We've moved

We've moved!  We've grouped up with some of our other colleagues and now blog at CFO Knowledge.

Besides blogs on Enterprise Performance Managment, you'll find lots of other stuff on accounting and finance.

Zions Bancorporation enjoy the benefits of 'closing the loop'

As yet few companies are using performance management solutions in tandem to deliver closed loop performance managment and those that do, such as Zions Bancorporation, are well ahead of the curve and gaining benefits that their peers have yet to enjoy. Zions Bancorporation uses the SAP® BusinessObjects™ Planning and Consolidation application for planning and budgeting and the SAP BusinessObjects Profitability and Cost Management application for modeling costs. It feeds the costs, together with interest spreads calculated in the bank’s funds transfer pricing solution, into the “profitability mart,” and calculates net profits at the individual account level. Knowing how different products and different types of customers create value for the bank is critically important to many commercial decisions that executives and managers have to make. It helps them determine, for example, where best to spend marketing dollars and how to price individual loans.

But the bank gets much more from its implementation of SAP BusinessObjects Planning and Consolidation and SAP BusinessObjects Profitability and Cost Management than simple best-of-breed deployments. It can take trended volumes and activity unit rates from the latter application and combine them with data on interest spreads and fee income from its shareholder value model, which summarizes the data in the profitability mart. It can then auto-populate many of the important line items in its budget. This means that business managers no longer have to forecast expenses themselves and can simply review and amend the figures generated for them.

This has resulted in budgets that are both quicker to produce and more accurate. But a specific transformational benefit is enabling the bank to keep resources and capacity tightly aligned with demand during the current period of uncertainty. That benefit is the ability to manage the business with quarterly rolling reforecasts rather than the traditional annual budget and half-yearly review.

Below are the video testamonial of Walter Young discussing their implementation and the Business Transformation Study.


Walter Young of Zions Bancorporation talks about SAP EPM from Richard Barrett on Vimeo.
Zions is a $51 billion US based financial services company. This interview was conducted with Walter Young, SVP of Zions Bancorporation. The group is unique in that it comprises 8 individually named and autonomous banks. In Walter’s words, they have moved from a 1,000+ spreadsheet “excel mess” to an efficient and streamlined budgeting cycle. Zions are using SAP BusinessObjects Profitability and Cost Management in addition to other SAP BusinessObjects solutions such as Xcelsius.

Zions mfp

View more documents from SAP.

Is Driver Based Budgeting Picking Up Speed?

In a recent survey of planning and budgeting practices, analysts Aberdeen Group, found that the ‘Best in Class’ - the 20% of respondents who had shorter budget cycles, more accurate budgets and who had actually improved their year-on-year profitability by 20% or more, were roughly twice as likely to use methodologies such as zero-based budgeting and driver-based budgeting – the majority sticking to tweaking the previous year’s actuals.

Driver-based budgeting is something close to my heart in that I wrote a book on it back in 2007 – Planning and Budgeting for the Agile Enterprise. Other than receiving a few metaphorical pats on the back from the folk who make their living by writing or lecturing about performance management, the book languished on the Amazon listings where it has stubbornly remained for the last few years, while I moved on to travel writing which is both more enjoyable and more lucrative. But clearly driver-based budgeting hasn’t gone away. In fact, Aberdeen found that the ‘Best in Class’ enjoyed some considerable benefits in that they were more able to perform ‘what-if?’ analysis and re-forecast as market conditions change. Given that many people talk about rolling re-forecasts, but few can actually achieve the frequency they desire it looks as though driver-based budgeting is on the ascendant; an idea whose time has finally come.

Now the interesting thing is that the Aberdeen research didn’t find much difference in the type of software used for budgeting between the ‘Best in Class’ companies and the industry average. So although enterprise applications may help improve productivity in finance and make the data easier to manage, it’s not the technology that is making the difference here. It’s the simple step of moving away from traditional budgeting, (little more than the collection and collation of line item expenses to my mind), and adopting a driver-based methodology that makes the difference.

Being a numbers business, telecoms is an ideal industry in which to implement a driver-based approach to planning and budgeting and I’ve written before about how I sat through a breakfast meeting at SAP Sapphire in Orlando earlier this year and was gladdened to hear to Sandy Rogers, Director of Financial Systems at Qwest Communications talk on their adoption of driver-based planning and budgeting that consulting organization Column 5 Consulting helped them implement in SAP BusinessObjects Planning and Consolidation. Sandy shared some of the benefits of the approach as well of some of the change management issues in helping financial analysts and business folk move away from the ultimately false security that comes from a traditional approach to budgeting with its endless line item detail. It was compelling stuff. Who knows; if this momentum continues then that book might just begin to pay back on the time and effort invested in writing it!