used for analytics and “Exploration”. It allows for easy pivoting, drill down in rows and columns and makes it really easy to analyze variances and drill down to understand drivers of performance. It is also very effective as the first step to set up a desired view that can then be converted for one of the other report types for further use

Quick Report

This is a new view for IBM and is most similar to the traditional “Block Retrieve” that will be familiar to legacy Essbase users or others using similar tools. Report is defined as block of values that are included in rows, columns and context, the numbers retrieve in a block. Quick reports are not well suited for free form analytics and the drill down capability is fairly clunky, however, they are great for standardized reporting, allow for multiple cubes / reports to be combined on a single page and can be used to work offline with subsequent submission of values into the system.

Custom Report

This is the legacy “Perspectives” reports from the old TM1 platform. This report is the most flexible to allow any combination of values to be included on the page. Each cell is a specific formula that draws from a set of defined values and dimensions. The report provides unlimited configuration and formatting flexibility and is probably the most flexible in terms of analytics, standardized reporting as well as custom view and report creation.

Dynamic Report

Finally – this is the old “Active form” from TM1 – it is similar to the Custom report but allows for drill down on rows and the ability to navigate the hierarchy and flex with any changes in the underlying structures.

Given this many options, it can be difficult for users to decide what report type to use in which particular scenario. For example if you are looking for standardized reporting, is the Quick or Custom report better? What format should you use for input templates? When do you use a Dynamic report vs a Custom report?

The decision has to be made in the proper business context and will generally fall into three categories:

Standardized Reporting

A Custom Report will provide the most flexibility in terms of report structure, formatting and adding external items such as calculations, visualizations, etc. It is the format of choice for many users to build their reporting package. As a cell-based retrieve, it will facilitate any combination of cells and values, allows for asymmetric reports that need to combine different values in rows and columns for functional reporting, etc. The report is very stable and will maintain it integrity even after significant customization.

The second option for reporting is Quick Report. As a block-based retrieve, it does not include any formulas and thus will be most performant of all. It will facilitate custom formatting, allows insertion of rows and columns and also including of custom calculations and values. Multiple reports can be combined on a single page and the format supports virtual hierarchies. Quick Report is convenient as it can be distributed directly users without system access – a Custom Report will need to first be saved as “values” before distribution thus requiring an extra step.

Budgeting and Forecasting

Just like for reporting, Custom and Quick reports are the best choices. A Quick Report will provide the most flexibility. Input templates tend to be pretty well defined, locked down, and therefore do not need a lot of flexibility or customization. A Quick Report can be set up and formatted as needed. It provides the ability to work offline and submit all changes upon re-connecting to the system. It supports block upload of information – users can copy and paste blocks of content from another book / area for upload. It will work with Excel formulas and support calculations.

Analytics and Explorations

The “Exploration” is the best choice for free form analytics. It allows drag and drop of dimensions into rows, columns and page context, drill down on rows and columns, leverages subset edits with all static and dynamic subsets, supports virtual hierarchies, etc. This is the “Ultimate Pivot Table” and for the pivoting enthusiasts out there it will open the door to unbounded analytics. There is no better mechanism for analyzing variances and drilling down to detail to understand the underlying drivers and causes.

For additional detail, download our free 4-page guide on the various use cases and guide for selection.

Download Guide

Topics: IBM Cognos TM1, IBM Planning Analytics

IBM Planning Analytics Version 46 - Key Release Updates

Posted by Rob Harag on Thu, Oct, 10, 2019 @ 07:46 AM

IBM Planning Analytics Version 46 will be released on October 15, 2019. The release includes a number of exciting enhancements to IBM Planning Analytics Workspace as well as fixes and updates to IBM PAX (Excel) and the system overall. Key highlights are the following:

Numbers formatting in IBM PA Workspace

The ability to set format directly from the front-end is being added. This makes it much easier for users to pick the right format in their specific views and reports. A set of pre-defined formats as well custom formatting options are available.

Drill-up on Visualization in IBM PA Workspace

A feature that allows drilling up on a visualization is finally available – until now drill-up was only possible using the “Undo” button, this feature will provide more flexibility in navigating and analyzing individual tables.

Additional technical enhancements to IBM PA Workspace

  • Ability to unload a cube from memory - this allows for temporary reduction of RAM use during times of high usage or issue resolution
  • Setting of thresholds and alerts for individual databases in the Administration page - this simplifies configuration and facilitates unique threshold and alert settings for each database
  • Combining system resource thresholds and alerts in a single configuration page - this simplifies configuration in all environments, both cloud and local, plus provides greater control in monitoring multiple agents in PA Local

 

Click HERE to find more detail and information on the above items as well as all IBM PA Workspace releases by version.

In addition to the above, 15 fixes and defect corrections that are released in IBM PA Version 46, including IBM PAX and general system issues please click HERE

 

IBM Cognos Controller 10.3.1. Released

Posted by Rob Harag on Sun, Dec, 03, 2017 @ 10:35 AM

The latest version of IBM Cognos Controller is now available and features integration with IBM Planning Analytics Workspace. This provide tighter integration and opens up possibilities for better insight, analytics and provides more power to the hands of users.

IBM Planning Analytics is a powerful interface that facilitates reporting, visualization, analytics and planning / forecasting. With a better integration to Controller, it can be further used as a common interface for both the Record-to-Report as well as Report-Analyze-Model-Plan cycles.

A high level overview of the integration capabilities can be viewed at the link below

https://ibm.box.com/s/nscuagvqlfo37m5sn3ckm7hb6lo2y75f)

IBM Cognos Controller is a robust application to support Financial Consolidation and Close. It is a finance-owned solution that is managed and maintained by Finance and offers out-of-the-box consolidation capabilities without need to do any programming or scripting. With its pre-built capabilities to manage the close process including workflow, review and reporting, it is a system that vastly simplifies and streamlines the month end process and provides a robust foundation that improves control and compliance.

IBM Cognos Controller is available with equal functionality for on-premise as well as cloud based deployment. It offers over 260 pre-built and packaged reports to facilitate ease of adoption and maximize ROI.

Some additional capabilities off the Controller 10.3.1. Release include the following:

  • Improved data import in Controller Web
  • More efficient remediation of import errors in real time during the import
  • Drill from data entry forms to the source level detail in the import file
  • A number of other popular customer enhancement requests
  • Limited use license for PA Local & WORKSPACE
  • Support for click to run

Publicly accessible knowledge center site is https://www.ibm.com/support/knowledgecenter/SS9S6B_10.3.1

Topics: IBM Cognos Controller, FInancial Consolidation and Close

Trends in Enterprise Performance Management...

Posted by Rob Harag on Sun, Jun, 07, 2015 @ 06:13 PM

Enterprise Performance Management (EPM) systems are becoming more powerful, user friendly and more accessible - that is the core theme of an article published recently by CFO Magazine. Advances in technology allow EPM systems to process larger quantity of data on-demand and thus increase their analytical capabilities. Wider choice of specialized products and new features such as compatibility with Excel, predictive analytics, cloud computing or mobile access are transforming the way users interact with the applications and thus help advance many traditional functions and business processes.

While IBM, SAP and Oracle command about 70% of the market, there are plenty of sophisticated systems to choose from in the remaining 30%. Reversing a prior trend of industry consolidation, more companies are entering the market and provide interesting capabilities that are often tailored to a specific market or industry segment. Examples of such focus areas include budgeting, forecasting, profitability optimization or scenario modeling.

Gartner categorizes EPM solutions into two main buckets: Office of Finance Processes and Strategy Processes. Most of today's solutions, however, aim to combine financial and operational data across the company and provide a fully integrated view of the company's performance. Such increased transparency and insight into underlying trends and drivers facilitates a higher focus on key factors affecting financial performance. This in turn helps to more effectively execute a company's business strategy.

There are three primary drivers that are currently changing the way people and companies interact with and deploy EPM solutions:

Speed – with the increased use of in-memory computing, systems are more nimble and flexible to complete calculations in real time and are able to handle the ever increasing quantity of data. The improved performance facilitates a number of benefits such as usability, collaboration, integration and others. These capabilities are further changing the role of Finance and help it to be a more effective facilitator of change, trusted advisor to the business and a driver of value.

Usability – there have been great advances in user friendliness and usability of the tools as vendors continue to make significant investments into more intuitive and easier to understand user interfaces. Dashboarding, visualization, integration with Excel, web-based capabilities and templates are some of the key focus areas. Cloud computing plays an important part in increasing adoption through better flexibility of use. Finally, mobile computing facilitates more distributed data collection and reporting with the ability to drill down directly on the mobile device, typically an iPad.

Integration – EPM systems are becoming increasingly more integrated with solutions expanding far beyond the traditional financial planning and reporting. Operational planning, sales performance management, strategic planning are only a few examples of such new use cases. Integration of these systems and processes provides a higher quality output and facilitates collaboration across groups and departments, which yields more efficiency and improves performance. Predictive Analytics, while still in early stages, is further pushing the frontier on the type of insight and depth included in financial information involved in decision-making.

Topics: Business Forecasting, Performance Management, Financial Planning and Analysis

4 Reasons Why Financial Planning & Analysis Is Not Effective

Posted by Rob Harag on Fri, May, 01, 2015 @ 09:40 AM

Considering how important the Financial Planning and Analysis (FP&A) function is in providing critical business insight to company CFOs and CEOs, it is surprising how low its capabilities are still regarded amongst business executives. According to a recent study published by APQC, only 40% of 130 executives surveyed described the FP&A function as effective. Given all the talk and focus in the industry on business analytics and insight, as well as the availability of numerous systems and solutions from niche players and mainstream vendors, it is surprising that the FP&A function is still rated this low. Based on our observation and experience, there are four primary factors that drive this outcome:

1. Continuously raising the bar on expectations

The demand for meaningful business insight and analysis has been growing continually over the past years. Economic uncertainty, regulatory scrutiny, increasing competition, changing weather patterns or geopolitical pressures keep creating new and more urgent demand for information that FP&A needs to satisfy. Even as the FP&A capabilities, processes and technology improve, the FP&A groups are under increasing pressure to respond to more and more ad-hoc requests from many different groups and stakeholders. As a result, they spend most of their time scrambling to respond to requests under rapid fire and often do not have the ability to step back and develop capabilities that would bring them to the next level. What was working well yesterday is not good enough today.

2. Playing catch-up with technology

Today’s finance and planning infrastructure is typically complex as a result of aggressive growth and multiple mergers and acquisitions. Often times the reporting and analytics relies on information from multiple legacy or department level systems. Excel typically plays a significant role in arriving at the end product. To further complicate matters, the demand for business driver detail and modeling require information residing in transactional systems that are outside finance. Even though companies continue to invest and integrate the various systems, ongoing business evolution continues to fuel more changes at a rapid pace, thus creating a moving target. As a result, Finance spends most time pulling information together from various systems and compiling reports or explaining variances at a high level (vs budget) rather than analyzing data and providing value add insight.

3. Slowly adopting advanced planning techniques

Majority of companies still rely on a fairly static process for budgeting, forecasting and reporting. While some of the advanced techniques such as rolling forecast or driver based planning are slowly creeping in, they are not the prevailing methodology yet. It is not uncommon for a large organization to spend 6 months preparing the annual budget and for the budget to be obsolete shortly after it has been completed. Forecast is often times the result of a finance process (YTD Actuals plus Budget) and includes little real time insight from the business. Reporting tends to be backward looking, focused on results to-date and explaining variances to plan or forecast. As such, financial planning is not sufficiently flexible and aligned with business strategy and is slow to adapt and accommodate changes in business conditions.

4. Advanced Analytics still in early stages

While predictive analytics, demand planning and other capabilities are all the buzz these days, they are at a very early stage of adoption. Even if they exist, they are typically not integrated with the overall financial performance management framework. They are usually performed by a dedicated group of people, many times statisticians or other similar functions, in isolation and focused on a specific area / problem. The result is then used as an input into the planning process for further processing. Tremendous upside exists in integrating the forward looking capabilities into financial planning from both systems and procedural perspective, however it will take some time until this practice becomes mainstream.

Topics: Business Forecasting

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