You may or may not be familiar with the “catch 22” idiom. It is where one is trapped between two contradictory conditions, a somewhat inescapable paradox. It is a situation that I frequently come across when discussing the benefit of an Enterprise Performance Management (EPM) solution. Organisations are in desperate need of a tool that streamlines their FP&A processes, but the team involved shudders at the thought of implementing a solution.
It is a simple calculation that occurs in a second and it looks something like this:
my normal work + a project = total nightmare!
I have seen people in finance look despairingly at just how much input and effort, either real or perceived, is required from them to implement an EPM solution. However, it is also common that after the initial shock, they realize that a solution is needed. The most pressing question is what is the outcome if nothing is done. Well, you can imagine the answer.
If you are at the point where a solution is being considered, it is because there is a genuine need. There are so many budgets and forecasts where an increasing amount of time can continued to be spent reconciling numbers. When numbers do not tie, or are not as expected, the inevitable dive down the rabbit hole of formulas, spreadsheets, emails and phone calls begins. It is stressful, tedious and exhausting. A late change to a budget or forecast can cause a series of ramifications for finance.
Fortunately, it does not have to be that way. Organisations need to recognise the existing pain points and act accordingly. The ideal position is to anticipate the looming issues that are just around the corner and address them.
The typical EPM storyline
Most forecast solutions begin in Excel. One or two analysts create a manual solution which is added to over time. The organisation grows and so does the manual solution, as well as the number of people directly involved. Fast forward a number of years and the business has grown. There is a new office, revenue has increased, employee numbers have tripled and there is actually an HR department(!).
One part of the business that hasn’t managed to evolve beyond its initial form is the budget solution. It is not unheard of that millions of euros/pounds/dollars are still projected within spreadsheets, and all the headaches that come with it. I once spoke to a client where 90% of the knowledge of the budget spreadsheet sat with just one person. It got to the point where the analyst couldn’t easily take leave and a sick day was dreaded by management as the budget process would quickly come to an abrupt halt. Not a good situation.
It was precisely this scenario that triggered the need for a centralised solution but also created a catch 22 situation. There was such a dependency on one person that they could not be released to work even part-time on an implementation. It was painful for everyone. The tipping point can be avoided with good leadership from CFO’s, and increasingly CIO’s.
The symptoms
If you answer yes to one or more of these questions, then I recommend the topic of an EPM solution needs to be put on the table, and quickly:
- Is your budget or forecast process increasing in duration?
- Is the business over-reliant on a handful of staff to complete their budget?
- Can you confidently explain where the numbers have come from if asked to do so by the business?
- Are late changes to a budget or forecast properly put through your existing system?
- Is consolidating your budget/forecast a highly manual task and often error-prone?
You might be reading these questions and be silently nodding. I don’t think you’ll be the only one.
Final thoughts
The fact that a business is growing should trigger the need to have a budget solution that provides the breadth and depth of insight to make informed decisions. The goal should be to avoid a situation where the existing process is so crippling that a new process cannot be introduced. The impact of this can be catastrophic for a business.
The COVID pandemic exacerbated this, which I wrote about in a previous article. However, it is never too late to do something. The investment in implementing a scalable EPM solution is always better than attempting to maintain and build upon one that is, quite frankly, no longer fit for purpose and in perpetual decline, leaving you in a catch 22.
