Some organizations in their eagerness to improve decision making, decide to acquire BPC software and hire consultants, which do not always reach the expected results to improve profitability or properly execute customer-centric strategies.
Loss of credibility, poorly defined scopes, erroneous algorithms, unmotivated users are just some of the effects that anyone can perceive when professionals with the lack of leadership fail in their BPC initiatives.
For example, Financial Services Institutions use industry-specific guidelines and standards to build their models. So not all “BPC experts” can use their generic templates and tools.
When you buy SAP BPC, unless you include a preconfigured model, it comes empty! It is like a spreadsheet that has no limits for your imagination!
The problem increases when the person behind BPC has not the necessary professional skills or is just a monkey who only receives half-hearted instructions by the super user.
SAP BPC is only as good as the professional implementing it!
Financial Planning and Analysis (FP&A) are simple concepts to understand and yet can be difficult to perform. Management accounting models are multifaceted in their nature. Their context can come in a range of types, that many times people easily get confused. The confusion and disagreements on BPC models are diverse; this complexity increases when new technological components arrive. Here are some points typically not well considered:
Entity? 70 legal entities or just one entity for performance management purposes
Currency? Inflation effects?
IFRS, USGAAP. Do we need to make data adjustments?
Do I need to include cost standards?
我明白了什麼.... full or variable costing?
Business context. Is it Strategic, tactical, operational or legal?
Where do we start? Predictive Driver-Based, Traditional
Participative vs Authoritative (bottom-up or top-down)
The master plan, or a cloud puzzle?
Planning and Forecasting In Memory. What the &$#K is that?
Ethics.. really… Say no toolkit
Experienced scuba divers never use equipment and resources they have not previously tested in controlled immersions. Like a scuba diver, do not try to use your new BPC equipment on an FP&A complex task, if you are in a situation you have not experienced before.
The management accounting has a maturity scale, both for descriptive and predictive information. It is not coherent to be at the 1P level of maturity and want to be at 5P level after just 20 weeks!
It is important to remember that change takes time for processes, data, technologies and people to execute a new operating scenario.
An excellent reference to identify the evolution steps is the originally published by Gary Cokins (IMA); Figure 1 shows management accounting maturity levels which should consider before the execution of any BPC initiative.
Do not try to implement all type of plans or forecasts at once!
A good area to start is with models related to descriptive information. Planning ideas and expectations have to be compared with the results obtained. This is how it is eliminated “the pipe dreams and fantasies syndrome” and generates certainty in the planning process. You can begin with your statutory consolidation and understand the annual report without even speaking to business users.
BPC is a great tool, and if you have the right people involved on both sides, you can improve the quality of decision-making in your organization.
When BPC is going to be implanted for the first time, or when it has to be toned, it is important to determine the challenges and needs to jump between levels of maturity. It is always important to consider the information needs and the characteristics that should have the rules of calculation of the financial model to determine previously at least these points:
Take a detailed inventory of financial reports and content detail
Prepare relevant data, BEFORE you try to start your project formally
Develop skills and knowledge of staff related to FP&A (practitioners and users)
Design a project plan with your solution approach before you buy BPC and hire consultants. (When you start your project you will have many opportunities to collaborate with others and improve what you expect from your solution approach)
And very importantly, Before you begin, clarify the expectations of those involved in the BPC engagement and have them work under a common code of ethics.
I hope this article written for LinkedIn has been helpful to you.
Have a great weekend!!!
Pedro San Martin