Best Practices for Getting Started

Before you create your application, gather information about current processes. This is a best practice to ensure that the application meets your business requirements.

• Analyze your current processes.

  • Look at what is working in your current processes, and plan how to build that in to the application. Consider taking this opportunity to improve current processes.

  • Review your company’s financial statements. Determine the key revenue and expense areas that make up 80% of profit and loss.

  • Focus on the major drivers of your business. For this subset of accounts, understand the business drivers and required dimensions. For example, employee compensation typically accounts for 50-60% or more of expenses.

  • Decide if detailed modeling is required, or if another methodology exists. For each major account in the profit and loss statement, understand how to derive appropriate values for the account. Business logic could include simple calculations like Units x Rates or other methods.

  • For the remaining 20% of the accounts, plan or forecast using some simple logic such a percentage growth or simple entry.

• Gather any existing spreadsheets. Based on your current process, gather your input sources and understand their purpose. Review the sources to determine the business logic, relationships, and other calculations.

  • Analyze the spreadsheets to understand your current processes. Understand the sources of information and the business logic that they support. Find out if your business process logic applies to all organizations.

  • Find out if your business process logic applies to other business units and divisions. If the process differs, decide if you want to make processes consistent.

• Gather your current reporting requirements. Because reports are used to present financial results for management review and analysis, they are a key consideration during design.

  • Understand the business logic, relationships, and calculations for your current processes.

  • Find out if your business process logic applies to other business units and divisions. If the process differs, decide if you want to make processes consistent.

• Review your current financial statements. Review reports and consider what type of information is included.

  • Identify the dimensions in reports, for example, if reports are done by cost center, division, account, or customer. Decide if you need to add dimensions, such as product.

  • Review financial statements and examine the intersections. Learn if reports are done by account and entity or by other slices.

  • Understand the business drivers for accounts, including the dimensions involved. Review profit and loss line by line to determine if modeling is involved or if the information is simply added by users.

  • Note the layout of reports, including which elements are on the rows and columns.

  • Determine the number of unique report formats such as by Cost Center or by Division. Specify a report format for each type of report you need.

• Gather planning and forecast requirements. Collect the requirements for producing an annual plan and forecast. Conduct an analysis and understand if all processes are the same.

  • Determine currency requirements. Identify the currencies in which you plan and report, and whether you plan or forecast in multiple currencies. Verify foreign currency requirements. Confirm if you perform any currency sensitivity analysis.

  • Determine the planning horizon. Know how many years in the future you plan, such as one, two, three, or five years into the future. Plan how much historical data to bring into the application. It's typical to include one or two years of historical data.

  • Identify the planning and forecasting process. Know whether you prepare annual budgets and forecasts. Understand how often you revisit your forecast, such as monthly or quarterly.

    Determine the planning processes you want to support, such as Plan or Forecast. Establish if planning and forecasting processes are similar. Know whether you want to prepare a rolling forecast.

    Decide if you'll plan toward a target. If you set high level targets for plan or forecast, decide on the level of accounts to target.

    Determine if multiple iterations are required. Establish if you need to store multiple submissions of Plan or Forecast. Determine how many forecasts you maintain. Decide if you want to do comparisons, such as comparing forecasts.

    Additional questions to help you plan the process:

    • What are the expense drivers for your business, such as compensation, material, travel, or capital and equipment expenses?

    • What are the revenue drivers for your business, such as products, projects, or services?

    • If Product is one of the main revenue drivers, how many products do you have?

    • How many business units or entities do you have? What main metrics and KPIs are tracked? How many users are involved in financial planning? Who are the main users?

    • Determine the approval process that should be incorporated into the application. Is the approval process the same for Plan and Forecast?

  • Understand your data sources. Know the file format and the contents of each data source. This helps you plan requirements for dimension and data integrations.

    • Determine the source of dimensions such as Account, Entity, and custom dimensions.

    • Determine the source and frequency of Actual results.

  • Determine your approach going forward. Identify process improvements, and note which ones to incorporate in your application. Plan the strengths to incorporate going forward, and identify any weakness and areas to improve in the future.