Workday Adaptive Planning

FP&A Done Right: Forecasting Revenue for Services-Based Businesses: A Growth Factor

August 19, 2022 by Revelwood

More than half of professional services firms can’t forecast project revenue beyond six months. Workday’s Mark David and Justin Joseph share insights into how organizations can get revenue forecasting right, even when business is anything but usual.

What is it about revenue forecasting that can be so challenging? For people-based industries such as professional services, their project revenue is based on talent supply. And people—including all 109 billion of them who have ever lived on Earth—can be difficult to predict.

“People are highly variable,” said Justin Joseph, senior director of product strategy at Workday. “They aren’t always available. They go on vacation. And, as we’ve experienced the past few years, people leave, and there can be skills shortages. So there’s a lot of variability in how professional services companies generate project revenue.”

Beyond the variability of their employees and the impact of unprecedented trends and events, professional services firms also deal with different systems in different parts of the organization. These silos can cause data to be inconsistent and inaccurate—challenges that only get worse as an organization grows.

“The larger an organization, the more complex things get,” said Mark David, vice president of solution management at Workday. “Organizations then become more reliant on processes to manage projects and people, but that requires accurate data from disparate places.”

In this episode of the Workday Podcast, we’re 100% focused on revenue forecasting for professional services, with guests Joseph and David. They share trends impacting firms, the pros and cons of different types of forecasting, and how firms can start to solve their challenges to better plan and forecast.

Here are a few highlights of our conversation, edited for clarity. Be sure to follow us wherever you listen to your favorite podcasts, and remember you can find our entire podcast catalog here.

“The reason most companies can’t forecast their revenue more accurately is because they have different systems and data across their lines of businesses and services. And all those different systems mean that you have data that’s going to be wildly inconsistent. You’ll need a lot of integrations to pull this data together to make sure that you have an end-to-end process for revenue forecasting.” —Justin Joseph
“A year ago, a customer who runs a 5,000-employee professional services firm told me the one thing he needed was a good revenue forecast more than anything else right now. As you can imagine, this was especially needed with what’s happened over the last few years, which have made forecasting where your business is going even more difficult.” —Mark David
“With unexpected scenarios, you’re following the exact same processes as expected scenarios, but you have to forecast at a much faster pace and much more frequently because your assumptions are changing so rapidly, maybe hour by hour or day by day. How quickly can you pull this data together and then model it and share it out? It may sound contradictory, but they’re similar. Speed is ultimately what’s different.” —Justin Joseph

This blog post was originally published on the Workday Adaptive Planning blog.

Workday Adaptive Planning Tips & Tricks: Data Integration and the Planning Data Source

August 17, 2022 by Marc Assenza Leave a Comment

Did you know that Workday Adaptive Planning integrations can use the metadata in Adaptive Planning as a part of the integration?

It’s true! The process requires setting up the credential and setting up a data source for Adaptive Planning. You must have the proper credentials yourself within Adaptive Planning to set this up.

To set up the credential you will need to do the following:

From the Workday navigation button, go to Integration🡪Design Integrations

You will arrive at the following screen. Under the Component Library section click on the Credentials option.

From the list that is presented, the first option is to Create a new Credential, select this.

Once clicked, the following list will be presented, select Planning Credential, and give it a name. Giving it a name that is meaningful matters, Adaptive certainly fits the bill here.

Once created, you will see that your credential exists under credentials in the Component Pane, but no access to the data source has been granted yet because no authorized user has been assigned. To assign an authorized user (a user with the rights to perform all these steps) to the credentials, you follow the on-screen instructions and click “Authorize” under the Actions panel.

When you click authorize, the following appears, enter the credentials in the pop-up screen and click “Authorize” on the lower right-hand portion of the screen.

Next you will want to click the Save button to save the login information with the credential.

The next step will be to Test the connection. This is done by clicking on “Test Connection” under the Actions pane. A pop-up window will display, click on “Test.” If the login credentials are valid, the following window will appear and the credential is all set up.

To set up the data source, you will need to do the following:

Under the Component Library, click on Data Sources.

Click on the option “Create New Data Source.”

Here again select Planning Data Source and give it a meaningful name, keeping the name the same in this example and calling it Adaptive.

Once the Data Source is created, the following screen will appear. Here you will assign the Data Source the Credential that was created in step 1 and save it.

You will notice that no tables have appeared. That is because we have not defined them yet.

On the left-hand side under Actions, click on “Manage Sources.”

The following popup window will appear, click on the sources folder first, then click on the Add button.

You will now see a list; in the example we will import metadata about Accounts and Levels. Those two will be selected.

You have the option to rename the source, so Accounts and Levels will be used in place of the default name.

No tables are in the Data Source yet because the Data Source needs to be saved and the structure needs to be imported. Click the Save option first followed by “Import Structure.”

The table structures are now present as seen below.

The next step is to import the data, this is done by clicking “Import Data” under the Actions pane.

That’s all it takes to set up the credential and the Adaptive Data Source, now you’re ready to utilize it in the Staging area for integration however you see fit!

Visit Revelwood’s Knowledge Center for our Workday Adaptive Planning Tips & Tricks or sign up here to get our Workday Adaptive Planning Tips & Tricks delivered directly to your inbox. Not sure where to start with Workday Adaptive Planning? Our team here at Revelwood can help! Contact us info@revelwood.com for more information.

Workday Adaptive Planning Tips & Tricks: Utilizing Split Rows in Modeled Sheets

August 3, 2022 by Dillon Rossman Leave a Comment

Do you know how to utilize splits in Workday Adaptive Planning for a modeled sheet? Splits allow you to have multiple lines as part of one record and you can set splits on a column-by-column basis.

A use case might be a personnel model in which you want the ability to allocate a single employee to multiple departments. To turn on splits, navigate to the settings of your modeled sheet and click “Columns and Levels.”

From here, click on the “Sheet Properties” button

Within the pop-up menu, click on “Settings” then enable “Allow Splits” and hit “OK”

Once this is completed, you will notice each column now has a checkbox for “Split.” In this example we will turn this on for the “Department” and “Allocation” columns.

Within our sheet we have an existing row for John Smith. In order to create split rows we just have to right-click on John Smith’s row and select “Split Row.”

Once the split row is added you will see that only the two columns we designated with splits are split. The information from the consolidated row gets carried down to the split rows for the non-split columns.

In this example I will create two split rows. I’d like to allocate John Smith to two departments. After adding a second two split row, updating the information, and saving the sheet, you will now see two split rows that are each allocated 50% to their department and a consolidated row that totals up to a 100% allocation.

You could have accomplished the same end result with multiple independent rows, however, splits provide several benefits including:

Non-split columns will automatically copy the consolidated row data to the split rows.
Split rows are grouped together.
Groupings show the summations of split column values, in this example you can see the allocation percentages add up to 100%. Independent rows would not clearly show you an employee is allocated 100%.

Workday Adaptive Planning Tips & Tricks: Data Integration and the Excel Spreadsheet Data Source

July 20, 2022 by Marc Assenza Leave a Comment

Did you know that Workday Adaptive Planning can use Microsoft Excel Workbooks as Data Sources for Data Integration?

It’s true! The process is surprisingly simple if a few basic rules and steps are followed:

Your column names, positions, and formatting should remain consistent once you decide upon the layout. In the example below, Period, Value, Account and Level will always be in the same order with the same consistent formatting on a moving forward basis.

The name of your worksheet within the workbook will need to remain the same. Within the Workday Adaptive integration, the worksheet name becomes the table name in the Design Integrations task pane. As a side note, if you have multiple worksheets as part of a workbook, each worksheet becomes an available table to use for that spreadsheet data source. See screenshot below:

ALL row and column values must be exactly that, values. There cannot be any formulas or summed totals on the spreadsheet

Import your Spreadsheet data source through the easy-to-use Actions Pane link named “Import Spreadsheet.”

Follow the automated prompting.

Ensure your workbook was uploaded by viewing it in the Data Sources data pane.

Open your Data Source and locate your table from the Data Components Pane.

Drag your table into the Staging area to review and query the data.

That’s all it takes to import an Excel Workbook as an Excel Spreadsheet Data Source. Be on the lookout for more Workday Adaptive Data Integration tips and tricks from me in the future!

Workday Adaptive Planning Tips & Tricks: Loan Amortization

July 6, 2022 by Robert Nordhagen Leave a Comment

Loan amortization schedules in Workday Adaptive Planning are slightly different than those done in Excel.

In Excel the typical amortization schedule looks like this:

In Workday Adaptive Planning most versions only go 1-5 years into the future. Creating a complete 10-25 year amortization schedule is not the best practice. Here is an example of an Amortization Schedule in Adaptive:

In Adaptive we show inputs in rows 2-8. Rows 10 through 14 are the formulas that calculate the interest per period, the principle and the declining principal balance.

Row 2: Input the initial loan balance for every month the loan will be active. If you are keying it in, as opposed to uploading a file from Excel, you can use Copy Forward rather than key it in every month.

Row 3: Input Balance (if acquiring the loan). Instead of the initial balance, put the balance as of assumption date.

Row 4: Principal Payment. This is used for variable rate loans

Row 5: The months will be the same just like the Initial Balance for every month that the loan is active.

Row 6: Amort Month is a counter that increases by 1 each month until the loan matures, then the field should go blank. In most cases the version will max out before the loan matures.

Row 7: Interest Rate %. This will be the same every month for fixed rate loans. For variable rate, forecast the expected rate by month.

Row 8: Draw Down. This is for additional payments.

The formula rows will calculate as follows:

Row 10: Beginning balance is equal to prior month ending balance.

Row 11: Total Payment. This is the most complicated formula and takes many scenarios into account using nested ifs. The basis of the formula is the payment formula; ie, Balance x i / ( (1+i) * (1- 1/( 1+I )^n ))

Row 12: Interest Payment. This takes the Beginning Balance * the Interest rate (monthly rate: rate/12)

Row 13: Principal Payment. This takes Total Payment – Interest Payment

Row 14: Ending Balance. This takes the Beginning Balance – Principal Payment – Draw Down

Follow up to Amortization is Conversion to Straight Line

Previously, we showed how to do a loan amortization in Adaptive Planning. Now we will go to the next step: Straight-line the interest according to GAAP in certain situations. Below is a loan amortization that takes the loan payments to maturity. The interest payments are summed. That sum is then divided evenly among the payments and the amortization schedule is redone with constant interest every month as shown in the second schedule.

This is tricky in Adaptive Planning because a typical Excel schedule is run out to term since there are almost always sufficient columns in an Excel sheet to handle all the monthly payments. However, in Adaptive Planning, a typical version will be only 3 to 5 years into the future so only loans within 60 months of maturity could follow the same pattern.

For any longer maturities we have to apply the following logic. For loans with a constant monthly payment (which is most loans), calculate the payment. Then multiply the payment by the number of payments such as $9541.10 * 120 months, which is equal to $1,144,932.00 (slightly different by $0.37 due to rounding). Subtract the initial balance $1,144,932 – $1,000,000 = $144,932 which is the total of the interest. Now the Interest Payment will be equal to the total interest divided by the number of payments as seen below.

Now the GL account for Interest Expense can be linked to SL_Interest_Pmt and the GAAP reporting of Straight Line interest will be in the P&L.

Workday Adaptive Planning Tips & Tricks: Choose the Correct TIME Syntax

June 22, 2022 by Michelle Song Leave a Comment

Are you familiar with all the TIME syntax in Workday Adaptive Planning? Do you know what is the best practice for each of them? This blog post will tell you the difference between them.

Below are the most common TIME syntax in Adaptive Planning.

Month(this)
Versionmonth(this) – returns the
This.year.positionof(this.month)
This.version.positionof(this.month)

In the following example, this instance has a custom calendar which is from July – June. The example is created using Month as the stratum. The same logics are applied to Quarter and Year.

Graphical user interface, application, table

Description automatically generated

In July 2021, Month(this) returns the month in the standard calendar, which is month 7. This syntax also assumes that July is from July 1^st to July 31^st. For example, if 7/30/2021 in a custom calendar is actually a date in Aug 2021, then versionmonth(July-2021) and versionmonth(Aug-2021) will return the same number. This same situation also applies to Versionmonth(this).

Versionmonth(this) returns the month of the version, which also follows the standard calendar and assumes July is from July 1^st to July 31^st.

Graphical user interface, table

Description automatically generated

This.year.positionof(this.month) returns the fiscal month of the year, which is month 1 for July-2021. This syntax references the custom calendar. For example, if 7/30/2021 in a custom calendar is actually a date in Aug 2021, then This.year.positionof(this.month) returns month 2 in the year, which is Aug 2021. Same situation applies to This.version.positionof(this.month).

Graphical user interface, text, application

Description automatically generated

This.version.positionof(this.month) returns the month in the version since the Start of Version. In this case, the Start of Version is July 2021, therefore it is month 1 in the version.

Other use cases and helpful formulas related to time.

Personnel Sheet:

For Headcount calculation that has a Custom Calendar and Start Date before the system date
- this.Year.positionof(this.Month) – correct result, but shown as RED (error) on Income Statement because the date is outside of the system date.
- versionmonth(this) – might result in incorrect result due to date overlaps in two months.
- Use iff(ROW.PartialHeadcount>0, 1,0) as a workaround.
Cumulative Salary
- Standard calendar:

iff(month(this)>1, ROW.Salary+ROW.CumulativeSalary[time=this-1], ROW.Salary)

Customized calendar:

iff(this.Year.positionof(this.Month)>1,ROW.Salary+ROW.CumulativeSalary[time=this-1], ROW.Salary)

FP&A Done Right: The Changing Role of the CFO

June 17, 2022 by Revelwood Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning, explaining strategy and vision for the Office of Finance.

Companies are asking more of their CFOs than ever before. They’re expected to lead environmental, social, and governance (ESG) initiatives, oversee finance transformation projects, and ensure their teams have the right skills for the future. That’s why finance leaders need the right technology.

The role of CFOs is changing as their responsibilities keep growing. “Today, CEOs and boards are looking to CFOs to help outperform peers while navigating crises,” said Terrance Wampler, group general manager, office of the CFO, at Conversations for a Changing World, a global Workday digital event. “CFOs are moving from a sole focus of maximizing shareholder value to addressing a much broader set of stakeholder values.”

These broader stakeholder values—and expectations—require a greater focus on sustainability, talent acquisition, and digital acceleration.

Simply put, companies are asking more of their CFOs—especially when it comes to having the right technology.

Growing Revenue

“Revenue is all about growth,” Wampler said. “Successful growth requires striking the right balance between quick wins within three months, medium-term operational improvements spanning three to nine months, and longer-term, more strategic initiatives across one- to three-year plans,” he said.

There’s a strong correlation between revenue growth and high-performing financial planning and analysis (FP&A) teams, according to a 2021 study by the Institute of Management Accountants (IMA). Companies with high-performing FP&A teams saw a 21% revenue growth, compared to just 4% growth among companies with the worst-performing FP&A teams.

What does a strong FP&A team do well?

“One of the most impactful things CFOs and FP&A teams can do is model multiple revenue scenarios,” Wampler said.

Workday can help them do that, Wampler explained: “With Workday, customers model and execute on short-, medium-, and long-term scenarios, incorporating financial and operational data and performing what-if comparisons.”

Controlling Costs

Reining in costs remains a primary concern for finance leaders: In a 2022 PwC survey, almost one-third (30%) of CFOs ranked reducing cost as a percentage of total revenue as a top priority.

When looking at organizations that are successful at optimizing spend and driving predictable cash flow, one of the biggest opportunities to manage discretionary spend lies with their suppliers and procurement practices.

As they grow revenue while containing costs, CFOs also must ensure that capital investments maximize ROI.

“A CFO is the guardian of the capital that he or she has been entrusted with,” Wampler said. “Planning in Workday can help organizations get the most return from their capital investments with improved forecasting of capital expenses, effective and efficient capital project planning, and, of course, fast and accurate reporting and analysis for the complete lifecycle of your capital assets. You can also plan and model capital asset acquisitions, automate depreciation methods, and gain complete visibility into the impact of capital on your financial statements.”

Meeting ESG Goals

Organizations and their CFOs face increasing pressure to deliver not only financial impact but environmental, social, and governance (ESG) impact as well. For 58% of corporations, there was a positive relationship between ESG and financial performance, according to a 2021 meta study by the NYU Stern Center for Sustainable Business and Rockefeller Asset Management.

Companies that have made ESG factors a priority can benefit from the ability to track sustainability data—not just within the organization but extending to third parties, as well. “Data you could track include things like a carbon footprint, climate change, even risk to the supply chain … all through a configurable dashboard,” Wampler said.

Recruiting and Retaining Talent

As the “Great Resignation” sees workers leaving their jobs in record numbers, CFOs must consider how they can best recruit and retain talent in a rapidly changing economy. Of employed U.S. adults, one in four plans to look for opportunities with a new employer once the pandemic subsides, according to a Prudential survey.

Employers need to leverage technology that can give them an edge in hiring.

“A good software user experience translates to a great employee experience,” Wampler said. That’s why Workday prioritizes developing products that improve employee engagement, in part by automating processes, he explained. With intelligent process automation, Workday enables teams to work smarter, not harder.

Machine learning (ML) and artificial intelligence (AI), along with the opportunity to learn new technology skills, are additional ways to keep employees engaged, Wampler added.

Beyond providing better technology solutions, a cloud-based platform also helps support workers outside of the office. As many employees have adapted to remote or hybrid work environments due to the pandemic, Workday’s robust functionality allows employees to perform their duties regardless of where they’re located and gives them additional flexibility, Wampler said.

The CFO Stakes

Employees, suppliers, customers, and communities can benefit when companies invest in transforming back-office processes and systems—suggesting that there’s a lot at stake today’s CFO.

The good news: 75% of CFOs say the pandemic has accelerated the digitization of their operations, according to the Hackett Group. “Next-generation technology is now considered table stakes not only to survive but to thrive in the new normal of uncertainty,” Wampler said.

Workday Adaptive Planning Tips & Tricks: Revenue Cohort Modeling

June 8, 2022 by Ailenette Cruz Leave a Comment

Do you know about cohort modeling in Workday Adaptive Planning?

A cohort model provides meaningful insight of data grouped into subsets based on any characteristic important to the company. The groups are called “cohorts.” Cohorts can be based on time (i.e. season, monthly, yearly), segment (i.e. commercial, residential), or size (i.e. low, medium, high), just to name a few. Cohorts follow a pattern of behavior that helps analysts project future trends. This can help companies focus efforts on lowering churn and optimizing revenue.

Cohort model vs. Regular model

Compared to a regular model, a cohort model provides a more granular view of the data. Projecting revenue at the cohort level helps companies understand outliers that would otherwise be missed in a regular revenue model.

For example, in a regular model, projected revenue shows overall revenue for the year and may show growth. However, if you dig further into the segments, you will see that one cohort, such as small businesses in the manufacturing industry, had a large decline in sales.

If this information was available early in the year, further decline could have been prevented and management could have strategized to avoid a blow to the bottom line in the following year. Maintaining and analyzing multiple cohort models on a regular basis is crucial for successful strategic planning.

Where to use cohort modeling

Subscription base revenue – tech, gaming, food, streaming, service, etc.
Contract billing – by milestone, period, ASC 606 amortization, etc
Seasonality base revenue
Freemium – lead conversion
Sales Rep capacity or conversion

How to build cohort models in Workday Adaptive Planning

Cohort model in Adaptive may comprise of multiple sheets. Below is an example of a cohort model structure.

1. Planned # of Customers/Cohort

Modeled sheet
Create number data entry column to input number of customers
Create calculated account and link the data entry column
Input by cohort dimension – this can be by month/period, type of cohort, etc (ex. Jan, Feb, Mar – the month new customers are acquired)
No timespan

2. Cohort Drivers/Curves

Modeled sheet
Create number data entry columns, display as % (ex. 12 columns representing 12 months of the year) – this is where to input cascading percentages (aka curve)
Create calculated accounts for each data entry column and link
No timespan

3. Revenue per product/customer by month

Modeled Sheet
- With timespan

4. Cohort Waterfall

Cube sheet
Create standard account as a trigger – in this case using active month designation
- The active month designation to trigger what month the cohort waterfall calculates for each acquisition month
Create calculated account with formula using iff and switch (this serves as an index match)

iff(isblank(ACCT.Cohort_Waterfall.Cohort_ActiveMonths),blank(),

iff(this.version.isactuals,blank(),

ACCT.NewCustomers_byCohort.No_Customers[Sales Region=this, Sales Channel=this, Order Type=this, Products=this, Cohort Acquisition Month=this]

switch(ACCT.Cohort_Waterfall.Cohort_ActiveMonths,

1,ACCT.Cohort_Drivers.M1[Sales Region=this, Sales Channel=this, Order Type=this, Products=this],

2,ACCT.Cohort_Drivers.M2[Sales Region=this, Sales Channel=this, Order Type=this, Products=this],

3,ACCT.Cohort_Drivers.M3[Sales Region=this, Sales Channel=this, Order Type=this, Products=this],

4,ACCT.Cohort_Drivers.M4[Sales Region=this, Sales Channel=this, Order Type=this, Products=this],

5,ACCT.Cohort_Drivers.M5[Sales Region=this, Sales Channel=this, Order Type=this, Products=this],

6,ACCT.Cohort_Drivers.M6[Sales Region=this, Sales Channel=this, Order Type=this, Products=this],

7,ACCT.Cohort_Drivers.M7[Sales Region=this, Sales Channel=this, Order Type=this, Products=this],

8,ACCT.Cohort_Drivers.M8[Sales Region=this, Sales Channel=this, Order Type=this, Products=this],

9,ACCT.Cohort_Drivers.M9[Sales Region=this, Sales Channel=this, Order Type=this, Products=this],

10,ACCT.Cohort_Drivers.M10[Sales Region=this, Sales Channel=this, Order Type=this, Products=this],

11,ACCT.Cohort_Drivers.M11[Sales Region=this, Sales Channel=this, Order Type=this, Products=this],

12,ACCT.Cohort_Drivers.M12[Sales Region=this, Sales Channel=this, Order Type=this, Products=this],

0)))

Cohort modeling is a powerful feature in Workday Adaptive Planning. Try it out and see what insights you can discover.

FP&A Done Right: How to Rejuvenate your Budgeting Process

October 1, 2021 by Lisa Minneci Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning, offering three steps to take to disrupt your out-of-date budgeting process.

Disruptive technology is a popular term. No matter how long companies have been in business, many claim that their technology, platform, or business will completely disrupt whatever industry it’s in.

That’s all well and good. But what most organizations should disrupt are their budgeting processes. Here are five ways to refresh your approach to budgeting as you head into annual planning season.

Step 1. Stop relying solely on spreadsheets

Many companies still rely on spreadsheets to do budgeting and planning, and finance departments struggle to compile multiple spreadsheets and consolidate data across the company. Even worse, most spreadsheets contain serious errors, often due to broken links and data integrity issues. Plus, they don’t easily scale, and they’re not secure.

Spreadsheets are great personal productivity tools for ad hoc analysis. But when you have more than one person using them, they become a barrier to collaboration and efficient workflows. Some people spend an enormous amount of time—12 to 18 hours each month—on “spreadsheet maintenance”: updating, revising, consolidating, auditing, and correcting frequently used spreadsheets.

That time sink keeps finance away from more valuable pursuits, such as strategic analysis. And, a Workday Adaptive Planning survey found that 63% of CFOs report lack of time for analysis—primarily due to lengthy data gathering and reconciliation tasks—as a top inhibitor to being a more strategic CFO.

Solution: Automate your budgeting process and make it accessible to business partners at any time, from any location. Look for a dedicated, cloud-based planning and forecasting tool that encourages collaboration, rather than impeding it. Provide a central repository and all users can work from a single version of the truth, so you know your data is right, 100% of the time.

Step 2. Replace multiple budget iterations with continuous planning

We’re all too familiar with the typical budget process. Managers come up with a budget and send it up the food chain to the executive suite. That version gets rejected and sent back. Managers revise their budgets again. And again. And again. It becomes an exercise in gamesmanship and negotiation.

Meanwhile, everyone is budgeting to the “wall,” which is usually the end of the year. By the time the annual budgeting exercise is completed, market conditions have changed and the assumptions are out of date.

Solution: Use a continual planning process to manage funds and raise visibility into future market conditions. Use scenario and what-if planning to model how your plan might adapt to changes in the market. (This is especially important for multiyear projects or budget assumptions that carry over the end of your fiscal year.) The result? Finance helps sail the ship, instead of standing at the back of the boat.

Step 3. Focus on drivers, not detail

Many organizations try to budget at the chart of accounts level, and technology enables them. They add lots of detail, down to the penny, and get caught up in minutiae, thinking that good corporate budgeting is about being precise. But there are only two things you guarantee when you add detail to a budget or plan: You create a lot more work for everyone, and you create more opportunities for errors.

Solution: Focus on significant business drivers like risk, profit, and working capital. Remember the 80/20 rule: If you have 100 or more business drivers, you’ll likely spend 80% of your time gathering data and only 20% on analysis. Drop the number of drivers to 20 or fewer, and that equation flips: Data gathering may take up 20% of your time, freeing the other 80% for analysis.

Step 4. Don’t use the budget to control costs

Some organizations fear that without a budget, costs will spin out of control, so they use the finance department as a club. Some CFOs even punish people for overspending. But this attitude creates some serious problems. Managers won’t exceed their budgets, but they won’t spend any less either because they feel entitled to the funds they worked so hard to negotiate—and they know that next year’s budgets will be based on this year’s spending.

And that freezes flexibility. A budget that’s set in stone once a year can’t shift in response to changing demand, which stresses existing resources and causes service levels to deteriorate.

Solution: Shift to a dynamic resource allocation that works from the latest set of assumptions so that you can respond quickly and flexibly to changes in the economy and your industry. Instead of asking “Do I have the budget for this?” encourage employees to ask, “Is this really necessary? Is it the right thing to do? Does it support my strategy?

Step 5. Tie bonuses to relative performance, not budgets

When you link bonuses and compensation to budgets—rewarding managers when they hit their target numbers—you can bring out unproductive behaviors. Managers set targets they can easily reach—or give guidance below what they know could be achieved—to ensure their bonus. They act conservatively instead of trying to optimize the organization or take advantage of market opportunities.

You may have a good market position that works for a while, but over time, if you’re not running as fast as your market will allow, competitors will overtake you and you’ll find yourself in a much weaker position. Even worse, this lack of transparency creates a game of liar’s poker. You risk destroying the ethical foundation of your company.

Solution: Shift to a system that rewards relative performance instead of meeting fixed targets. Tie bonuses to outcomes—what value employees delivered in the environment they were in. Evaluate how you did compared to the opportunity you had, and your competitors.

Also, if you refocus your budgets on a few key growth drivers, as suggested earlier, it will make it easier to refocus your performance and rewards systems from short-term earnings to long-term growth drivers.

Disrupt has several synonyms: disturb, upset, interrupt, and unsettle, to name a few. All of these words imply radical change—and that can scare people. But disrupting your budgeting process doesn’t have to be scary. Cloud-based planning systems are flexible, easy to use, and quick to deploy, while offering powerful features to manage workflow and encourage managers to collaborate in the planning process.

This blog post was originally published on the Workday Adaptive Planning blog.

FP&A Done Right: Forecasting Revenue for Services-Based Businesses: A Growth Factor

Read more FP&A Done Right posts:

Workday Adaptive Planning Tips & Tricks: Data Integration and the Planning Data Source

To set up the credential you will need to do the following:

To set up the data source, you will need to do the following:

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Workday Adaptive Planning Tips & Tricks: Utilizing Split Rows in Modeled Sheets

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Workday Adaptive Planning Tips & Tricks: Data Integration and the Excel Spreadsheet Data Source

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Workday Adaptive Planning Tips & Tricks: Loan Amortization

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Workday Adaptive Planning Tips & Tricks: Choose the Correct TIME Syntax

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