WHAT SETS THE BEST-IN-CLASS APART?5 BEST PRACTICES IN PLANNING AND FORECASTING

© AberdeenGroup 2008

WHAT SETS THE BEST-IN-CLASS APART? 5 BEST PRACTICES IN PLANNING

AND FORECASTING

© AberdeenGroup 2010 2

o Aberdeen PACE Model Pressures

Actions

Capabilities

Enablers

o Strategies and Tactics

o KPIs – Usage and Specifics

o Follow-up Surveys

interviews

Aberdeen’s Research Methodology

Financial Planning,

Budgeting, and

Forecasting

Will the Economy

Emerge? Will You?

Planning, budgeting and forecasting lay the

foundation for any effective business plan,

but economic uncertainty can make it

difficult to set clear goals and objectives.

During volatile economic times, this is more

critical than ever for success and survival.

Are you able to adapt financial plans and

budgets as conditions change? Are your

finances accurate?

Each respondent who answers the survey

will receive a complimentary full copy of the

report containing this study's results (a

$399 value). Individual responses will be

kept strictly confidential and data will only

be used in aggregate.


Top Pressures Year over Year

34%

42%

34%

37%

24%

25%

32%

29%

39%

21%

22%

34%

41%

47%

0% 10% 20% 30% 40% 50%

Current processes are too long &

resource intensive

Current / past accuracy of the budget

negatively impacts corporate performance

Corporate mandates for cost control

Need to better align Planning /

Budgeting with corporate goals

Market volatility creates the need to

dynamically account for change ('agility')

2010

2009

2008

Percentage of Respondents


Best-in-Class Criteria

Definition of

Maturity Class Mean Class Performance

Best-in-Class:

Top 20%

of aggregate

performance scorers

102% overall budget accuracy*

99% forecast accuracy

20% improvement in profitability year over year

66% “always” finalize budget prior to the next fiscal year

Industry Average:

Middle 50%

of aggregate

performance scorers



6% improvement in profitability year over year


Laggard:

Bottom 30%

of aggregate

performance scorers



8% decline in profitability year over year


*Ratio of actual to budget


How Do Companies Approach Financial Budgeting?

For top performing companies, strategy drives budget

71%

14%

44%

26%

50%

22%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Strategy drives budget Budget drives strategy

Perc

ent of R

espondents

n=

171

Best-in-Class Industry Average Laggard


28%

52%

40%

20%

40%

19%

19%

38%

41%

47%

0% 10% 20% 30% 40% 50% 60%

Develop a consolidated view of the process

and the results, to be available on demand

Improve data quality

Involve more decision-makers in the

planning / budgeting / forecasting process

Automate the process flows associated

with the budget process

Develop a formal planning / budgeting /

forecasting workflow process

Percentage of Respondents

2010 2009

Strategic Actions of Best-in-Class – Planning for the Year


Re-forecast Frequency

4%

13%

1%

9%

21%

17%

40%

18%

32%

26%

2%

5%

1% 1% 0% 2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Never On

Demand

Daily Weekly Monthly Quarterly Semi-

Annually

Annually

Perc

enta

ge o

f R

espondents

, n =

171

Current Frequency Desired Frequency


What Budgeting Methodology are Companies Using?

Laggard companies are predominantly focused on historical data only

budget)

38%

22% 28%

13%

59%

14% 20%

7%

63%

6%

22%

8%

0%

25%

50%

75%

Budgets prepared

based on historical

data (Previous

Year’s Actuals)

Zero-based

budgeting (start

with a clean slate /

no historical data)

Performance Based

Budgeting (PBB)

(Result oriented

planning and

budgeting)

Driver-based

budgets (for

example: net new

customers drives

customer service

Pe

rce

nta

ge

of R

esp

on

de

nts

, n

= 1

71



22% 25%

50%

14%

34%

48%

18%

35% 39%

0%

25%

50%

75%

Bottom-up Top-Down Combination Top-down,

Bottom-up

Pe

rce

nta

ge o

f R

esp

ond

en

ts, n

= 1

71


22% 25%

50%

14%

34%

48%

18%

35% 39%

0%

25%

50%

75%

Bottom-up Top-Down Combination Top-down,

Bottom-up

Pe

rce

nta

ge o

f R

esp

ond

en

ts, n

= 1

71


Leading companies use a combination of top-down and bottom-up approach

Enhanced Collaboration in Financial Planning, Budgeting, and Forecasting Process


66%

59% 61%

52%

38% 40%

32% 27%

20%

0%

20%

40%

60%

80%

Ability to reforecast

as market conditions

change

Ability to perform

“what if” scenarios

and change analysis

Ability to incorporate

business drivers into

the on-going forecasting

process

Pe

rce

nta

ge

of R

esp

on

de

nts

, n

= 1

71


Dynamic Planning Capabilities


Ability to Conduct “What if” Scenario Analysis with Forecasting / Re-forecasting…

20% 9%

33%

22%

14%

30%

41%

45%

0%

25%

50%

75%

100%


Yes , but selectively because it’s

entirely manual

Yes, some portion of the

process is automated

Yes , it’s automated

More Best-in-Class companies have fully automated or semi-automated “what if” scenario analysis capability with forecasts / re-forecasts


Visibility Leads to Alignment of Goals

68%

58%

45% 45% 38%

33%

22% 30%

14%

0%

20%

40%

60%

80%

Ability to integrate and

align sales forecasts with

overall business revenue

and cost forecasts

Able to drill down to

successive levels of detail

from summaries

Able to perform multi-

dimensional reporting with

roll-ups

Perc

ent of

Respondents

n=

171

Best-In-Class Industry Average Laggard


14%

12%

27%

15%

26%

28%

26%

38%

43%

48%

27%

32%

37%

45%

71%

0% 20% 40% 60% 80%

Percentage of Respondents, n = 171

Best-in-Class

Industry Average

LaggardBudgeting and forecasting features of an

ERP or other financial application

Corporate / Enterprise Performance

Management application

Financial reporting and consolidation features

of an ERP or other financial application

Planning / budgeting / forecasting

(standalone) application

Financial reporting and consolidation(standalone) application

14%

12%

27%

15%

26%

28%

26%

38%

43%

48%

27%

32%

37%

45%

71%

0% 20% 40% 60% 80%

Percentage of Respondents, n = 171

Best-in-Class

Industry Average

LaggardBudgeting and forecasting features of an

ERP or other financial application

Corporate / Enterprise Performance

Management application

Financial reporting and consolidation features

of an ERP or other financial application

Planning / budgeting / forecasting

(standalone) application

Financial reporting and consolidation(standalone) application

Specialty Applications - Technologies Supporting the Process

Economy & Finance

WHAT SETS THE BEST-IN-CLASS APART?5 BEST PRACTICES IN PLANNING AND FORECASTING