ISG Software Research Analyst Perspectives

Centage recently released Budget Maestro Version 9, a complete revamping of its longstanding budgeting application designed for midsize companies. The software, now offered as a multitenant cloud-based offering, delivers several structural improvements that can enhance the effectiveness of a company’s planning processes and at the same time is easier to use. Budget Maestro Version 9 is designed to support what Centage is calling a “Smart Budgets” approach to replace traditional budgeting. This approach is consistent with what we have been calling integrated business planning. Technology makes major improvements to the traditional budgeting process possible. For example, Budget Maestro Version 9 gives organizations the ability to work with almost unlimited dimensions. This multidimensionality provides substantial advantages over using spreadsheets for forecasting, planning and budgeting. For example, companies can quickly create and save any number of scenarios and, using the companion Analytics Maestro, visually compare outcomes side by side. Our benchmark research found that nearly half (46%) of companies that can explore every relevant scenario and understand their implications have accurate plans compared to just 6 percent that can only examine a limited number of scenarios or none at all. Budget Maestro Version 9 supports planning processes that can drive better performance. It facilitates the creation of driver-based plans that allow operating units to connect business objectives to the resources required to achieve them. In building driver-based plans, companies can use key performance indicators such as sales pipeline funnel ratios or scrap rates to help create plan objectives and drive effectiveness and efficiency gains. The multidimensional structure allows a company to create a traditional fiscal year budget while, in the same system, supporting rolling-quarter forecasts and plans that can extend out for as many periods as desired. The rolling-quarters approach recognizes that business doesn’t stop at the end of a budget’s fiscal period, which keeps executives and managers focused on a continuity of business strategy across fiscal periods. Budget Maestro Version 9 also facilitates business planning across the organization. Today, budgeting and operational planning efforts are typically only loosely connected. A better approach closely integrates unit-level operational plans with financial planning. Relying on information technology, this form of planning enables companies to plan faster with less effort, while achieving greater accuracy and agility. Our benchmark research finds that two-thirds (66%) of companies that directly link financial and business planning have a planning process that works well or very well, compared to 40 percent with information copied from plans and just 25 percent that have little or no connection to plans. Budget Maestro’s redesign addresses many of the shortcomings of previous releases and acknowledges a growing preference for cloud-based budgeting and planning. At the same time, it retains its use of accounting logic in its models. This, in turn, facilitates the creation of corresponding balance sheet and cash flow plans that are consistent with revenue and expense forecasts. These can be as detailed as an organization wants. For midsize businesses, the ability to project balance sheets and cash flows for monthly periods is important. Accurately forecasting cash flows can be beneficial because smaller organizations are less able to tap external credit sources and are therefore more reliant on internal funding. At the same time, those organizations that use outside financing will easily be able to provide lenders with consistently timely reports and will have better visibility into conditions that would warrant discussions of future credit requirements or the danger of breaking loan covenants. The software enables an organization to automate the process of bringing results from ERP and accounting systems into Budget Maestro to quickly and accurately update the monthly “actuals” at whatever level of detail it desires. It makes it possible to immediately drill down into underlying details to identify significant variances between planned and actual results. Our benchmark research finds that only 20 percent of companies are able do this. Being able to pinpoint important differences between, for example, planned and actual unit sales and average price of individual products by channel or territory enables a company to address issues and opportunities that require attention sooner and therefore respond to changing business conditions with greater agility. Budget Maestro Version 9’s ability to integrate planning across all business units enables companies to plan headcount by role and simultaneously calculate their financial impact. It allows an HR department or administrators to set the expected salary levels by role or title and project benefit costs so that managers can focus on staffing requirements and executives can be certain that forecast personnel costs will be based on a consistent set of assumptions. The system is also flexible enough to permit managers to set specific compensation for individual hires. Budget Maestro Version 9 also enables an organization to do long-range planning that is integrated with its annual budget. The software can facilitate creating and continually updating a detailed two-fiscal-year plan with three additional years’ projections at a lower level of detail – a typical approach. The multidimensional structure enables executives to gauge the impact of specific initiatives (such as an acquisition or capital investment) and assess the effect of changing the timing of such initiatives. Our benchmark research shows that almost all (89%) companies that link their long-range plans and annual budgets have a strategic planning process that works well, compared to 39 percent of those where those two processes are only partially integrated or not integrated at all. Budget Maestro Version 9 makes constructing this type of model quickly a relatively straightforward process. The market for planning and budgeting software is crowded, although the dominant player remains Microsoft’s Excel. There are substantial drawbacks of using spreadsheets for planning in a company. Despite that, our research finds that a majority of companies use spreadsheets for a variety of planning and budgeting activities. Among the alternatives, Centage competes directly with several software vendors including Adaptive Planning and Prophix for midsize companies. Budget Maestro Version 9 offers a significant improvement in functionality over the company’s previous releases and addresses the increasing demand for cloud-based planning software. Its cloud-based design and the restructuring of its architecture make Budget Maestro Version 9 more appealing to larger midsize companies than previous releases. I recommend that midsize companies and divisions of larger companies that plan and budget independently stop using spreadsheets for this task. I also recommend that they consider Budget Maestro Version 9 as they assess their options for planning and budgeting software. Regards, Robert Kugel Senior Vice President Research Follow me on Twitter and connect with me on LinkedIn.

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