Robert Kugel's Analyst Perspectives

Workday Planning Improves Control and Visibility

Posted by Robert Kugel on Nov 21, 2016 8:58:54 AM

Ventana Research recently awarded Workday a 2016 Technology Innovation Award for its newly released application, Workday Planning, because it simplifies and streamlines the budgeting and planning processes while facilitating collaboration, deepening visibility into spending and enabling tight fiscal control. These capabilities can help a variety of user organizations in several ways.

While I’ve long stressed the importance of ventanaresearch_technologyinnovationawards_winner2016_whitepaying more attention to business planning and less to budgeting, that doesn’t apply to every organization. By “business planning” I mean a process of capturing the most important “things” in business plans that drive results, such as production volumes, material yield, labor hours, sales pipeline conversion ratios, capacity utilization and so forth, while deriving the financial implications (revenues and expenses) to create a financial budget from those plans. However, this approach isn’t applicable to most government, higher education and nonprofit organizations. For them, the financial budget is usually of paramount importance. In addition, companies that have relatively stable and predictable revenues (such as regulated utilities) may have a preference for a traditional planning and budgeting process focused on controlling costs.

Especially if expenses related to head count consume a substantial share of their operating costs, organizations using Workday for their financial management and human capital management (HCM) requirements are likely to find its software an attractive option, especially if the organization is using desktop spreadsheets to manage its planning processes. Our next-generation business planning benchmark research finds that 82 percent of government, education and nonprofit organizations use spreadsheets for budgeting (compared to 66% of all other corporations). A dedicated application such as Workday Planning can improve financial control and visibility while streamlining planning, budgeting, reporting and reviewing.

Almost all government, higher education and nonprofit organizations operate in a way that puts a priority on controlling expenditures. This is because, either by statute or contract, money spent on a department or purpose cannot exceed the amount set in the budget. These types of organizations employ fund accounting, a system for recording and tracking resources whose use has been limited by law or by a donor, grant authority, governing agency or other individuals or organizations. This approach contrasts to almost all for-profit businesses, for which no such restriction exists and executives can alter spending at their discretion to address business needs and conditions.

Most government, higher education and nonprofit entities have little need for sophisticated business modeling, which is valuable when dealing with uncertain revenue flows and costs associated with them. For these organizations, fiscal control, visibility into how monies are being spent and ease of budgeting and administration are key concerns in managing their finances. Software designed for this purpose can add considerable value to the process by reducing the effort required to establish budgeted amounts, monitor outlays by individual budget, and enhance visibility into spending and trends while providing targeted alerts when necessary to address issues.

Our next-generation business planning research reveals that 82 percent of government, education and nonprofit organizations use spreadsheets for budgeting. Compared to spreadsheets, Workday Planning can provide a better budgeting experience because it is an integral part of Workday’s financial management and human resources applications. This eliminates the cost and bother of maintaining links between a budgeting system, the general ledger and HCM systems. Because Planning is part of a single system it uses the same data as financial management and HCM, updates to actual results are immediate and effortless, as are changes to head count. And because planning data uses this same database, periodic reports and dashboards will show accurate and up-to-date information about actual and committed spending as well as spending trends. Another reason why companies replace spreadsheets with a dedicated application is that the latter enables them to look forward. Our research finds that 55 percent of companies that use a dedicated planning application are able to explore all the implications of various scenarios, compared to 40 percent that use spreadsheets.

vr_ngbp_06_dedicated_applications_help_users_look_ahead_updatedAdditionally, Workday’s software has a strong set of collaboration-in-context features that facilitate rapid exchanges to sharpen the plans and speed their completion. Rather than exchanging spreadsheets, commentary and documents through a disjointed series of emails, instant messages or comments inserted in a spreadsheet cell, individuals can communicate with a group of relevant individuals. They can refer to specific budget or income statement items as well as related documents in a persistent conversation thread that can be easily referenced at any point in the future.

Workday also can significantly improve visibility into spending and fiscal control. Expenditures are immediately charged against specific budgets. Combined with planning data covering the remaining fiscal period, the software can provide an alert when outlays are running ahead of plan. Organizations with a disciplined purchase order system can also monitor committed spending against a budget. In such a case, those approving a purchase can immediately determine not only if funds are available and but also whether outlays for this particular purpose are in line with the budget and whether spending alterations must be made in future periods. Government, higher education and nonprofit entities often are people-intensive, so having head-count plans and related costs as part of the same system that holds compensation and head-count data (both actual and anticipated) ensures that budgets are always synchronized with up-to-date actual amounts and projections about head count, salary and benefits.

I strongly recommend that government, higher education and nonprofit organizations that use fund accounting and are currently using Workday for both financial management and HR evaluate Workday Planning to manage planning and budgeting, especially if they are currently using spreadsheets. Organizations of this type that are currently evaluating systems that combine financial management and HCM software should take into account Workday’s planning and budgeting capabilities in making their vendor selection. Similarly, I recommend that corporations using Workday Financial Management and HCM that prefer traditional budgeting and are currently using desktop spreadsheets to manage the process should evaluate Workday Planning as a replacement.


Robert Kugel

Senior Vice President Research

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Topics: Big Data, Marketing, Office of Finance, Budgeting, In-memory, CFO, Workday, controller, demand management, Financial Performance Management, financial reporting, FPM, Integrated Business Planning

Robert Kugel

Written by Robert Kugel

Rob heads up the CFO and business research focusing on the intersection of information technology with the finance organization and business. The financial performance management (FPM) research agenda includes the application of IT to financial process optimization and collaborative systems; control systems and analytics; and advanced budgeting and planning. Prior to joining Ventana Research he was an equity research analyst at several firms including First Albany Corporation, Morgan Stanley, and Drexel Burnham, and a consultant with McKinsey and Company. Rob was an Institutional Investor All-American Team member and on the Wall Street Journal All-Star list. Rob has experience in aerospace and defense, banking, manufacturing and retail and consumer services. Rob earned his BA in Economics/Finance at Hampshire College, an MBA in Finance/Accounting at Columbia University, and is a CFA charter holder.