Build a Better Crystal Ball: PlanGuru CEO Talks about Forecasting

Terry Sheridan
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How are you planning? What tools do you use (or fail to use) for forecasting? PlanGuru is a business budgeting, forecasting, and performance review software company based in White Plains, N.Y. AccountingWEB recently spoke with its CEO, Christian Wielage, about the hows and whys of business forecasting.

Why is forecasting so important for accountants and other financial managers?

Financial performance reviews in most companies start with building a budget and each month doing budget comparisons: what happened, what didn't happen or didn't happen as well as you thought it would. That's important, but for most small businesses the critical element is the forecast. The really difficult—but critically important—thing to do is to say",OK, July is over and let's take our forecast that we looked at during the beginning of July, replace it with actual results and then re-forecast."

A lot of small-business owners and CPAs in my webinars think you have to be a rocket scientist to do this. You don't. If you're thinking of hiring a new person, put it in the forecast. If you're having a marketing event at the golf course that will cost $20,000, put it in the forecast. When companies have a healthy forecasting process, they cultivate a better decision-making process. They aren't just flying by the seat of their pants.

When you become comfortable with slapping in actual results and re-forecasting, it's a place where we can spread it all out and not forget anything, and boil it down to how much profit and how much cash we'll make, and do we need to change course.

Your site mentions Key Performance Indicators. That term gets tossed around a lot but can you describe why it's important and how a company goes about deciding what KPIs are?

Each business has different KPIs that are important to it. These are typically the business drivers that actually impact financial performance.

What 90 percent of our users do every month is a budget, versus an actual "performance review", as I call it. You want to challenge your team to go above and beyond, and then you come back and see what happens and re-forecast. Just looking at financial statements isn't enough. You have to look at relationships and non-financial drivers. KPIs are tools to elaborate and expand on information in financial statements.

Here's an example: Take a traditional software company, and track its website traffic, then the percentage of people who join a webinar or take a free trial, the percentage who buy, and finally which version they buy. We use those KPIs, those drivers or metrics, to forecast where you are headed and as levers to drive financial statements. An important part of the performance review process is about identifying those key business drivers that are really driving financial performance—going beneath the financial statement to say "How can I directly build that logic from the customer walking in the door to the customer looking at items to the customer buying the item." Look at units sold, head counts, and billable hours and the relationships between those and revenue. You can't just say",I wish we made more money." You have to increase the leads you have or who downloads the free trial.

How has forecasting changed from the days when software such as yours wasn't available?

I would say over 90 percent of firms still use Microsoft Excel to build their budget. It's a wonderful tool. But it's not good for the semi-experienced person trying to craft an elaborate financial model from scratch. It's a tedious process to build a dynamic financial model on Excel. Without software, you need an expert financial modeler and they are rare and expensive. We give you the framework, you populate it with your own accounts, and we automatically calculate cash flows. But when you're sitting at your desk and trying to get three different financial statements to tie out on Excel, no one benefits from that.

Does software level the playing field for smaller companies without large finance departments?

Absolutely. You can do the work in less time and you don't need someone with years and years of experience and massive Excel chops. Even if you are one of those people, you can do it in less time.

Does software open the doors for accountants in public practice serving as outsourced CFOs?

"Outsourced CFOs" is getting a lot of buzz in the accounting space. Three years ago, I never heard anyone talk about this. Today, more and more accounting firms offer this service. Software takes it from something that's a niche you can do for two or three of your biggest clients and makes it so it's a service you can offer to a majority of your clients. We also teach CPAs, for CPE credit, how to sell and deliver this service.

Tell me about your cloud-hosting abilities. Will this be more common going forward?

Absolutely this will become more common. Our core product can be delivered on your desktop or run in any network environment. For the cloud-hosting platform, we partner with Right Networks and Novel ASPect. For any budgeting process that will be collaborative, it's important to have cloud-hosting options. There are still a lot of people who prefer to run PlanGuru with QuickBooks. But the real exciting thing we came out with a couple of months ago is PlanGuru Analytics: a 100 percent cloud-based tool where we do dashboards and performance scorecards.

Where are the big opportunities for your customers? What niches will they be moving into? How will they change?

It's a two-part process. One part is setting targets and getting people to work toward those. The other part is doing the forecast, knowing how much cash you'll have in the bank and making better decisions.

Outsourced CFO services is the niche. We're trying to change that so it's not a niche, so it's the standard. There is a select group of premier accounting firms that do this. Every day, we talk to accounting firms who are excited about getting into this space, but it's not a viable service if they use Excel. That's because of the 20-plus hours on the very low end you might spend simply building what is necessary to offer this comprehensive service, and that's before you even have a single meaningful conversation.

There's a huge reservoir of opportunity in the sub-$1 million space because the market is enormous and it's easy to offer this service to them and they get a tremendous benefit.


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