As Finance leaders, we can’t expect the business to view Finance as value-added partners if we...
Evaluating Financial Planning Tools for Start-Ups
November 8, 2022
Throughout 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?
|
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?
| |
Consulting Team or in-House? | Will there be a consulting team hired to do the installation, or will the vendor itself perform the installation?
| |
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?
|
| Product | Consolidation Speed | How long does it take to upload data from all the sources into the tool and produce a month-end result?
|
| 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).
|
| 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?
|
| 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?
|
| 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?
|
| 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?
|
Price | Contextualised Negotiation | Price will always vary on the size of the organisation, the complexity of the installation and the number of users.
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.
The full text is available for registered users. Please register to view the rest of the article.
