Budgeting and reporting were time-consuming processes for this IBM client’s cost-center managers and finance team, limiting visibility and making it difficult to manage costs effectively.
The company worked with IBM Business Partners CDW and Prolifics to replace manual, spreadsheet-based processes with a new financial planning solution based on IBM Analytics software.
Revealsexpenditure patterns that help managers make better budgeting decisions
Drivesaccurate spending classification that reduces budget variances
Increasestransparency, helping managers serve themselves with the data they need
Business challenge story
Controlling the controllables
In any business, sales and revenues in different business areas and product lines may fluctuate depending on the prevailing economic conditions. For property and casualty insurers, for example, a boom in home insurance may be counterbalanced by increased competition in the auto insurance market, or vice versa. Operational costs, on the other hand, tend to remain more stable over time.
According to the Director of Actuarial Services at one IBM client—a leading property and casualty insurer—the key objective is to continue to offer members excellent coverage at attractive premiums, regardless of market conditions. To achieve this, his company decided to “control the controllables” by finding ways to increase operational efficiency and take tighter control of expenditures.
“Until recently, our financial planning and reporting processes were mainly based on spreadsheets,” he explains. “We did an annual budget, where our cost center managers would do a lot of calculations and send spreadsheets with their estimated figures, and we would consolidate them manually into a plan for the whole organization. We then did quarterly variance reports to help monitor whether they were on track throughout the year.”
He adds: “Both budgeting and variance reporting were time-consuming processes, but that wasn’t the biggest problem—the problem was the lack of visibility. Except for the quarterly reports, people didn’t have much visibility of their actual expenditure. If they had a question, they had to ask us to run the numbers and provide an update for them. This was time-consuming at the best of times; and at month-end or during the budgeting cycle, the phone barely stopped ringing. It became a full-time job.”
The company decided to look for a better way to manage financial and operational performance, by replacing its spreadsheet-based processes with a centralized platform for financial planning and analysis.
Adopting a more automated approach
Following a detailed selection process, the insurer decided to replace its existing general ledger application, and build a data mart that would allow it to update and analyze its actuals data on a daily basis. To provide both the data mart and the analytics tools, the company selected an IBM Planning Analytics Express solution (previously known as IBM® Cognos® Express).
“As actuaries, we are very familiar with spreadsheets, and we liked the fact that the IBM solution would allow us to build our financial models in a spreadsheet-like interface,” says the Director of Actuarial Services. “At the same time, it provides a single source of truth for our data, which avoids all the typical version control issues and other problems with managing data in spreadsheets.”
He adds: “When cost center managers want to submit data, they just log into a simple web interface—there is no more need to send spreadsheets around by email, and the system consolidates the figures automatically within seconds. We saw that as a big advantage.”
The company worked with two IBM Business Partners: CDW helped with the purchase of the software licenses, while Prolifics took the lead during the solution design, implementation and training stages of the project.
“Prolifics in particular made a big contribution to the project,” says the Director of Actuarial Services. “They were very knowledgeable and always responsive to our questions. Whatever we needed, they were able to deliver. It was important for us that by the end of the project, our users would have all the skills they needed to work with the solution on a day-to-day basis, and Prolifics’ mentoring approach helped us get them up to speed quickly.”
Better visibility helps improve financial control
By automating many previously manual aspects of the company’s financial planning and analysis processes, the IBM solution has helped to streamline its budgeting and reporting cycles, giving time back to the actuarial team.
“Data collection and consolidation is now all automatic, so we don’t need to spend so much time putting the numbers together, and we have more time to focus on analysis,” says the Director of Actuarial Services. “More importantly, the IBM solution gives our end-users the ability to serve themselves with the data they need. Instead of the phone ringing constantly with questions about how each department’s actual spend compares to the budget, people can now answer those questions for themselves, and even drill down to the level of individual invoices to understand exactly where their budget is going.”
He continues: “The real key is visibility. The IBM solution makes it easy to see how the chart of accounts actually works, which shows the importance of being diligent in coding expenses in the right categories. The data mart updates every day, so if an invoice has been mis-allocated, it’s obvious immediately. By shining a light on where our costs really are, it empowers our cost center managers to estimate and manage their costs much more accurately.
“It’s difficult to quantify exactly, but we are definitely seeing a downward trend in our variances as our users get more skilled with the solution. Our cost center managers are becoming better budgeters, and our senior leaders have much more insight into what each department is spending. As a result, over time, we expect to be able to identify opportunities for cost reduction and take action quickly to take costs out of the business.”
He concludes: “With help from Prolifics, we have come a long way in a year—and we’re excited about where our Planning Analytics journey will take us next. There is so much that we could do with the solution, and we are eager to explore its potential for long-term forecasting and what-if analysis. With Prolifics and IBM in our corner, we are looking forward to becoming even more accurate budgeters and forecasters, and providing even greater value to the business.”
Leading property and casualty insurer
This IBM client is a leading property and casualty insurer in one of the southeastern states of the USA, with offices in every county. The company focuses on home and auto coverage. It has issued over a million policies, administers more than USD2 billion in assets, and has a surplus of over USD1 billion.
- Cognos Express
- Planning Analytics
Take the next step
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For over 35 years, Prolifics has experienced continued growth and recognition for its expertise as a global IT services company. Prolifics’ mission is to be a trusted technology partner to its customers, capable of assisting across the entire software development lifecycle. Prolifics’ performance management practice leverages the latest IBM Analytics technologies, such as IBM Planning Analytics, to help its clients’ finance and line-of-business organizations optimize their performance management processes with better analytics and insight. To learn more about products, services and solutions from Prolifics, please visit www.prolifics.com