This article originally published by DIginomica
The speed of budgeting has more benefits than purely getting an accurate picture of the business. It helps finance become a service to the business. This case study explains how that works.
Getting a thumbs up for your software from a Rust Belt company is a pretty tough ask, but Vena Solutions was more than happy to put me in front of Kelly DeWispelaere, finance director of ADAC Automotive, a Grand Rapids-based company that specializes in manufacturing inside and outside handles – including next-generation passive entry and electronics integration, exterior mirrors, body side moldings, fuel doors, rear upper spoils and rear access systems.
Founded in 1975, ADAC Automotive has seen good and difficult times. Right now, business is brisk with the company at 1,300 employees and a $300 million run rate. Paradoxically, that translates into relatively predictable throughput but with enough variability to keep budget holders on their toes. During the recession of 2008-9, the company found itself adjusting production on a weekly basis as its customers responded to changing demand. Both of those situations place demands on the finance function and especially those engaged in budgeting and variance analysis.
The Dreaded Spreadsheet
ADAC Automotive is a Microsoft shop running Microsoft Dynamics AX for its ERP and making extensive use of Excel budget templates, as is common across many industries. Equally, that comes with problems. DeWispelaere explains:
We were producing our budgets through a series of probably 50 different budget templates in Excel and then trying to roll all of those up. I’m sure you’re familiar enough with Excel to know that that creates a multitude of headaches. Anytime somebody deletes a line, adds a line, breaks a link, the roll-ups don’t work. As you might imagine, this had a significant impact on time to completion. We would start our budget process in August and finish by the end of December.
To give an indication of scale, the finance team has five people dedicated to budgeting processes that support up to 35 line of business managers. Clearly, this situation wasn’t sustainable but it set the stage for ADAC Automotive to be clear about its budgeting requirements. While it wished to retain the spreadsheet metaphor:
We wanted to find something that was comprehensive. Something that allowed every user to touch the same database, with all the information in one place, where we could get the information back out and it would be accurate. We wanted to eliminate problems rolling up our totals.
That’s a fairly straightforward list of requirements but also, finance wanted to remain in control of the implementation. DeWispelaere says that finance was able to achieve this because of Vena Solutions, its chosen provider, demonstrated that its system would not have an impact on either the security of the Dynamics AX system, neither would it compromise ERP data integrity. Simplicity of implementation was high on the company’s wishlist, especially as it chose to run the project during a budgeting cycle.
We would not normally recommend that approach because of risks associated with a project faltering at a critical time. Vena assured the project team that it would be a fast track implementation and that line managers would not need to learn a new system since they’d continue to work in Excel:
We decided to eat the elephant whole. And it really was not that bad. Vena helped us use our current templates that all of our users were familiar with to access the Vena systems. So, everything looked familiar, it felt familiar to all of our users but the information was going into the Vena system so it was in one place. We didn’t have to worry about the roll ups. The Excel templates just became a vehicle to access the Vena system at that point.
Sounds almost painless but what about benefits?
Slashing Time to Results
ADAC Automotive implemented Vena some three and a half years ago and during that time, has shaved six weeks off the budget cycle. This year, the company anticipates starting the budget process right about now and expects to reduce time to completion by another two to three weeks. While it has become customary for line managers to take two weeks to complete their part of the process, DeWispelaere believes that can be reduced further to around a week. In turn, that means the closer the finance team gets to year end in running the budget cycle, the more accurate the plan is likely to be for the coming year.
More than anything, Vena has taken out the time we used to spend checking that the information we work upon is accurate. Now we spend time analyzing what the budget submissions are telling us rather than making sure the information is correct. The line managers can still run their what-if scenarios when we raise queries but the fact we have control makes for a much better process all the way around. From an internal finance department communications perspective, what-if analysis can be done on the fly to assist the CFO in making budget change requests.
Last year we went through our budget process, looked at the end result and said, “You know, that’s not quite good enough. Everybody needs to go back to the drawing board.” We gave them targets as far as spending rate options we wanted in each department. We communicated that, sent the spreadsheet back to them and within a matter of probably a week or two we had another final budget and no worries over budget control total accuracy.
Budgeting is normally considered an on-premises desktop product but Vena operates as a SaaS solution. This contributes to the speed of turnaround:
We have quite a few people that travel around the world. We had people in India and China during the budget timetable and they were able to access their spreadsheets, either access their own templates or were able to approve templates for their budget owners from wherever they were in the world.
Budgeting and reporting are the usual first step in developing a complete corporate performance management (CPM) suite of decision support solutions. But does the introduction of a new system lead to better outcomes for line of business? That depends on a number of variables. In this case, ADAC Automotive implemented a ‘vanilla’ version of Vena, using existing templates and making very few changes.
Once users became comfortable with fast turnaround, tweaks were made. More important, budget holders have a greater sense of ownership in their budget and can anticipate questions around variance and spending reviews. DeWispelaere says his team try to make this process easy for line of business using familiar metaphors like min/max’s or red, yellow, green formatting to highlight positive and negative variances.
Advice for Buyers
What advice does DeWispelaere offer those seeking a similar solution? She provides four main pointers:
- Find something that’s flexible enough for your changing needs yet is secure. We budget for our payroll, our salaries and wages, we have a separate database set up within Vena where we do the forecasting simply for security purposes and then that pushes from one database into the budget database. It’s seamless.
- Look for something that is easily implemented without a lot of IT involvement beyond meeting their security concerns. We understand these processes and they don’t so it just makes better sense for finance to manage and control the project.
- Make sure versioning is almost invisible in the sense that you will want to run comparisons but still maintain versions. You really need a system that talks to your general ledger.
- Make sure you know where time and effort can be reduced. Running financial statements right out of Vena means we have no impact on the back end systems.
What of the Future?
DeWispelaere’s team has made significant progress in operating the budgets at a fine level of detail:
We load up our cost of sales by part number for thousands of item numbers to do sales and margin analysis versus the budget and it will be versus the forecast as well. We also have the ability to then look at what we see by customer, by program, by product line over different periods. We can compare the actuals to the budgets in a meaningful way. Now we are continually thinking of other things we can use it for.
Going forward, the company expects to do more by way of cash forecasting and dipping its toes into predictive modeling. In that sense, DeWispelaere’s team has become a service to the organization.
We are much closer to the business and can help them make the right kinds of decision that are vital when things are moving quickly.