Compare leading financial planning tools and software

Financial Performance Management (FPM) plays a critical role in driving business performance. As such, it is one of the key management tasks aimed at aligning a company’s strategy with its business processes to achieve the best possible performance at strategic, tactical and operational levels.

FPM focuses on the optimization of management processes in finance and controlling. The core elements of financial performance management are financial planning, group consolidation, disclosure management and internal management reporting, as well as the analysis of financial data.

What is financial planning?

Financial planning and forecasting refer to the planning of an organization’s financial results. As such, both are central to the financial management of organizations and define financial goals. The goal of financial planning is to maximize profits and increase shareholder value. On the other hand, it must ensure liquidity and thus the continued existence of the organization. To ensure liquidity, it is essential to balance future revenues and planned expenses in order to avoid insolvency.

Integrated financial management and financial performance management (FPM)

Integrated financial performance management generally requires the planning, management and control of an organization’s financial performance. While financial planning sets the financial goals of an organization, financial reporting must continuously inform internal and external stakeholders about the achievement of these goals. Financial analysis must identify variances so action can be taken when necessary. Depending on whether the analysis is performed at individual company or group level, it may be necessary to consolidate the financial results of individual companies and subgroups in order to present them correctly from a group perspective.

Integrated and meaningful financial planning, on the other hand, requires a link to the operational sub-plans (operational planning) in order to present a comprehensive financial view of a company. The impact of operational planning on a company’s financial results (balance sheet, income statement, cash flow) is only transparent if it is fully integrated.

What are the typical features of financial planning tools?

Modern financial planning and financial performance management software platforms provide robust support for all tasks related to planning, managing and controlling an organization’s financial performance.

Key features of financial planning tools include:

• Modeling: Business-friendly modeling (e.g., importing and setting up the required planning structures, flexible definition of the key figures to be planned).
• Business content: Predefined solutions can help speed up implementation, especially in the early stages of a project. It is essential that this financial planning content can be customized to individual requirements (e.g., position plans, P&L structure, DB invoice).
• Currencies: Support for multiple currencies including currency conversion. Plan data must be entered flexibly in different currencies (e.g., local vs. group currency) and converted at different exchange rates (e.g., average rates, closing rates).
• Planning masks: Flexible structure of individual planning masks with freely definable content, which can be used to enter data in the financial planning model.
• Workflows: Definition of planning processes to control all parties involved in financial planning. Workflows support process-based collaboration between planners.
• Plan data entry: Support for plan data entry, commenting on entered values, data distribution functions, etc.
• Simulation and Forecasting: Functions for simulating and analyzing scenarios and for flexibly creating (rolling) financial forecasts and predictive forecast models.

Because financial planning is closely linked to the other FPM disciplines described above, market-leading software platforms often also provide functionality for the following tasks:

• Group consolidation: Consolidation of group results (actual and planned data) that meet external requirements (legal, commercial) as well as internal requirements (management views).
• Financial reporting: External reporting (disclosure management), e.g., to fulfill the obligation to publish annual financial statements. Internal reporting to provide management with financial information.
• Financial analysis: Analyzing financial data (e.g., plan/actual variances) and scenarios (e.g., best case/worst case, what-if).

What are the benefits of financial planning solutions?

Organizations most commonly achieve the following benefits and value from financial planning tools:

• Increased visibility into financial performance
• Better and more informed financial management decisions
• More accurate and detailed planning of financial results
• Improved quality of planning results
• Better integration of financial planning, financial reporting/analysis and group consolidation

BARC’s experience and in-depth analysis shows that only software tools that best meet the requirements of the organization using them can deliver a high level of value. Therefore, a comparative evaluation of different solutions is essential during the software selection process in order to harmonize the functional scope with your own requirements.

Why should you compare financial planning software and what should you look for?

The goal of sound software support must be to cover all existing functional and technical requirements.

The financial planning and performance management software market offers a wide range of products. Each tool has its own strengths and weaknesses. We therefore recommend a step-by-step approach. The first step should always be a functional, technical and organizational requirements analysis that includes all key future users of the tool. The next steps in the evaluation process are the creation of a long list, the reduction to a shortlist based on knock-out criteria, and the detailed evaluation of the remaining solutions.

In general, organizations should pay particular attention to the following criteria when selecting a financial planning solution:

• Coverage of all planning requirements and support for the planning process
• Inclusion of predefined business content for integrated financial planning
• Support for neighboring disciplines such as reporting, analysis or group consolidation
• High degree of usability
• Predefined interfaces and data integration capabilities from source systems (e.g. ERP)
• Embedding of the solution into the current and future system landscape/architecture

Comparative evaluation of multiple software solutions is critical to making a future-proof decision. A conscientious approach protects organizations from making the wrong decisions.