Financial forecasting solutions with Excel and PerformancePoint

Tony Crowhurst

Tony Crowhurst is Product Manager for PerformancePoint at Microsoft in the UK. Tony has been with Microsoft for 7 years and has specialised in business intelligence applications from a consulting, sales and now product management perspective. Tony has a strong finance and industry expertise – he worked as a management accountant in the financial services and telecoms industries prior to joining Microsoft. Tony is able to provide business decision makers with a clear understanding of how technology can best be utilised to improve an organisation’s performance.

Question: We are a manufacturing company of 470 staff. We have a pretty good sales system in place, but it would be very useful to have a more advanced financial forecasting tool than Excel (which we already use, but in which we enter data manually). Any advice? - Mark, London

Answer: Hi Mark, Microsoft Excel is a great tool and it has some excellent capabilities, for instance the ability to summarise and analyse data. In an organisation of your size however - where you need to create and share detailed product forecasts - a greater level of control is required over what data is analysed, what version you’re working with and who has access to that data. This is something an application such as PerformancePoint can provide; it has its own data warehouse and is implemented with an understanding of your business so that you can produce meaningful forecasts.

Just the data you want, when and where you want it

To produce a complete picture of your organisation’s planned performance, you need to integrate information from your existing sales system with data from other parts of the business - for instance production and marketing. Creating a sales forecast in isolation may mean that your production department may not be able to meet that estimate. Not taking into account unstructured data (e.g. forecasts of economic performance for the economy) into your model will also result in a less meaningful forecast. This is where a business intelligence solution that combines multiple sources of information gives organisations the edge. The right information delivered to the right people when they need it and in a format that would like to receive it is key. Collaboration and data sharing are thus key components of effective financial forecasting and if that data can be as current as possible, so much the better.

Getting IT to match the business

No organisation exists in isolation and just as sales links to production, production is driven by raw materials from suppliers and the availability of labour. Understanding the impact of all these components is imperative and this is not as onerous task as it seems. Almost all of this information comes from one place - the people already within your business. So before you go ahead and implement a forecasting tool, you must assess the needs of the business. What kind of cross-functional business processes and workflows are involved in building the financial picture you require? There may be a number of existing systems which deliver this data, from supplies and procurement to the financial back-end or even a web-sales operation. A little effort in flow-charting the data you need will yield great rewards.

This process has come to be called “Business Process Management” (or BPM), and there’s a wide selection of technology solutions designed to make the most of BPM efficiencies. Most are designed to trim back excess expenditure and resource, leading to as lean a company as possible. Your requirement, however, is specifically one of forecasting; Microsoft’s recommended product here is PerformancePoint Server. PerformancePoint is designed to manage the entire corporate performance management process, from planning and forecasting and monitoring results to analysing where we had discrepancies. This is a continual process; plans are monitored and analysed to produce future plans which are in turn monitored and analysed.

Getting to grips with PerformancePoint

If you have an existing Microsoft infrastructure, PerformancePoint will integrate seamlessly. You can continue, for example, to use Excel 2007 on the desktop, which will still be your route to not only creating reports and charts but also as a method of inputting and viewing budget data. But with PerformancePoint, any amount of company data is gathered in a structured, centralised and secure way- and made available to you (and other users) when you need it. By the way, for any users uncomfortable with technology, PerformancePoint is designed to work with your existing applications - information can be tailored to individual user requirements and can be viewed in a browser or in Excel so there are no new and complex applications to learn. It also integrates with the existing security model so there are no separate logins required.

Implementation of PerformancePoint, or indeed any other system, comes with one essential caveat. The information which is produced may be visually appealing and aid effective decision making, however, those decisions will depend entirely on clean and valid data being entered in the first place. As you connect different sources of data together the risk of unreliable data increases, as does the requirement for accurate data entry. We recommend:

--Tony

Related Links

• A Microsoft Partner can advise on improving business processes through technology
• PerformancePoint Server helps organisations improve performance by integrating monitoring, analysis and planning into a single application

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