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Evaluating Financial Planning Tools for Start-Ups
November 8, 2022

By Matt Armstrong, VP Finance at Busbud

FP&A Tags
Planning and Budgeting
Financial Planning and Analysis

evaluating-financial-toolsThroughout my experience, I have found that both start-ups and mature organisations can benefit from installing a financial planning tool, regardless of its stage of maturity. Every organisation I have worked for has had significant issues forecasting growth and/or costs because they either did not have a financial planning tool or they under-invested in the tools they had in place.  

I believe installing a planning tool early, regardless of the company's situation, is a good idea despite the investment required. You need to make sure that the investment matches the organisational need.

Many next-generation planning tools have been developed recently for finance teams. They are lightweight and flexible enough to aggregate multiple data sources and create a single source of truth to enhance an organisation's forecasting and reporting capabilities, compared to the more established offerings like Hyperion, Anaplan and Adaptive Planning. These tools advertise multiple bells and whistles but are not always everything to every organisation. Each tool has its pros and cons. Prioritising the proper criteria based on organisational needs using a checklist of standards will help compare all the different tools on the market to identify what suits the organisation best.

Selecting the Criteria

When evaluating a financial planning tool, I have found that there are three types of criteria: 

1. Integrations and installation.

2. Product functionality and usability.

3. Price.

Integrations and installations are essential as you need to understand how efficiently you can get your tool up and running. You don't want to spend significant time making the data flow properly into the tool instead of troubleshooting once you are live. The product and its usability must match closely with what you need organisationally, i.e., how many ways you want to pivot on the data, functionality for month-end/forecasts, and other information. And finally, the price is always dependent on what your organisation can afford; however, if your needs are met with the right system, the return on the investment should always pay itself several times over.

The following is a set of criteria within the three themes that can help guide your finance team's decision-making process.

Integrations / Installations

Native or ETL Integrations from Your Data Sources

 

Does the vendor provide a direct integration from your data source, or is it a 3rd-party ETL?

  • The key point here is: are you going to spend all your time ensuring that the data from your sources flow into the tool without error?
  • A native integration usually provides a better connection as it has been tested rigorously, limiting data flow errors. In contrast, ETLs are likely more generic and may have mapping inconsistencies that need to be continually customised for you.

Validating Data Once It Is Loaded

How can you prove that the data loaded from your sources are the same as what is loaded into the tool?

  • Specifically, is there an automated process that validates the mapping of the data sources?
  • Does the Balance Sheet in the ERP tie out to the financial planning tool, and if not, can the tool pinpoint the problem so that it can be addressed as soon as possible?

Consulting Team or in-House?

Will there be a consulting team hired to do the installation, or will the vendor itself perform the installation? 

  • This is important as there is an incentive perspective here - as most companies will not have every detail specified in the sales cycle.
  • Will the consulting team charge for add-on services and bill for every little detail not specified, as they are by the hour?
  • An in-house team is usually more inclined to provide a flat rate to ensure your success, rectifying issues that arise instead of charging for every change.

Business Software Integration

How will your organisation interact with the tool? Are there add-ons for MS Office/GSuite to ensure that your company seamlessly integrates with the organisation’s office productivity tools?

Product

Dimensions

How many dimensions can you pivot on? Are they unlimited, and will those dimensions be fixed after the initial installation?

  • It's essential to understand how you want to analyse different cuts of your business, and those dimensions also may change over time.
  • The dimensions include geography, entity, product offering, business line, marketing channel, supplier, scenario/version and more.

Product

Consolidation Speed

How long does it take to upload data from all the sources into the tool and produce a month-end result?

  • Once you update a forecast to ensure that all other data rolls up together, how long does it take to consolidate? Seconds, minutes, or hours? If you are going to make an update, do you need to wait 2 hours for the roll-up to consolidate before you see the results, or is it more instantaneous?
  • This is usually dependent on the scope of data volume in your business, but working this out with the vendor will help provide context to determine the usability during the forecast and close phases.

Product

Month-end and Forecast Version Control

In many situations, the accounting team will close the month and create a Version 1 (V1) so that the FP&A team can review and, provide feedback back to accounting so they can adjust and close the month to create a Version 2 (V2).

  • Understanding the variances between these V1 & V2 versions are important to ensure that adjustments were booked appropriately; similar needs are required for a forecast process.

Product

Projecting Deferred Revenue from Bookings

In businesses where bookings are not directly translated to revenue, does the tool provide simple forecasting of deferred revenue?

  • This is important in SaaS businesses and marketplaces with owned inventory for proper revenue recognition and cash flow management.

Product

Sales Operations

If your organisation has a strong sales management component, can the tool provide integration with your CRM and perform Sales Operations work?

  • i.e., Commissions calculations & quota management, where they can easily integrate with sales bookings.

Product

Balance Sheet and Cash Flow

Income statement modelling is vital for operational trends. Still, understanding cash flow is critical to project the business, especially for start-ups, since the timing for the next fundraising is essential.

Product

Headcount (HC) Management

For HC integration, many organisations look at snapshots of HC at the end of the month. Can the tool provide month-end snapshots and potentially realign cost centres as well?

  • Is a database field-level security to ensure employee salaries and other PII data are hidden from tool users?

Product

SSO

Is there an SSO (secure single sign-on) integration to maintain security while making it easy for users to log into the application?

  • i.e. direct integration with Okta or OneLogin?

Price

Contextualised Negotiation

Price will always vary on the size of the organisation, the complexity of the installation and the number of users.

  • Many vendors will use your organisation's revenue as input to set your price point.
  • In addition, negotiation is always an option; ensure that you have options and work with the vendors, as they know you are doing your due diligence with others too!

For a mid-sized company of ~500 employees with average complexity and 15-20 users, expect to pay between $40000-$80000 annually with a similar amount for a one-time installation.

Conclusion 

There will always be trade-offs between your organisation's needs and what tools out there can offer you. Prioritise the criteria most important for your organisation and determine what workarounds you can afford to make, so you can close the existing gaps with the tool you choose.

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