Tag Archives: budgeting

The other side of Cognos Insight – A powerful planning client for TM1 (Guestpost)

Cognos Insight and TM1

There is a lot of buzz about Cognos Insight. It is a great tool for analyzing and discovering data. There is also the ability to perform powerful what-if analysis through the use of write-back capabilities. But Cognos Insight is actually more than just a personal desktop analytics tool. You can use it to create visually appealing planning applications for IBM Cognos TM1.

An awesome planning client

Many business users literally hate the mandatory planning, budgeting and forecasting processes. Part of the issue are the cumbersome spreadsheet templates. Cognos Insight provides a radically new approach. You can develop visually appealing applications that connect directly to your TM1 model. Here are some of the great things you can do with Cognos Insight:

  • Create detailed instructions for the planning or forecasting process
  • Instructions can include images and hyperlinks
  • Automate process steps by including action buttons
  • Provide additional planning context by including dashboards that connect to your Cognos 10 models

To do that, you simply have to connect Cognos Insight to the workflow of a specific TM1 planning application.

Cognos Insight and TM1

Let’s take a look at a simple example – a sales forecasting model. It is a well-known best practice to include specific instructions in a planning template. That helps the business understand the model and to identify specific tasks that they need to focus on. Cognos Insight allows you to insert text boxes, images and hyperlinks. Action buttons make it easy for casual users to jump between different planning pages and cubes. The result is a clean-looking set of pages.

Cognos Insight TM1

Planning and forecasting should go hand-in-hand with analysis. Cognos Insight allows you to include dashboards and reports from your Cognos 10 or TM1 environment. This makes it very easy and pleasant for the business people:

Cognos Insight Dashboard

You can finally also include traffic lights and real-time charts right in your actual planning application. This provides users with instantaneous & visual feedback. We all know that a picture says more than a thousand words, right?

Cognos Insight TM1

Last but not least, you can also leverage great short-cuts for entering data.

Cognos Insight & TM1

Cognos Insight is much more than just a personal analytics tool. Using it as a client for TM1-based planning or forecasting models offers up some fantastic opportunities. Business users love the visual and interactive applications you can build. Is it hard to create these applications? No, not really. All it takes is drag and drop.

Paul BremhorstAbout our guest blogger – Paul Bremhorst

Paul is currently working as a Solution Architect for the IBM Business Analytics Product Marketing team. He joined Cognos as a BI Consultant in 2007 from a background of developing sales reports in the banking and finance sector. He lives in beautiful Stuttgart, Germany and loves to ride his motorcycle.

 

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Please welcome IBM Cognos TM1 10.1

IBM Cognos TM1 10.1

There is a lot of exciting stuff happening in the Business Analytics area. Last week, I wrote about the release of the personal analytics tool Cognos Insight. But there is more. Along with Cognos Insight, IBM also released the latest version of TM1. And let me tell you, IBM Cognos TM1 10.1 is a significant release. There is a lot of new and really exciting stuff in there. Here is a really short preview. If you want to see more, make sure to register for the official virtual launch on Wednesday, March 7th.

Performance Modeler

One of the most significant enhancements to TM1 10.1 is the addition of Performance Modeler. This is the environment where you can build and maintain the different models for planning, forecasting, profitability analysis and such. Performance Modeler provides new and highly visual tools for getting the work done. There are guided processes for standard tasks such as importing data and deploying models to end users.

Performance Modeler

TM 10.1 - New modeling workbench

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Better Forecasting And Budgeting Starts With Analysis – IBM Cognos 10 in Action

FORECAST ANALYSIS

Much has been written about developing better forecasting and budgeting templates or improving the overall process. But to my surprise there is hardly any focus on the role of analysis. I have seen many organizations where managers ‘survive’ the forecasting and budgeting cycle without ever spending time performing meaningful analysis of their data. They simply focus on getting the numbers in to satisfy finance and senior management.

This is a wasted opportunity. People should use that occasion to gain insights about their business. Lack thereof is likely to result in forecasts and budgets that are not meaningful. Some of you might say: ‘Wait a second! Managers do obtain some reports.’ True. They get the classic variance report with a ton of detail. But working with this is time-consuming and it is extremely difficult to identify critical trends and to see the big picture.

Forecasting Report

A traditional variance report. What does it tell us?

BETTER FORECASTING WITH ANALYSIS

Using a Business Analytics platform like IBM Cognos 10, you can make is easier for managers to gain critical insights. Here are a few ideas that you might find useful. Let’s look at the example of a sales manager for a European division of a global company. This manager has to forecast revenue and associated expense.

1. GO VISUAL

First of all, toss those detailed variance reports. Line of Business managers will most likely not obtain any information from them. Human beings do much better processing visual information. You can find a lot of information about this topic on this blog. So, try to swap out those hundreds of data points with a few meaningful charts. Your teams will be thankful.

2. CONSIDER EXTERNAL DATA

The variance report does not really tell us anything about our business potential. We could therefore consider looking at external data such as market trends. More and more of my clients do that. It helps them with assessing their overall position and it also helps them set realistic but ambitious targets. The example below shows that market growth in Europe is a bit limited compared to North America and Asia.

Market Size chart

The situation in Europe is not looking good

3. STUDY HISTORY

History is not necessarily a predictor of the future. But we should not ignore it. We might be able to identify seasonality and to detect general trends. Pick the critical measures. Line charts are usually a great choice to display this type of data. The example below shows that revenue is cyclical and that the general trend is positive:

Revenue Reporting

On the rise: Revenue trend for Europe

 

4. CHANGE YOUR PERSPECTIVE

One of the nice things about modern Business Analytics tools like Cognos 10 is that we can view data from multiple different angles. Use that capability to your advantage! Try to explore different perspectives. Look at the example above. Now, compare this to the view below. Same data. Just a simple change in Cognos 10:

IBM Cognos 10 dashboard

A different perspective

Our biggest months used to be in summer time. But that has shifted towards year-end. Same data – different perspective. Explore!

5. BENCHMARK YOURSELF

It makes sense to learn from others as well. We could do some internal benchmarking as well. In our example, we could look at deal sizes (looks like Europe’s deals are growing nicely and they are above company average):

Deal size chart

The average deal has grown bigger

Ok. That sounds good. But does the deal size come at a cost? Once again, let’s do some internal benchmarking and look at the ratio of expenses and the associated revenue. It looks like Europe is slightly higher which might explain the higher deal size.

Expense Ration chart

Every penny that is earned in Europe requires higher expenses

That information is valuable. It also leads us to think further and to ask some critical questions (Does it make sense to review our spending? Does the higher spending lead to bigger deals?). We should obviously not stop right here.

6. LOOK AT LEADING INDICATORS

What about other non-financial data as well? For revenue budgeting, I might also want to look at a leading indicator like customer satisfaction. And I might also want to look at our track record of winning deals (win-loss-ratio). Take a look:

Customer satisfaction chart

Customer satisfaction is rising again. A leading indicator for sales?

BETTER INSIGHTS

This is a simple example. The manager is now equipped with a few key insights:

  • Market growth is low
  • Our revenue trend is still positive
  • Buying patterns have shifted
  • Our strategy of investing in selling activities has increased the deal size
  • Customer satisfaction is increasing which could lead to higher sales

These are valuable insights. And it did not take much time to obtain them. The old variance report would not have provided that insight and it would have consumed a lot of time.

Try to incorporate a few of those ideas in your forecasting and budgeting processes. Doing this with spreadsheets is obviously difficult and probably explains why so many organizations are stuck with the traditional approach. Business Analytics software like IBM Cognos 10 makes it a lot easier to do that.

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Annual Budgeting – Our favorite season?

BUDGETING

Yes, it’s that time of the year. The time that is often filled with pain and fear. No, I am not talking about Halloween but about the corporate budgeting process. Much has been written about the annual budget. And most of the written stuff is not positive. Jack Welch alone has provided us with a few memorable quotes such as:

“The budget is the bane of corporate America. It never should have existed.”

“But the budgeting process at most companies has to be the most ineffective practice in management. It sucks the energy, time, fun and big dreams out of an organization. (…) And yet (….) companies sink countless hours into writing budgets. What a waste!”

WHAT IS A BUDGET

In theory, a budget should actually be a rewarding and important process. Why? Let’s look at the purpose of a budget: It should outline how we want the future to look. It details planned actions, outlines investment areas etc.. When you think about it, these are very important tasks. And it should not be that nerve racking. Budgeting and planning allow us to sit back, look at our past achievements and provide us with the opportunity to lay out a path towards future success. Doesn’t sound too bad, right?

THE PROBLEM

Indeed, the annual budgeting process is anything but popular. No wonder. It is usually very difficult and the resulting value is dubious. So, what’s wrong? Many things. Here are a few statistics that I pulled together from various articles, books and conferences. Depending on the specific sources, number tend to vary a bit here and there. But the general trend is the same.

  • Over 70% of all budgets loose their validity after the first quarter of the new fiscal year. The speed and volatility of our global connected world renders many assumptions useless.
  • And estimated 94% of all executives do not have confidence in the budget numbers. They believe the numbers are either outdated, they are padded or they are meaningless. Huh?
  • 75% of all companies need more than three months to complete the entire cycle. Even three months is a long time these days. Responding to changing market conditions becomes very difficult with these long cycle times. Also, think about the enormous amount of resources that are invested into the process. Do we really want to spend all that time only to find that the output doesn’t actually reflect reality?
  • Over 75% of all budgets are believed to be sandbagged. Gaming the numbers remains a popular competition: cost center managers exaggerate expenses to protect their turf. Sales managers express negative market views to maximize their earning potential. Not good.

TIME FOR CHANGE

It’s time for a change! In the next few weeks I will share a few ideas for making the budgeting process more valuable. On Thursday, business advisor Mike Duncan will discuss the overall purpose of the budget. He recently wrote a nice article called Six Ideas for Setting Successful Budgets.

If you have stories and best practices to share, please get in touch with me.

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Simplicity is the ultimate sophistication

Have you ever been to a giant buffet? Try to remember what it was like. We usually get excited when we see the various options and we ‘cruise the aisles’ to identify what we want. If you are like me, you have a hard time deciding and you end up wandering around taking a little bit of everything but nothing of anything. By the time you leave, you feel bloated and promise yourself to go easy next time. Chances are you won’t even remember what you ate.

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A Few Thoughts About Planning

There is an interesting discussion going on right now. Actually, it’s been going on for a few years. There are some people that argue against planning: “Why plan today? The world is so volatile! Any plan is typically rendered useless within a few weeks or months.” And then there are others who argue that planning is more important today than it’s ever been: “Planning helps us prepare for the future. It helps us consider our options.” I personally support the later opinion. Planning is a critical process today.

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Success with Forecasting – A discussion with Pieter Coens

Please meet Pieter Coens. Pieter is the Director of Finance & Control at Landal GreenParks in the Netherlands. He started his career in public accounting and joined Landal over 16 years ago. Pieter has held various positions in finance at Landal.

Landal GreenParks is a leader in bungalow-park management and rental. Landal has over 65 parks with a total of approximately 11,000 chalets. With 47 parks in the Netherlands, Landal leads the Dutch bungalow -park market. Outside the Netherlands, Landal has parks in Germany, Belgium, Austria, Switzerland and the Czech Republic.

Pieter gave a great presentation about Landal’s planning and forecasting processes at the IBM Finance Forum in Amsterdam on May 24th, 2011. We were able to have a quick chat at the event.

Christoph Papenfuss: You have implemented IBM Cognos to automate your budgeting and forecasting processes. What have you accomplished so far?

Pieter Coens: IBM Cognos currently helps us create an annual budget along with a monthly forecast. For that purpose, we have implemented several elements including models for Rental Revenue and our P&L.

Christoph Papenfuss: How did you manage your processes before that?

Pieter Coens: We used to manage our processes with a myriad of Excel files. It was very difficult. We ran into various issues such as managing excessive file sizes that slowed down the network, dealing with sluggish recalculations, difficulties tracing interdependencies etc.. Aggregating the different files was extremely cumbersome and time-consuming. And of course, there are the associated audit issues with spreadsheets.

Christoph Papenfuss: How are you benefiting from the implementation?

Pieter Coens: IBM Cognos has allowed us to automate a lot of the steps in the process such as preparing, distributing and aggregating planning templates. We are also able to develop more intricate models that provide us with better insights. Overall, we feel that our finance team and the business users are now able to focus more on the actual planning activities rather than the administrative tasks that I described earlier. My team is much more productive.

Christoph Papenfuss: You have an annual budget and also a monthly forecast. Who is involved in the process?

Pieter Coens: Finance is in charge of executing the process. But the business owners have to work and develop their own budgets and forecasts. They are in charge of entering their data in the models. Finance plays the role of the coach: we help the business make sense of the numbers and we guide them through the forecasts and budget iterations. This approach provides us with several advantages: By actively involving the business we can obtain more accurate and timely data. We also feel that the business is able to gain better business insights by actively working with their budgets and forecasts and the associated monthly actuals. Last but not least, Finance has more time to focus on value-added tasks such as performing analysis.

Christoph Papenfuss: You have a solid forecasting process. How often do you update the forecast and how far do you look into the future?

Pieter Coens: We currently use a monthly forecast. This allows us to anticipate and react to market changes. We ask the business to perform a detailed forecast for the next two months only. The remaining months until year-end are automatically calculated as a trend of the 2-month forecast. We found that creating a detailed forecast further out than 2 months does not necessarily result in very accurate data and it also takes a lot effort. We want the business to focus their energy on the short time-horizon and only forecast the know effects throughout the Full Year.

Christoph Papenfuss: You are proponent of driver-based models. Can you give us an example of how you have implemented this? Also, what are the benefits for the organization.

Pieter Coens: Driver-based models allow us to increase the speed of the budgeting and forecasting exercise. Also, we are able to perform better analysis at month-end and during the planning activities: Instead of just looking at an absolute variance, drivers allow us to review this from different angles such as price or volume effects. Food & Beverage Revenue, for example, can be calculated as Number of Guestnights * Average Spend on Food & Beverage.  The associated Cost of Sales are a percentage of the Food & Beverage Revenue that has been calculated.

Christoph Papenfuss: How did you go about implementing the IBM Cognos solution?

Pieter Coens: We decided to follow a modular approach and started with a few smaller projects. This allowed us to build critical skills and develop success much earlier. This in turn led to a situation where the business heard about our accomplishments and they started asking for additional projects e.g. forecasting on Operational Management Information.. Change management is a lot easier if the business users ask for projects instead of us pushing them to accept

Christoph Papenfuss: What else are you planning to do?

Pieter Coens: We are definitely looking to reduce the level of detail in our models. More detail does not mean higher accuracy. On the contrary, more detail requires more work and it does not necessarily drive accuracy. We are also looking to implement additional models such as cash flow and predictive modeling/forecasting for our Yield department.

Christoph Papenfuss: Thank you very much, Pieter! Good luck with your implementation.

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The ultimate rolling forecast workshop

Having fun at the workshop

Forecasting is a critical topic for many companies these days. No big surprise: the volatility and the speed in the world requires organizations to stay agile. About four years ago, my team and I started working with several customers and thought-leaders (David Axson, Steve Morlidge) to collect best practices for forecasting in these turbulent times. The results of the countless hours of talking, brainstorming, analyzing and reading are captured in the IBM Cognos ‘Best Practices in Rolling Forecasts’ workshop. This workshop ended up being way more successful than any one of us would have ever imagined. I have personally delivered over 100 of these events in the past three years.

THE WORKSHOP FORMAT

Forecasting is a complex topic and we were able to collect a full library worth of experiences. But simplicity rules and we selected the most interesting aspects

David Axson is showing the way!

to fill the agenda for a half-day workshop. That creates more focus and the attendees leave with just enough ideas to drive change in their organizations and without feeling overwhelmed. The overall focus is on the business process and not software. While we share a lot of best practices, the workshops are very interactive. We usually have extended and very fruitful discussions amongst the participants. Many attendees stay after the official event ends to continue their idea exchange. This is one of my favorite parts. There are always many things to learn.

BEST PRACTICES AND MORE

Static vs rolling forecasts?

So, what do we cover? A lot! The focus is clearly on proven practices that were identified by our customers. But it is also important to look beyond those things. We therefore injected some thought-provoking ideas from our thought-leaders. And each workshop we run typically provides new ideas, stories and experiences that we leverage to enhance the materials.  It would be too much detail to cover in this post but here are some of the things we discuss:

  • Is a rolling forecast right for your organization?
  • What’s the right time horizon? 90-day? Four quarter? Six quarter? Three year?
  • How often should you update the forecast?
  • How do you use a rolling forecast as an early alert of threats and opportunities?
  • What is the role of scenarios?
  • What role can driver-based modeling and tools play in the forecast process?
  • How do you sell the need for a rolling forecast?
  • What does the business case look like?
  • How can you measure the efficiency and effectiveness of your process?

IT’S YOUR TURN NOW!

If you are considering to make changes to your forecasting processes or if you are working in the IT department supporting Finance, you should join one of these workshops. It is a great opportunity to meet other finance & IT professionals and to get solid ideas. Believe it or not, but we have had several customers attend multiple events. They simply liked the interaction with the other professionals so much and they felt that they got a lot of value out of each workshop. Check out my events page to find out about upcoming dates or simply drop me a note. Hope to see you soon!

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Vienna calling!

Harald Hornacek

A famous host: Harald Hornacek

Greetings from Vienna: home of the schnitzel, yummy dumplings and lot’s of amazing history. But Vienna is also the hub of many successful companies. Today is the third European IBM Finance Forum 2011. We have had a great day so far. Lot’s of attendees from the Finance & IT departments of different Austrian businesses and government agencies. The agenda here is once again packed with Finance content. And as in all the other locations, we also have some great speakers. The event in Vienna is hosted by Harald Hornacek, chief editor of the popular business magazine Succeed. The magazine is distributed by Austrian Airlines and flyers love it for its fresh and meaningful content. Harald is quite famous in the Austrian and European business community for exactly that reason. The attendees have a great time listening to his insightful comments and questions. But let me back up for a quick second. There was another Finance Forum in Zurich last week.

HIGHLIGHTS IN ZURICH

The Dolder Hotel, Zurich

The Finance Forum Switzerland was held at the famous and gorgeous Dolder Grand hotel. It is situated high above the city with breathtaking views left and right. Steve Morlidge, the author of ‘Future Ready‘ delivered a refreshing keynote about best practices in forecasting. He will be speaking at many different Finance Forums across Europe this year. We also had a customer speaker from a 500 year-old company (can you believe that?): Mr.Binzegger from Orell-Fuesseli talked about their innovative use of SPSS software to develop highly accurate credit ratings for companies. We also heard Mr Wirth from Nycomed talk about how to build an effective reporting and information strategy in a global environment. The Dolder Hotel staff also served up some amazing food and coffees during the break. Great event.

VIENNA CALLING

Back to the event here in Vienna. It’s been a bit of a mad rush for me in the background. I left home on Sunday morning to run two Rolling Forecast workshops with close to 40 CFOs from different companies in the Middle East on Monday and Tuesday. Wednesday morning we found out that one of our customer speakers in Vienna ended up calling in sick and I jumped in with a different presentation last minute. We are about to start a panel discussion between different customers and experts.

NEXT STOP BUCHAREST

Hopefully you will get the opportunity to join one of the IBM Finance Forum events in the next few months. As you can see, we always have great speakers, great content and also lot’s of valuable discussions. Knowledge exchange and networking is a critical part of this. My next event is scheduled for May 4th in Bucharest. To see more photos from all the different events click HERE. See you soon!

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Vienna: Vista 3 - The location fro Finance Forum

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Finance Forum: Many great discussions

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Collaborative BI: A real-life scenario

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Cool software? The Connected Business – Part 3

Yeah, those spreadsheets. Welcome to part 3 of this series of posts. An interesting special section in the Financial Times prompted me to post a quick summary with interesting quotes. But the report did not necessarily provide some specific details about why spreadsheets make our lives difficult. Part 2 then focused on the particular pain points we all experience in our daily business lives.

THE PROBLEM & ANSWER

But how exactly does Business Analytics software help and how can we replace spreadsheets? I get very frustrated when I read white papers that talk about ‘gaining efficiencies and critical insights with the push of a button’. There is so much BS talk out there. And as a result, I find that there are many managers out there that still don’t understand what technology can do for them. It’s time for clarity, isn’t it?

A FAIRY TALE?

Let’s take a look at one of my clients. When we first met, the new CFO was extremely frustrated with the tedious annual budgeting process. A team of six well paid finance professionals spent almost seven months pulling the annual budget together. The entire process was run through spreadsheets. The team spent an awful lot of time managing the 250 something workbooks for the different cost and profit centers. Complex formulas had to be fixed, data had to be copied & pasted from SAP R3, files had to be distributed and collected, reports had to be manually compiled and reconciled. In other words: it was painful and the team of six had very little time to do something fun. Their workload was extremely close to the picture we discussed in part 2 of this post.

HERE COMES THE SOFTWARE

The CFO decided to do something and selected Cognos to help automate the budgeting process. It was actually a rather short project with only 35 business days for the expense budget. Cognos replaced the entire spreadsheet jungle. But why and how did it help exactly. Here are some basic examples:

  • Centralized model maintenance: One of the key issues with spreadsheets is formula maintenance across different workbooks and files. Instead of copying and pasting, BA software allows me to maintain my formulas in a central repository. One change in one place only. That saves a ton of time and also ensures data integrity. How is that?
  • Automated interfaces: Why should we have to manually load actuals or other data from transactional systems into spreadsheets? There is a lot of risk (apart from the boring manual labor). BA software allows you to run automated interfaces. Just like in our transactional systems. Nothing fancy. It just works. And it saves a ton of time and frustration.
  • GPS: One of the other frustrations with spreadsheets comes from the inability to track progress. A simple question like: “Has Ted started his budget?” can be extremely difficult to answer. The file is not on the central server anymore as Ted is out on a business trip (and then he deletes his file by mistake..). BA software allows us to keep track of progress and it stores all the data in a central repository. Again…a very simple thing. But extremely effective. Imagine a spreadsheet with a powerful GPS on the roof!
  • Cool interface: Working with a spreadsheet template can be very frustrating. Either the templates are completely locked down or they are so flexible that I can break them. Modern software provides us with easy-to-use interfaces (web-based). They are actually fun to use and I can customize the layout to my personal needs – all that without breaking the model. This is a great way to engage managers that are not so technology-savy.
  • Automated aggregations: Getting a snapshot of your budget can be a bit tedious with spreadsheets. We need to make sure all files are accounted for so that we can link our master spreadsheet to them and aggregate the numbers. BA software takes care of that….in real time. All the data is stored in a central repository. You need a snapshot? Give me a minute. Here you go!
  • Easy analysis: Performing detailed analysis on a spreadsheet budget can be extremely difficult. Management decides to make some top-down changes and finance then has to figure out how to push this into the different organizational units. Asking some what-if questions can turn into a tedious exercise. BA software allows us to perform analysis in real-time. It’s that simple. We make change somewhere, and we can report on that right away. Cool!

Ok…I admit it. This is probably a bit ‘salesy’. But that’s the way it is. By the way, this particular client is now able to turn the entire budget around in less than 1.5 months. They actually like the budget process (scary thought?) now. It’s nice to talk about this but it’s better to see this in action. Why don’t you come and join one of our global workshops?

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