In 2016 Unit4 acquired Prevero, a financial performance management software company. The acquisition reflects a trend toward the convergence of transactional and analytical business applications. ERP and financial management software vendors increasingly are adding analytic capabilities – especially in financial performance management (FPM) – to the core functions of transaction processing and accounting in order to broaden the scope of their offerings. The integration of transaction processing and analytical software is especially valuable to Unit4’s core customer base of midsize organizations, which we define as those with 100 to 1,000 employees. Midsize entities have almost the same systems requirements as larger ones but lack the resources the latter enjoy.
Prevero is an especially useful tool for financial planning and analysis (FP&A) groups. It provides a practical alternative to desktop spreadsheets for planning, budgeting, forecasting and analysis. It is designed to be consistent with Unit4’s design philosophy of “self-driving” software; as a result, although analysts need to be familiar with the basics of multidimensional systems and modeling, Prevero is much easier to master than the most popular business intelligence tools. This is in large part because it uses forms, formulas and contexts that are familiar to an advanced spreadsheet modeler. It doesn’t require mastering a programming language or programming constructs. At the same time, the software eliminates issues inherent in desktop spreadsheets, notably their lack of dimensionality, referential integrity, data integrity and controls. These defects prevent those relying on spreadsheets from viewing planning and budgeting as a more useful business tool. The technical limitations of desktop spreadsheets diminish the effectiveness of any collaborative company-wide process because dealing with the shortcomings inevitably is time-consuming.
Because it doesn’t have spreadsheets’ limitations, Prevero is able to support what I call “continuous planning.” This is a highly collaborative approach to planning that relies on frequent short cycles to create and rapidly update integrated companywide operational and financial plans. Embracing continuous planning makes it easy for individual business units and departments to create their own plans while enabling headquarters to connect those plans to create a unified view.
Continuous planning uses technology to substantially improve the effectiveness of planning and budgeting in organizations. It makes it possible to maintain direct links between functional or departmental plans, eliminating the need to roll up plans submitted in spreadsheets. In most companies, business unit or departmental plans are stand-alone efforts that are at best only indirectly linked to others. Thus, the only truly integrated business plan is the budget. However, budgets are financial plans aimed at controlling spending based on a targeted revenue objective. They are essential for governance and primarily address the needs of the finance department. Therefore they have limited utility as a business management tool.
Our business planning benchmark research finds that companies that maintain persistent links between functional plans have a planning process that works well more often than others that do not. In addition, the research shows that two-thirds (66%) of those that maintain such links have a planning process that works well or very well, compared to 40 percent that copy information from individual plans into an overall plan and just 25 percent of organizations in which plans have little or no connection. Having direct links between departmental and business unit plans also makes for a better process. Our benchmark research reveals that to be accurate, most (77%) planning processes depend to some degree on having access to accurate and timely data from other parts of the organization.
To make planning a useful business and financial management tool and readily support continuous planning, a system must have the following capabilities:
- Each planning unit in the organization is able to model its business in any way it desires while providing to the central enterprise the data it requires to create an integrated enterprise plan.
- All models and related data are on the same planning platform. This enables planning units to share relevant data, facilitates consistency in assumptions across business units (such as compensation and benefits costs) and makes possible rapid consolidation of the plans of all business units into a single view.
- The system supports driver-based planning. This type of planning identifies an organization's key business drivers and creates a set of business plans that mathematically model the relationship between the driver and its outcome.
- The system makes rapid-scenario planning feasible. Driver-based models in an in-memory system can quickly render a consolidated enterprise-wide view that enables executives to see the impact of changes in global and business unit assumptions almost immediately. Such scenarios might involve changes in a global assumption such as economic growth, the price of a commodity or exchange rates. Or it may involve specific units’ product plans. A multidimensional system makes it easy to save scenarios and compare some or all of them side-by-side.
- The software facilitates rolling-quarters planning and budgeting. This approach doesn’t stop at the end of the fiscal year (which is typical for budgets) but extends out five or six quarters into the future. This ensures continuity in business planning.
Prevero has all these capabilities and also offers a broad set of administrative and reporting capabilities, including spreadsheet-like report design, automated report distribution and flexible and easily administered permissions for viewing information and reporting, among other features.
As I write this in August, for many companies the annual budgeting process is either underway or just about to start. There will be the usual amount of grumbling about the time required to produce a budget and its value to managers and executives. But nothing will happen. It brings up the quip attributed to Mark Twain: “Everyone talks about the weather but nobody does anything about it.” Companies that plan and budget using desktop spreadsheets can’t easily change because of the limitations that spreadsheets impose when used in any collaborative, repetitive enterprise-wide process. These limitations make it infeasible to implement continuous planning.
Companies have many options to consider when assessing tools for planning and budgeting as well as other elements of financial performance management. Prevero competes with a large number of budgeting and planning software vendors. Because Prevero is now part of Unit4, users of the latter’s ERP software are likely to find it an attractive option for budgeting and planning. For everyone else looking for a relatively easy replacement for spreadsheets that provides a unified multidimensional platform, I recommend they investigate Prevero.
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