Why should a services firm use a corporate performance management suite? to take the nightmares away!

Any business based on services, has a multitude of factors to monitor in order to ensure that the business remains profitable and performs as expected. It goes without saying, that the need to build a plan for the year is imperative to be able to contain the costs, and this task by itself is as difficult as it is complicated, given the intangible nature of the revenue and cost generating items. All of these factors taken into consideration, mandate a robust system of data management which needs to be able to store the required data points and the attributes tagged to them; fiendishly complicated enough to give FP&A professionals nightmares during the annual budgeting exercise!

To illustrate the complexity of the situation at hand, any revenue figure forecast for the year will not only have absolute value recorded, but will also have attributes, such as the ones listed below, on the basis of which, the business might like to collate and analyse revenue:

  • geographies
  • customers
  • verticals
  • service offerings (each vertical might have several different services to offer)
  • staffing mix (based on their billing rates)
  • locations of the delivery team(s)
  • billing currency (which most probably will be different than the currencies in which expenses are booked)

Not to be left behind are the cost drivers, which can be just as complicated to maintain, given that they might require complex business-rule based logic for the figures to be derived. A rather pertinent example is the planning for headcount and the subsequent compensation. Compensation, by far, forms the largest segment of the expenses that are incurred by a services organisation and can be arrived at as both, a revenue driven figure, as well as an outcome of a planned staffing drive. Compensation is further driven by attributes such as:

  • the employees’ grade (which reflects skill)
  • location (costs vary across locations)
  • the nature of projects they are assigned to (client servicing requires a different skill set than a support role)
  • starting and end dates
  • benefits (driven as a percentage of salary, performance of the SBU etc.),
  • staggered increment cycles
  • increment percentages (segregated on the basis of location, grade, roles and project type)

For indirect compensation expenses (amongst others), intricate allocation logics are required to apportion the costs to the various projects.

Services businesses also require frequent revisions of their planned revenue if they operate across multiple currencies. And the need to be able to revise plans and maintain a rolling forecast can never be stressed enough in an economy where the numerous macro-economic factors governing exchange rates remain in a state of flux, more than ever before.

To be able to factor all such parameters into the annual budget or for that matter, into the very next forecast, using a tool such as a spreadsheet, is akin to navigating a treacherous quagmire. With complicated linkages, multiple files, redundant data sets and complicated scripting to realise the full potential of the platform, accuracy and integrity of the resultant datasets remain questionable; and time consuming to arrive at.

A CPM suite takes all this pain away. With no other effort than the clicking of a few buttons, it:

  • automates the calculations
  • maintains audit trails
  • provides drill down and comprehensive reporting capabilities

All of which allow the audience to slice, dice and analyse the data, easily build forecasts and carry out detailed budget vs. variance analysis. In short, it takes the nightmares away while stitching the annual budget together!