How to Improve Financial Planning By Keeping Spreadsheets - Greater Transparency (
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The
biggest benefit to the CFO from this new system is greater transparency. For
example, Nemy says the new system enabled him to project an impending $1
million shortfall against the budget following its acquisition of a San Jose TV
station in October 2006.
“The management team took immediate action based on
that forecast, initiating more pledge days, which brought in $750,000 more than
we would have had,” Nemy says. The company was able to make other adjustments
to manage through the resulting lesser shortfall. “To me, the system in that
one instance already paid for itself,” the CFO adds.
When he
arrived at the company, although it had a Microsoft Navision general ledger accounting
system, Nemy says it lacked any means to match up actual income and expense
figures year to date against what was budgeted, or to do accurate forecasts of
financial performance for the remainder of the year.
“It met
our reporting needs, but it didn’t give me the information I needed as a
user—for instance, how are we doing with this particular group and how will it
do in the future?” he says. “There was no way to take year-to-date actuals and
look at variances from the plan. It’s important that our department heads have
a bottoms-up look at how their plans have changed and how they are performing
against them.”
Northern
California
Public Broadcasting has about 35 financial system users, including the
CEO. Besides Nemy’s financial staff
of 10, the rest are mostly budget managers and department heads. All use
OutlookSoft with an Excel front end. “This system is Excel,” says Nemy. “The
only thing really different is that instead of saving the spreadsheet data,
they press the send button and send the data to the database. Then when they
open the spreadsheet again, they must first retrieve their numbers.”
“We had
to overcome that initial fear some people had, that scary feeling they got of
not seeing the numbers they’d put into the spreadsheet,” he admits.
One reason
is that some power users of Excel tended to put their own financial formulas to
perform specific calculations inside Excel to speed the filling out of budgets
and other financial data. As a result some users worried they might lose these
formulas, which they felt were essential to their work as budgeters and planners.
“We had
to assure them that if they wrote the formula inside Excel, they would see the
formula later when they retrieved it,” Nemy adds. No doubt the unique
functionality afforded by the spreadsheet is the reason many financial
organizations continue to use it, despite its shortcomings relative to more
sophisticated financial management and business intelligence packages.
With the
Excel front end and the
SAP Business Planning and Consolidation application (formerly
OutlookSoft 5), Nemy believes he has the best of both worlds. For one thing, he
likes having immediate access to any department or project budget. “This
technology is absolutely essential to me in my job,” Nemy says. “The ability to
pull up anyone’s budget, to immediately consolidate numbers, and to make an
instant forecast of where we will be three months or six months out is
extremely useful. We’re able to see things we couldn’t see before.”
For
instance, any numbers that are significantly out of variance with the budgeted
figures appear in either red (over budget) or green (under budget). “Whether
it’s good or bad, I can see it right away and ask, ‘Where did this $400,000
come from?’” Nemy says.
Because
Northern California Public Broadcasting is a nonprofit entity, the firm is not
legally required to comply with the Sarbanes Oxley Act of 2002. Nonetheless,
Nemy says this spring the company will seek to comply with the “Audit Risk
Assessment Standards,” a set of financial standards applicable to nonprofits.
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