The performance ideas blog

Tag: rolling forecast budget

  • Why continuous forecasting is more enjoyable

    The case for continuous forecasting

    Time for a confession. I really hated forecasting back in my old job. Kind of crazy since I was working with clients on improving their planning, budgeting & forecasting processes. Yet, I absolutely hated doing my own forecast. What was wrong? First of all, the template was terrible. Way too much detail. It took me hours to get it done. Luckily, I only had to do this 2-4 times per year. But that was also part of the issue. Every time I received the updated template I had to start from scratch and enter a ton of data. Also, I had to re-orient myself and figure out how the template worked this time. And then there was the reconciliation between my project plans and the prior forecast. To sum it up: The ramp-up time was simply too long. It was awful. But there is a better approach: Continuous forecasting

    Fire-drill

    Indeed, the typical process for updating, distributing, collecting and aggregating forecasting templates can take up to a few weeks in many companies. Part of the issue is that the forecast templates are often unavailable to the user community. Analyst need to maintain and update hundreds of spreadsheet templates between forecasts (formula fixes, structural changes, data loads). The process looks something like this:

    Traditional Forecasting Process
    The traditional spreadsheet-driven process

    At the start of a forecast cycle, templates are distributed. Many business people feel overwhelmed at that point. Starting from scratch is always tough. You have to orient yourself, your have to build numbers up etc.. As a result, business people feel that forecasting resembles a fire-drill.

    Forecasting software

    But there is a much better approach that many of my clients have implemented. Modern planning & forecasting software allows us to keep our forecasting templates online nearly 24*7. Forecasting software like IBM Cognos TM1 automates and significantly enhances all those manual tasks such as formula fixes, data loads, aggregations, etc.. Overall maintenance is a lot easier and the templates can be online allowing the users to work with their forecast data around the clock. Forecasters can therefore perform quick incremental changes to their forecast instead of performing time-consuming, infrequent larger data input exercises. But what is the advantage of doing that? Very simple: Incremental effort is always easier and faster than ramp-up tasks. Think about your personal life: If you spend ten minutes per day cleaning up for desk or office, everything will be in good shape. But if you let things slip for a week or two, cleaning up suddenly becomes a daunting task. This is what the process can look like:

    Continuous Forecasting
    The continuous forecasting process

    Continuous Forecasting

    Does this work? Absolutely. I have experienced this myself. After every client visit, I spent a few minutes updating my forecast. A lot of my clients have implemented this approach. Clients typically experience three main advantages:

    • The more often you work with a system the more comfortable you become. Users tremendously benefit from that. Their efficiency increases.
    • The actual forecast process is a lot faster for the business users. Finance is able to reduce cycle-time.
    • Forecasts tend to be more complete. In the case of an urgent ad-hoc forecast (imagine something critical happened), the business is able to compile a near complete forecast in within a short period of time.

    But the Finance department now has to carefully manage this process and clearly communicate timelines and expectations to the business. Submission deadlines need to be crystal clear.

    Let me clarify one last thing: A continuous process does NOT mean I can simply aggregate my data every night and obtain an updated forecast. No, I need to communicate to the business WHEN I need the data. But due to the 99% availability I can collect my data very quickly.

    Continuous forecasting can be a powerful approach! Would love to hear your thoughts and experiences. Good or bad. If you are interested in this topic, why don’t you join of our Rolling Forecast workshops or IBM Finance Forum?

  • The reputation of business forecasting is not positive – Time for change!

    Business Forecasting

    The budgeting and business forecasting processes often have a poor reputation in many companies. Part of the issue is that the people involved in the process do not see a lot of value in it. Last year in November, two of my colleagues and I conducted a survey amongst 162 senior finance professionals in the UK.  One section of the short questionnaire focused on the value and the perception of the business forecasting process.

    Good is the enemy of great

    The survey asked finance professionals two different questions:

    • How do you rate the value that you get out of the forecasting process?
    • How does the business rate the value they get out of the forecasting process?

    Here is what we found:

    Business Forecasting
    Business Forecasting: Low satisfaction & value

    The results are sad – not necessarily surprising, though. Only 37% of the finance people rate the value they receive from the forecast process as good or outstanding. The rest feel it is just adequate or poor. It gets worse when we look at the business users. Less than 27% feel they receive good value.

    Some people might be tempted to say that the results are not that bad. Be careful, though. Business forecasting is a critical process in turbulent times. And it is time-consuming in many organizations. We should therefore not be satisfied with ‘adequate’ or ‘poor’. Imagine we would apply the same standard to our personal life? It would be a very sad life, indeed. Or think about professional athletes – they would not put up with ‘adequate’ materials or training plans. That would put them in the lower performance bracket.

    Time for change

    Take a look at your business forecasting processes. How satisfied is finance? What about the business? We should not accept ‘adequate’ or ‘poor’ for an answer. The stakes are too high. And we should not waste our valuable time managing low-value processes.

    It’s time for change! In one of the upcoming posts,  I will write about some of the reasons that lead to the poor perception of the business forecasting processes. In the meantime, you can find ideas for improving your processes on this blog. Alternatively, pick up the fantastic book Future Ready: How to Master Business Forecasting. The authors Steve Player and Steve Morlidge have done a fine job of providing insightful best practices.

    Remember the words of management researcher Jim Collins: “Good is the enemy of great.”

  • The Cognos Blueprints are back – for Cognos Insight

    IBM Cognos Blueprints

    Have you heard of the Cognos Blueprints? They are pre-configured planing and forecasting templates. You can download them from the IBM Cognos Innovation Center website. Each blueprint comes with a fully functional set of model definition files, model and business best practices documentation. There are over 50 different Cognos Blueprints available for functional and industry-specific processes. In the past, most models were available for either IBM Cognos TM1 or IBM Cognos Planning. Today, you can also download a few of the most popular Cognos Blueprints for the new Cognos Insight product. But let’s back up for a second.

    Cognos Blueprint
    A Cognos Blueprint

    Ideas and inspiration

    What’s the purpose of the Cognos Blueprints and how can you use them? Let me quickly tell you a story to highlight the value. A few years ago, my family and I moved to Europe. We rented a house that did not have a kitchen installed. Given that my wife and I love to cook, I thought it would be easy to walk over to the next kitchen store to pick something that we liked. Our enthusiasm quickly died. The available options were overwhelming. To make things worse, the first sales person immediately asked us for details that we were not prepared or qualified to answer (“Do you want the AW3-x series or the BT-4?”). It  quickly became obvious that we had no clue how to best go about ordering a kitchen – despite our love for cooking. (Stop here for a second – think about your business analytics implementations!). The initial “requirements gathering session” was a disaster and waste of time. But a sales guy in another store recognized our problem. He asked us to read a few brochures and wonder around the store to look at various different model kitchens before sitting down with us. And that’s what we did. Reading about configuration options and touching sample kitchens helped us understand. The meeting with the advisor went well. We were able to ask the right questions and provide important input. The brochures and model kitchens were our proverbial blueprints. They helped us gain knowledge and they helped us with visualizing the future state.

    Your projects

    Think about your business analytics implementations? When you first sit down with users, they have a hard time articulating their requirements. It is also very difficult for them to visualize how their planning process could look like in the new system. This is where the Cognos Blueprints help. They are a fantastic tool for learning about common business issues, best practices and modeling techniques. Use them to either educate yourself or to help your customers in the business. But be careful, blueprints are not necessarily intended to be implemented. Most organizations use them to get ideas and to learn more about a particular process. And they do a great job with that. I have used them in many projects.

    Analyticszone.com

    A small library of Cognos Blueprints is now available for Cognos Insight. You can download them on analyticszone.com. You will get the cdd file and simply need to open it in Cognos Insight. I have not had time to play with them, yet. But they look very similar to the original ones. There is even a task bar that guides you through the process. So, take a look at the Cognos Blueprints today!

    Cognos Blueprint
    A sample dashboard from the Expense Planning blueprint

  • How to improve your forecasting templates through initiatives

    Forecasting  concerns

    Despite its tremendous importance, forecasting remains one of most disliked processes in many companies. Part of the problem are the forecasting templates themselves. They are extremely complex and cumbersome. Today, I want to look at a simple technique that can improve the usability of the forecasting templates while also increasing the ability to gain insights from them. A few months ago, I provided another technique that involved the time-horizon. Let’s take a look!

    Forecasting templates

    Typical forecasting templates follow a certain pattern: Across the columns we can find the different months of the fiscal year. The rows feature hundreds of G/L accounts:

    Budgeting Template
    Graphic 1: The traditional forecasting & budgeting template

    Let’s be honest: this type of template is really difficult to use. First of all, there is an excruciating amount of detail. The structure also does nor provide a solid picture of our business. Think about it: Business managers do not think in terms of G/L accounts. You don’t believe me? Thought-leader David Axson once proposed to try this approach at home to see how difficult it really is. This is what our personal forecasting template would look like (oh…please….don’t try this at home….):

    Forecasting Template
    Graphic 2: The family forecast?

    We can argue about this, but I doubt that our families would appreciate it. My wife Jen would certainly send me off to see a shrink…

    Initiatives

    Let’s stick to the example of the personal forecast. If you think about it, most of us intuitively follow a different approach. We use projects and initiatives to structure our thoughts. Many people typically start budgeting or forecasting by creating a list of initiatives they are planning to do. Then they figure out the associated amounts:

    Family Budget
    Graphic 3: Initiative planning at home. A better approach.

    This forecasting template provides us with a mental framework that is easy to follow. The naked account list on the other hand does not provide us with any help. We simply think about amounts without being forced to ask ourselves more intricate questions like why, what, where, etc.. And this is what often makes the process so difficult, especially for non-financial people.

    Revisions

    The beautiful thing about using initiatives in forecasting templates is that it makes revisions a lot easier. Let’s say we want to cut our expenses by 5%. Using the traditional line item approach, this will become a difficult if not random exercise (how would you know in the first place?).

    Budgeting Template

    Where do you start? Most of us would probably be tempted to reduce a few numbers here and there. The data is just too complex. Contrast that to the approach in the next screen shot. This is a lot easier to deal with. The initiatives provide context. All expenses that are not related to a project have been captured in the ‘Sustain Operations’ bucket.

    BudgetingTemplate

    You can immediately sit down and review the different initiatives. Questions like: “Which initiatives are really critical?” come to mind. Ranking them provides additional context.

    Next you could drill down on each initiative and review the different expense types. Notice that the use of initiatives speeds up the process while also providing better insights.

    Your forecasting templates

    Take a look at your corporate budget. Where can you incorporate initiatives and projects in your forecasting templates? Granted this approach does not work in all situations but it is a relatively simple thing to do. But most cost centers can probably benefit from this approach.

    P.S.: The screenshots were created with Cognos Insight.

  • Forecast Analysis – An Effective Dashboard

    FORECAST ANALYSIS

    Last week I argued that a detailed variance report is not very helpful before and during the forecasting and budgeting process. That post continues to be one of the most popular ones recently. But why not take the basic ideas a few steps forward and create a dedicated forecasting dashboard? A dashboard allows us to view the critical information that we need to get our job done (i.e. create the forecast or the budget) in a single place. Conducting forecast analysis with this dashboard becomes easy and is less time-consuming than analyzing hundreds of variances in a spreadsheet.

    A COGNOS 10 DASHBOARD

    My colleague Paul took the ideas from the last post and he created an awesome forecasting dashboard in Cognos 10. Take a look (click on the image to enlarge):

    forecast analysis
    Forecast Analysis with IBM Cognos 10 – Business Insight

    This forecasting dashboard is geared towards a revenue forecast. The widget in the upper left corner provides a quick overview of year-to-date product sales. You might notice the use of micro-charts: the sparklines display the sales trend for each region. The accompanying bullet charts show the current status against plan (YTD).

    The other widgets provide a balanced mix of historical data (revenue, deal-size, expense ratio) and leading indicators (Win/ Loss Ratio, Customer Satisfaction). But there is also other important forward-looking information. Take a look at the lower left corner: We can view upcoming marketing events along with the anticipated number of participants and the expected sales pipeline. That is helpful for assessing future sales.

    EFFECTIVE FORECAST ANALYSIS

    This forecasting dashboard can help prepare for the actual forecasting process. It provides a better picture of the business than any detailed variance report can. And think about the time savings as well. The latter requires a lot of effort to be consumed. The dashboard on the other hand is efficient and effective. Last but not least, the dashboard can be utilized on a daily basis.

    So, that is a forecasting dashboard built with Cognos 10. I love the look and feel. It is simple, clean and easy to interact with.

     P.S.: The type of information to be included in such a dashboard obviously varies by company and industry.

  • 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.

  • 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.

  • Improve your forecasts – 6 things we can learn from weather forecasters

    Back in April, I posted an interview with a master forecaster: Franz the Frog. Interestingly enough, this post is one of the most popular entries on this blog. But all jokes and irony aside: Weather forecasters are indeed world champions in forecasting and there are some lessons that we as finance professionals can learn from them. Let’s take a look:

    LESSONS FROM MASTER FORECASTERS

    1. Forecasts should be objective: Have you ever seen a subjective weather forecast? Well, it may feel like that sometimes. But weather forecasters do not publish what they think the public or the managers of the TV stations or newspapers want to hear. That would be dangerous. No, they strictly publish what their algorithms and forecasting processes show them. We can therefore rely on them (except for the obvious and inherent forecast errors that can occur).

    2. Forecast discussions should look forward not backward: Huh? Well, weather forecasts focus on the future. Have you ever seen a weather person spend 75% of his time explaining past variances, apologizing and arguing about assumptions? No. Weather forecasts are strictly forward looking. The focus is on what lies ahead and not on what happened in the past.

    3. Forecasts should be flexible: How often do we we get an updated weather forecast? Once per quarter? Once per month? No, the weather is too volatile for that. The forecast would be outdated within a few hours. People might be unprepared for a snowstorm, for example. Instead, weather forcasters continuously update their models when new information arrives. That way we can all rely on the most current and accurate forecast. We don’t have to worry too much about being caught in dangerous weather.

    4. Forecasts should speak a clear language: Weather forecasts are being presented in a simple and concise manner: “Heavy winter storms expected with up to 20cm of fresh snow.” This type of presentation allows us to quickly make decisions (stay at home). The message is not hidden in hundreds of lines of technical details.

    Today's forecast is detailed. The further out we look the less detail we have.

    5. Detail is adjusted based on the predictive ability: What is easier to forecast – the weather tomorrow or the weather in two weeks? Stupid question: the weather tomorrow. Weather forecasts acknowledge that they cannot predict weather much further out than a few days. And they adjust the level of detail based on that insight. Today’s forecast shows detail by the hour. The forecast for next week is just a general trend (‘rising temperatures expected’). This approach obviously reduces the effort involved in creating the forecast. Most importantly, this approach avoids the trap of setting wrong expectations (“I thought it would be sunny in three weeks from now!”) More detail does not mean higher accuracy.

    6. Forecasts are compiled with the help of modern technology:

    Technology drives efficiencies and increases effectiveness

    What type of instruments and tools do weather forecasters leverage? Weather frogs, old fashioned thermometers, wet fingers, flight patterns of birds? No, they rely on modern technology. They continuously push the envelope and upgrade their equipment. This tremendously speeds up their work while also reducing mistakes and increasing the accuracy. They actively look for new ways to improve their processes and techniques.

    YOUR FORECASTS?

    Think about your forecasts. How do they stack up when compared to these six characteristics? Are there areas where your forecasts can improve? If you are interested, join of of our Rolling Forecast workshops to learn more.

  • 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.

  • 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!