Many companies have begun to reconsider traditional budgeting to opt for more accurate and

detailed methods. But changing such an integral process is a huge decision that can impact many
departments within your organization. It’s important to have all the facts, understand all the pros and
cons, and know what technologies can help you implement these methods.
If you’ve found yourself here, you’re already thinking about how you can improve your planning and
forecasting methods
In this eBook, we’ll discuss…

I. Barriers that Slow Your Planning Cycle

1. Lack of Automation
2. Decentralized Data
3. Metrics that Don’t Match Your Strategic or Operational Goals
4. Too Many Details
5. A Stagnant Forecasting Model

II. Choosing a Method: Rolling Forecasts vs. Zero-based Budgeting

1. Rolling Forecasts: Weighing the Pros and Cons
i. What exactly is a rolling forecast?
ii. Why use rolling forecasts vs. traditional budgeting?
iii. What challenges come with rolling forecasts?
iv. Would my organization benefit from rolling forecasts?
2. Zero-based Budgeting: The Pros and Cons
i. Pros of zero-based budgeting
ii. Cons of zero-based budgeting

III. Getting Started with a Planning & Forecasting Method

1. The Dos and Don’ts of Rolling Forecasts
i. Do retire your traditional forecast method
ii. Do base forecasts on 12 months or more
iii. Do focus your forecasts on top key performance indicators (KPIs)
iv. Do standardize your methods and rules
v. Don’t link forecasts to target or rewards
vi. Don’t lose sight of the point — to influence, not predict
vii. Don’t link forecasts to target or rewards
viii. Don’t let someone change your forecasts without consulting you
2. Questions to Ask Before Getting Started with Zero-based Budgeting

IV. Choosing a Tool to Implement Your Planning & Forecasting Method

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If you’re an FP&A professional at a large organization, you’re most likely all too familiar with long
budget cycles — often taking several months to complete. But, it doesn’t have to be that way. There
are five common culprits that are likely slowing you down.

Many business and finance leaders agree that Excel spreadsheets are extremely useful and can help
with performing complex forecasting functions. However, manual methods create delays with the time
it takes to input data, make corrections across multiple spreadsheets, and reconfigure sheets that are
returned in a different format by the many people across the enterprise who edit and manipulate the
data. And the Excel spreadsheet shuffle not only slows down
processes — it invites error.

Learn more in our white paper, Beware: Excel for Planning,

Budgeting, and Forecasting.

Planning software like Hyperion Planning or Oracle Planning &

Budgeting Cloud Service leverage the familiarity of Excel while
eliminating the pitfalls. Hyperion Planning is most often used in
conjunction with Essbase, which extracts and aggregates data
from a wide range of sources. Essbase stores data in a cube
and calculates your data, providing fast access to results.

Using Excel for planning and forecasting means your data is

siloed into individual business units. Data from one spreadsheet
might rely on data from another, significantly slowing your
planning cycle.
DOWNLOAD NOW

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Decentralized data can create havoc for other business units who need the data so they can plan
accordingly. An EPM solution like Hyperion Planning allows various business units to plan in different
ways for optimal results — and a faster planning cycle.

Driver-based planning is a buzzword, but for good reason. Traditional planning methods typically
don’t align with your organization’s strategy or operations. Driver-based planning, however, focuses
on your inputs, not your outputs — meaning that you’re focused on the key metrics driving your
business rather than the dollar amount.

With driver-based planning, you work backwards, focusing on the key metrics that are important to
your company’s strategic and operational goals. This will help increase transparency and help speed
up your planning cycle, since you’ll know which metrics to focus on.

We’ll cover driver-based planning in more detail further into the eBook.

A huge slowdown in your planning cycle is adding too much detail, which can cause an overload of
information. A good rule of thumb is to focus on greater details for short-term planning, and less detail
when you’re forecasting further into the future.

Conversely, you should ensure you provide enough detail for large cost items or volatile revenue
components.

The traditional method of budgeting and forecasting causes you to spend months on a forecast that
quickly becomes outdated. Then, trying to reforecast in response to market fluctuations isn’t really
feasible. You end up spending time on something worthless and scrambling later on.

Using rolling forecasts doesn’t just speed up your planning cycle, it makes your forecasting model a
living document. There are many advantages of continually forecasting — you become more agile in
response to changes or trends, and your information is more accurate.

In the next sections, we’ll go into greater detail about using a rolling forecast method for planning and
budgeting, as well as look at zero-based budgeting.

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In an increasingly fast-paced business environment, has the traditional annual budgeting and
forecasting process become an outdated model?

The financial crisis of 2008 bared the shortfalls of making static assumptions months ahead of time:
forecasts ended up worthless, and many companies had no process in place for reforecasting on the
run. Since then, expectations for CFOs have changed drastically. Finance offices are expected to sift
through unprecedented levels of information and reforecast quickly in response to market
fluctuations.

The benefits of faster, more accurate forecasting are clear. Take, for example, an energy company
that was able to not only survive a market downturn but thrive in it because real-time planning
capabilities provided a competitive edge. Oil prices were falling more than 30 percent in a matter of
months — in such market conditions, companies could not afford to spend 2 weeks on a planning
cycle. While competitors were still scrambling, our client was able to leverage their Hyperion Planning
application to analyze multiple scenarios, optimize capital allocations, and make real-time updates
during board meetings.

To increase agility, many companies are adopting methodologies like zero-based budgeting and rolling
forecasts. These are powerful tools for FP&A — if used correctly. One in five of the organizations that
implemented rolling forecasts recently have abandoned them because they were more complex than
initially expected. A 2015 survey of companies using zero-based budgeting found that 65 percent of
those companies failed to meet cost reduction targets.
But, if you know the pros and cons before getting started, you’ll likely see a higher success rate.

Every planning and forecasting method has its ups and down. It’s important to find a process that
works for you and your organization. Before getting started with implementing a rolling forecast

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method, you need to understand that pros of that process but, more importantly, you need to
understand and know how to address the cons.

Rolling forecasts allow for continuous planning with a constant number of periods. For
example, if your forecast period lasts for 12 months, as each month ends another month will be
added. This way, you are always forecasting 12 months into the future.

Rolling forecasts usually contain a minimum of 12 forecast periods, but can also include 18, 24, 36, or
more.

The biggest difference between rolling forecasts and the traditional budgeting process is that annual
budgets determine the plan for the entire upcoming fiscal year. Coming up with an annual budget is a
long process that takes a lot of research and ties up resources — then the rest of the year becomes a
countdown to the next budget.

Conversely, you should think of rolling forecasts as a living document. No longer are you spending all
that time coming up with the annual budget. Instead, you’re making decisions throughout the year for
a set time span. There’s no countdown and you’re always looking ahead, able to make tweaks to your
budget as predictions change.

Even if you view traditional budgeting and forecasting methods as sufficient, there are many
advantages to using rolling forecasts:

A common complaint about traditional annual budgeting is that by the time it is completed, it’s already
irrelevant. Rolling forecasts allow you to make quick tweaks along the way rather than letting
mistakes mount up and only giving yourself one shot to make those changes annually.

Rolling forecasts allow you to adjust the forecast to accommodate recent changes or trends, meaning
you’re able to respond better to time-sensitive decisions. Because your outlook is updated
continuously, you’ll always have long-term data available when your organization needs to make an
important business decision.

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With rolling forecasts, your predictions are no longer based on past results. Rather, your metrics like
category growth, market share, human capital, and customer satisfaction are fed into your system.
Any fluctuations to operational activities can be accounted for throughout the year, instead of just
once. Being able to add these key business drivers to your forecasting will allow you to improve your
forecast quality.

To learn more about how driver-based planning fits in with rolling forecasts, download the cheat
sheet:

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Unfortunately, many companies are resistant to move away from traditional forecasting methods. The
emphasis Wall Street places on quarterly earnings motivates organizations to stick with traditional
budgeting.

When companies do decide to start using rolling forecasts, they face a few additional challenges.
Preparing to start using rolling forecasts can cost time and money if your forecast process isn’t
already automated. Accountants will need more training, and their workload will probably increase if

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they’re doing constant forecasting throughout the year. Your organizations will also need to figure out
how to evaluate performance, since it won’t be looked at during one specified time every year.

Fortunately, there are tools to help automate your processes, such as Hyperion Planning and Oracle
Planning and Budgeting Cloud Service (PBCS).

Companies looking to improve their planning process should carefully choose a methodology that
best fits their organizational structure, leadership culture, and marketplace. Here are some questions
to consider:

• Is your marketplace dynamic and adapting to change difficult for your organization?
• Has your company or department missed its plan and the reasons why are unclear?
• Does the current budgeting process seem siloed and lack clear ownership?
• Do budget conversations focus more on financial variances and less on how the business is
operating or how customers are serviced?
• Does the current budgeting process seem like an exercise rather than a process to chart a
course for success?
• Are your budgets based on assumptions that usually turn out to be wrong?
• Is your annual budget time consuming, taking more than three months to complete?

Responding “yes” to any of these questions suggests a need for improvement — and an opportunity
to develop a more effective management process.

Zero-based budgeting (ZBB) is less common than traditional budgeting and rolling forecasts.
However, it’s been getting some attention in the last few years. Whereas traditional budgeting allows
you to include items from the previous year, ZBB requires organizations to justify every dollar in
detail.

Building a budget from zero might seem like a tedious process, but it can help you make the best
decisions for your company in the long run. In this blog post, we’ll cover some of the pros and cons of
zero-based budgeting. And, we’ll look at some questions you need to ask before getting started with
ZBB in Hyperion Planning.

• Historical trends may seem helpful when creating your budgeting, but it doesn’t ensure that
you take a detailed look at the spending. ZBB requires that you inspect all activities in the

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 budget, ensuring that the budget is distributed in the most efficient manner — based on
current needs, rather than past trends. Like rolling forecasts, ZBB is also based on key
business drivers.

• It sounds great, but does that mean I have to start from zero every time? Not necessarily. If
you have a tool like Hyperion Planning or Oracle’s Planning and Budgeting Cloud Service
(PBCS), you can easily turn ZBB into a repeatable process baked into the culture of
your organization. You can build a structured approach to ZBB and managers throughout
your organizations will participate in the process, giving expert insight into the activities that
make up the budget.

• ZBB is great for cutting costs, but it doesn’t have to mean severely cutting your budget. With
ZBB, you have true control over how much cost you cut. ZBB allows you to be aggressive
about cutting costs, but how much you cut and where you reallocate funds is entirely up to you.

• By looking at each activity with decision-makers in every department, you’re able to cut out
activities counterproductive to your organization’s success. ZBB is a not just a budgeting
method, but a tool to rid your organization of inefficiencies.

• ZBB might not seem like it’s designed for companies focused on growth, but cutting
inefficient costs can allow you to redirect spending that assists in your organization’s
advancement.

What ZBB really boils down to is allowing for you to address what’s happening in your organization
now, rather than basing decisions on past, outdated trends.

• Though you can implement repeatable processes with ZBB, it will most likely be more time-
consuming than traditional budgeting.

• You’re also faced with getting other departments to cooperate, and they might not be able to
adequately measure their needs for the entire year.

• The process might not include fixed costs included in a contract, such as an office or
building lease.

• Though a cost may not seem essential to your organization’s operations, it might affect your
brand and your damage customer’s experience.

• If your organization is large, it might be too costly and require too much commitment from
other departments to be a realistic method.

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Before you start using your new planning and forecasting method, you there are several
considerations you need to keep in mind. In this section, we’ll look at what you should and shouldn’t
do when it comes to rolling forecasts. We’ll also talk about questions you should ask yourself before
getting started with zero-based budgeting in Hyperion Planning.

While traditional budgeting methods can often cause up to four budget recompilations every year —
taking valuable time away from your finance staff — rolling forecasts ensure time isn’t wasted on
inaccurate assumptions. Rather, rolling forecasts enable you to make adjustments based on
corporate goals and changes within the marketplace. Always being able to look ahead will lend your
organization flexibility that just isn’t attainable with the traditional annual budget.
So, how can you ensure success when you start using rolling forecasts?

In business, it can be hard to make changes and leave old ways behind. To find success with rolling
forecasts, your whole team needs to adopt the practice and change their mindset. When an
organization maintains multiple models for too long, forecast owners tend to rely on the older, more
comfortable way and ignore the new model.

The best thing you can do is set a deadline to transition, and then involve key players in important
implementation tasks to gain commitment and prepare your finance office.

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Though you’re moving away from the annual model, you still want to ensure you’re forecasting over a
long enough period. When your forecasts go past the subsequent fiscal year, business leaders are
given more insight into the future. Forecasts periods usually last at least 12 months, but they can also
go up to 18, 24, 26, or more.

If you haven’t been able to convince your organization’s leaders that rolling forecasts are a better
method for planning, it’s probably because they don’t fully understand them. Many managers believe
that taking on rolling forecasts means completing an entire budget several times a year. Taking every
detail from your organization and compiling it into one forecast isn’t the right approach. Instead, you
should focus at your top KPIs that enable you to see the bigger picture.

With rolling forecasts, it’s important to work smart. One of the keys to saving time and ensuring data
consistency is to set rules for your salespeople in classifying opportunities. Define the stages of the
cycle, and set probabilities of closure that are based on facts, rather than opinions. This will help with
accuracy in your forecasting.

Forecasts — even rolling forecasts — can’t make you clairvoyant. “The only certainty about a forecast
is that it will be wrong,” write Jeremy Hope and Steve Player in Beyond Performance Management. The
purpose of a forecast is not so much to provide an accurate view of the future but to provide some
insights about how strategic options and future events will combine to produce the financial outcomes
that you want.”

This might be a hard pill to swallow for your leadership team, who never want to hear bad news.
However, when you take target setting, measurement, and rewards out of forecasting — you end up
with better results. Your accuracy will improve if you have a more realistic view of the future, rather
than adjusting your forecast so it reflects the agreed upon budget.

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If higher-level management has a problem with your forecast, do not simply allow them to change it.
However, it is fine for them to challenge the predictions and the assumptions on which the forecast is
based. Allowing changes to be made to your forecasts, no questions asked, will eliminate all
credibility.

ZBB applications are becoming increasingly popular in Hyperion Planning, especially for
organizations experiencing low growth who are interested in cutting costs. The biggest difference
between ZBB applications and traditional budget applications are the amount of detail captured.

Traditional budgeting applications directly plan an expense item or use a price X quantity formula. As
you might expect, ZBB applications plan every line item related to the expense. For example, if you’re
budgeting supply expenses, a ZBB application includes values for each detailed line item, including
things like paper, pens, staples, etc. Because of the level of detail needed for ZBB applications, you
must take careful consideration to reach peak performance in Hyperion Planning.

Before designing a ZBB application, ask yourself the following questions:

• Does the added ZBB detail require control over how you enter the data?
o If yes, add a separate line item dimension.
o If no, then supporting detail functionality within Planning may be sufficient.
• Does the detail have a direct relationship to an account?
o If yes, then smart lists within the account dimension can be leveraged.
• Is the ZBB detail relevant for in your current budget? Your application should include only the
line items needed for the current budget and remaining line items should be purged.
• Do all accounts require additional ZBB detail?
o If no, consider having a separate ZBB plan type to store line item information for the
account subset.

To learn more about setting up zero-based budgeting with Hyperion Planning, download this eBook.

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Choosing the right tool to implement your planning and forecasting method is just as important as
choosing the method that works best for your organization. Fortunately, Oracle has several tools that
we mentioned above, including Hyperion Planning, Planning and Budgeting Cloud Service (PBCS),
and Enterprise Planning and Budgeting Cloud Service (EPBCS).

Each tool can help you implement rolling forecasts and ZBB, but first you have to decide whether to
implement an on-prem solution (Hyperion Planning) or a cloud-based solution (PBCS or EPBCS). To
help you decide whether a cloud or on-prem solution is best for your organization, we’ve compiled
this eBook to guide you in your decision:

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If you decide to go with a cloud-based solution, you’re faced with an additional decision: PBCS or
EPBCS?
EPBCS was built off the framework of PBCS, but with out-of-the-box functionality, including:
• Strategic Modeling
• Workforce Planning
• Capital Asset Planning
• Project Financial Planning
• Financial Statement Planning
Since cloud updates occur monthly, new modules may be added to EPBCS. Unless you plan on
using these modules, PBCS might be a better, more affordable option. You don’t have to use any of
the modules in EPBCS but, without them, you’re essentially using PBCS.
To get a more in-depth look at the differences between PBCS and EPBCS, download this eBook:

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Whether you choose an on-prem or cloud tool, you’ll need to find an implementation partner who
can help you implement ZBB or rolling forecasts within your solution. Choosing an implementation
partner with the requisite functional expertise, project management experience, and technical
ability is key to a successful implementation.
Your implementation partner will be there from the beginning, helping you adopt your planning and
forecasting method from both a functional and technical standpoint. Even if you’re not sure what
technology you want to go with, an implementation partner can help advise you in your efforts.
For help evaluating EPM implementation partners, get the checklist:

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About US-Analytics
US-Analytics is a full-service consulting firm specialized in Oracle Dallas, Texas

Enterprise Performance Management and Business Intelligence 600 East Las Colinas Blvd.
Suite 2222
solutions. Applying decades of experience along with advanced
Irving, TX 75039
degrees and certifications, our team of functional and technical experts

have helped hundreds of the nation’s largest and brightest companies

Houston, Texas
bridge the gap between business goals and IT deliverables. 2500 CityWest Blvd.
Suite 300

To ensure end-to-end coverage of your technology, we provide a Houston, TX 77042

complete range of services: process and advisory, infrastructure,

Atlanta, Ga.
implementations, upgrades and migrations, training, and managed
5280 Avalon Blvd.
services.
Alpharetta, GA 30009

Learn more at www.us-analytics.com. info@us-analytics.com

877.828.USAS

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