Budgeting

“We need to add this functionality…and this dimension…and that dimension…and sometimes we get asked for this so let’s add something else to capture that…and this one is really important…we can add all of that, right?” I have been involved in several conversations very similar to this one. My answer is always, “Yes, but just because you can, doesn’t mean you should.” Unfortunately, anything I say after “yes” is frequently tuned out at first. Sometimes I wish I could simply say, “No, you need to choose.” The flexibility of the reporting, planning and analysis systems on the market today is both a blessing and a curse.

Could you create one set of drivers for your Domestic operations and another set of drivers for your International operations even though they provide the same services? Could you create metrics or reports that are similar, but different, just so every manager can have his or her own “pet” metric or report? Of course, you could. Items such as dimensions, metrics, cubes, sheets, levels or reports can be added very easily. So why not add them? Right? Isn’t that better?

We tend to fool ourselves into thinking that more is better. That is simply not the case. More can cause performance issues. More can lead to confusion around what is important in your business. More can cause you to spend an inordinate amount of time on very low value-added tasks such as data validation. More leads to wasted maintenance time ensuring all your systems stay in sync. Less is often more.

I understand that the path of least resistance is to appease every end user (and manager) and simply add more and more to your solution. Don’t succumb to the “Kitchen Sink Syndrome” where you bring every possible bit of data and metadata in to your system just in case it is needed. Instead, focus on what drives your business. Your job is to provide Senior Management with the Key Drivers and Performance Indicators that will help shape their decisions and actions. Spend the requisite time now to update and standardize your processes and minimize those tasks and activities that take your time away from value-added activities. Use your system for those items that make a difference to your company and enable you to make smarter, faster decisions. Always keep in mind that just because you can, doesn’t mean you should. Flexibility is not always a good thing.

Read more blog posts in our FP&A Done Right series:

FP&A Done Right: Finance as the Conductor

FP&A Done Right: You Can’t “System” Your Way out of This

FP&A Done Right: Introduction

Music has been a large part of my life for many years now. I have played drums and percussion in multiple bands, orchestras and jazz ensembles, and I have sung in several choirs and barber shop quartets. The one constant through all of them has been a talented conductor or director at the helm. A band doesn’t simply get together and decide to play a famous concerto. The conductor chooses a piece that speaks to him or her, works with each section of the orchestra on their specific notes and rhythms and ensures that each part fits seamlessly together to make beautiful music. Your Finance department should be no different.

Finance should be at the center of your planning, analysis and reporting processes and solution. You need to direct the process so you can craft and tell your “story.” Picture a hub and spoke model which has Finance in the middle so all roads lead to FP&A. To be clear, every function (Sales, Marketing, IT, HR, Shared Services, Operations) needs to have a seat at the table so you all stay aligned and support the overall story while each group writes its own chapter. You need to make it a priority to reach out to all groups and understand what their needs are and learn how they operate. Ultimately, however, you own the overall three statement reporting (P&L, BS and CF) and you need to make sure that the functions support your story.

As you become more sophisticated, your journey will take you into the other functions. Follow every number/metric back to its source and work with that group to create a better, more inclusive process.  If you make them part of the process, you will gain their buy-in and ownership. In the past, I have worked in an organization that had Finance Business Partners embedded in each function. Those resources reported directly to FP&A but had a dotted line to the functional leadership. You may not have the luxury of additional headcount so just make sure to create a structure that includes everyone in the process.

As each section (department or function) improves, you will be able to play increasingly more difficult compositions and songs. The end product will be more concise and accurate and your entire organization will be aligned. Good luck and enjoy the music!

Did you miss previous posts on FP&A Done Right? Check them out:

FP&A Done Right: Introduction

FP&A Done Right: You Can’t “System” Your Way out of This