It’s almost 2016, but before we close off this year, let’s look back at what’s been trending in corporate finance—our pick of the most important things that happened in the world of finance in 2015, aggregated and packaged into a quick-to-read and easy-to-skim format. Here’s our selection of the articles and news that caught our attention during the year.
- Spreadsheets are still widely present
- Supply-chain disruptions can reduce a company’s value by 7 percent
- Finance needs to get better at workforce planning
- Abandoning budgets in favor of rolling forecasts
- Zero-based budgeting: no longer just a crisis tool
- Budgets are still spinning through endless iterations
- Margin management is the top priority for 2016
Ventana Research revealed that, despite all the investment in systems, 9 out of 10 companies still use spreadsheets to plan, budget, analyze, and report data.
Why does it matter? Although spreadsheets tend to slow down processes, be error-prone, and are not scalable, they remain a big part of business life. In fact, a survey from a recent Anaplan webinar found that 40 percent of finance teams are spending more than 20 hours a week in spreadsheets. Start this next year ahead by leaving spreadsheets behind.
Research by Accenture revealed that even a brief disruption in business can cause lasting harm to company revenue, market share, shareholder value, and reputation. And the retail industry has greatly faced this risk—stockouts and overstocks cost U.S. retailers $1.75 trillion a year.
Why does it matter? When the stakes are high, it is imperative that the CFO manages risk and ensures that the supply chain is resilient to disruption. With the supply chain tying up so much cost and working capital, it is an obvious place for finance to start as they increasingly partner with the business.
Business advisory firm CEB pointed out that few finance teams are good at strategic workforce planning.
Why does it matter? Responding to the growth opportunities while keeping a firm hand on costs is a perennial challenge. Human capital typically represents the major portion of controllable costs, and finance teams should work with their peers to develop workforce plans that are aligned with strategy, sensitive to supply, and go beyond simple recruitment plans.
Research by Accenture revealed that only 11 percent are fully satisfied with their planning capabilities and more are adopting rolling forecasts, flexible budgets, and event-driven planning.
Why does it matter? Moving to rolling reforecasts requires a change in mindset and most likely a change in financial systems, too. To be effective, forecasting needs to be a rapid, light-touch process for both citizen planners and finance teams—and that is difficult to accomplish with legacy planning solutions. In the new year, look for a solution that supports rolling reforecasting and strive to put rolling reforecasting into practice to enhance finance’s partnership with the business.
Zero-based budgeting (ZBB) is a classic business process that has been around for decades, but according to McKinsey & Company, it has gained a new edge. With an increasing number of high-profile companies using it, ZBB is an effective way of keeping sales, general, and administrative (SG&A) expenses in check.
Why does it matter? The results can be spectacular. In another related article, Accenture mentioned successful implementations where a consumer goods company was able to save $350 million in SG&A expenses in the first year of implementing ZBB. In the new year, consider combining your ZBB with your rolling reforecasting to enhance accuracy of SG&A expenses and other key business initiatives.
As most companies kicked off their annual planning and budgeting process, the non-profit business benchmarking and research firm APQC revealed that most budgets go through five iterations before approval.
Why does it matter? Spinning through repeated iterations of planning and budgeting is both time consuming and costly. It is increasingly recognized that unifying sales and operational planning (S&OP) and financial budgeting on an enterprise planning platform, such as Anaplan, helps to expedite FP&A processes.
It wasn’t a surprise when the Financial Executives Research Foundation (FERF) revealed that margin management remained the top priority for finance in 2016. Budgeting and tax planning figured in the top five, but a massive 82 percent of C-level financial executives listed margin management as their most important challenge.
Why does it matter? Providing detailed multidimensional profitability reporting used to be a major undertaking requiring significant investment; however, that is no longer the case. Quite a few of our partners have developed a range of cost and profitability apps—the most recent being Deloitte’s iCost app, which makes it fast and easy to design and run models that can quickly be adapted to changing needs and situations.
Each month, we will keep an eye out for topics to include in the next edition. Feel free to tweet your recommendations to @Anaplan and share your thoughts on our picks of the year’s hot topics in the comments below.