Planning is a big part of what we do in FP&A. There is the annual budget, quarterly or even monthly rolling forecast, and in COVID-19 times planning has felt like a daily exercise. The more you do a certain activity the better tools you need one could argue. However, many in FP&A continue to do at least part of their planning activities in spreadsheets while most consolidation, fortunately, happens in some sort of planning system.
From my days as a finance manager or even more recently as a business partner I remember this process all too well. We would get some spreadsheet templates from corporate to structure and document our input. To create the input for the template we often had multiple spreadsheets on the side. Eventually, our input would find its way into a consolidation system with limited features. That meant every scenario analysis we were asked to do found its way back to the spreadsheets. By all counts, it was a frustrating process for everyone involved.
The question is if there is a better way? Most planning software providers will say a resounding “YES”. Many FP&A professionals will nod in agreement yet when push comes to shove, they still like the full flexibility that spreadsheets offer them. So, what is the best way? Let us look at the upsides of both solutions and discuss which one to go for.
No one solution fits all
Of course, which solution to choose largely depends on many company-specific factors. Small companies might opt for spreadsheets even there might be cost-effective cloud solutions available. Large companies will likely go for a planning system and try to design their way out of needing spreadsheets. However, it is tough to find a perfect solution that exactly matches your needs. Let us try to compare the two options in a generalized way.
By the looks of it planning systems win on most counts while on some parameters it very much depends on the specific system. However, if you have a skilled financial modeler to help you it is possible to match planning systems on more parameters. You just need to avoid that the model is dependent on a single person because this puts you at risk if the person leaves. In that scenario, the model becomes much less useful.
Which solution should you pick?
As always, it depends on what your need is. For instance, it would be overkill for many small companies to pick a planning system. Many mid-to-large sized companies would benefit from picking a planning system though. Not least because Cloud has made solutions much more accessible and at an affordable price even for smaller companies. However, companies would be wise to consider the below points before picking a solution.
- Be careful about customizing the solution as it often makes it less reliable and switching costs will be higher
- If you pick a planning system do ensure that it is easy to export data to spreadsheets and back again – in that way you can get the best of both worlds
- Develop a good understanding of what capabilities you need before picking a solution – you might not need a Rolls Royce but will do well with a simple spreadsheet
- Make sure your solution includes a visually appealing front end as you would otherwise have to transfer work from the system to the final presentation
Most planning system providers know that they cannot beat spreadsheets completely hence they offer easy integration. In that way, it is not an either-or choice but a both. What solution are you using? Do you find that your planning system offers all the functionality you need, or do you frequently use spreadsheets for ad-hoc analyses and other tasks?
This blog is presented by ValQ in collaboration with Anders Liu-Lindberg, Business Partnering Institute. If you have any good cases for ValQ or stories to tell about how such solution can benefit you, please reach out to us.