Budgeting in SAP Analytics Cloud

The CCC Group consists of four independent brands that serve the specific needs of customers in the traditional and e-commerce channels. Their affiliation with a single group makes it possible to take advantage of business synergies – which is one of the company’s important strategic objectives.

This model of omnichannel customer outreach and service (pick-up at home or in a store) is the biggest, but not the only, business innovation.

Another equally important area of innovation at CCC is the use of technology and digitalization, including in the process of data collection and management. Data and the ability to process it efficiently are key management fuel for the modern company. It is important to analyze and interpret processes through data and the impact of processes on results. Also, effective communication with the market and recognition of customer needs thanks to CRM tools powered by a huge amount of information allow to better meet their needs.

These two features – diversity, presence in many markets, multiple brands, different outreach channels (e-commerce and traditional ones), as well as innovation in the field of technology – are an important context for implementing SAP Analytics Cloud (SAC) planning and reporting solutions.

The complexity of the business, the need to follow the consumer and the changing economic environment dictate the expectations that the company has attached to the new planning and reporting platform. The key objectives of the SAC implementation in the CCC Group are as follows:

• Access to effective planning and forecasting tools to accelerate and automate planning processes in the context of a changing business environment and its impact on financial goals;
• The ability to perform rapid scenario analysis with the top-down planning module. The diversity of business results in the frequent occurrence of surprising, unpredictable scenarios of developments. Scenario analysis will help prepare for events that cannot be fully identified at present;
• Improving profitability by simplifying and increasing the quality of planning in the main cost groups, in particular personnel costs and costs of retail outlets, higher planning transparency;
• Fast, dynamic and understandable management information in a changing business environment (reports and dashboards combining financial and operational data), improvement of cost visibility, the ability to make management decisions online.

The CCC Group uses SAP S/4HANA to perform its main management processes. A planning and reporting solution from the same manufacturer facilitates natural integration with SAP systems, which are the most important source of data for planning. SAP Analytics Cloud is a tool that integrates the planning and reporting environment and provides predictive tools. This choice also reduces implementation time and costs.

For a geographically dispersed organization, an important criterion is also the ability to operate on a cloud solution that improves the user experience (online access from anywhere), while being secure and efficient.

A uniform work environment, accessible to planners and decision-makers, and at the same time supported by the authorization system, will reduce the use of Excel sheets, which, although still important in the workshop of every planner, will largely be replaced with SAC functionalities, providing greater data integrity and consistency, and thus reliability and comprehensiveness of planning.

The project of implementing a comprehensive planning and reporting solution based on SAP Analytics Cloud was divided into three stages:

• Reporting;
• Profit and loss account planning (budget and forecasts);
• Cashflow balance planning.

In the first stage of the implementation, integration of real data from various sources, including financial data from SAP, data warehouses and other peripheral data sources, including Excel spreadsheets, was carried out. This allowed financial data to be combined with operational indicators and opened the way to creating a range of dashboards and management reports that help understand business performance and support decision-making.

At present (November 2023), profit and loss account (P&L) and operating expenses (OPEX) reporting is available in SAC. There is also a dashboard presenting personnel costs, combining financial data with operational data in the form of the number of FTEs and their diversity.

Another report that has already been released and is critical for the company, is the store profitability report, which also combines financial and operational data (such as store space). This allows you to look at the effectiveness and compare the performance of individual sales stores.

Also in the first stage of the implementation, ‌a P&L account planning model along with submodules was created. This allows business owners to analyze and plan the P&L account items for which they are responsible, e.g. sales, personnel costs, headquarters costs, logistics costs, the cost of retail outlets and other items of the P&L account that are planned centrally.

The creation of a profit and loss account model has enabled building a top-down profit and loss account functionality. It allows for preparing scenarios and short-term forecasts based on the formula and set of data that we have already provided in the central profit and loss account.

In the second stage of implementation, which is currently underway, we are working on expanding planning and analytical capabilities in business areas that are critical from the perspective of profitability, such as personnel costs and store operating costs. In this area, dedicated planning models will be prepared to model rents, salaries and other store costs. These are very important items for a retail company.

In this stage, an important baptism of fire was the planning process 9 + 3 and the budget prepared for 2024.

The preparation of a detailed concept of the third stage is still ahead of us. Plans for this stage include financial modeling of the balance sheet with submodules for analysis and planning of net working capital, capital expenditures, financing and other balance sheet items, and consequently obtaining the profit and loss account and balance sheet – the cashflow model.

Of course, one of the important goals of the project is to develop and improve management dashboards as new reporting needs are identified.

All this will create a full and complete reporting and planning ecosystem to meet the CCC Group’s key information needs.

Challenge: understanding the impact of a changing business environment on financial goals

Solution: integration of planned and actual costs and revenues

Transparency of the origin of data and the way in which data feeds into the profit and loss account model, as well as the ability to manage the security of data and access to it by different user groups, were identified as some of the key objectives of the project. On this basis, the architecture of the system was created. It consists of real data obtained from various sources (SAP S/4, data warehouse, flat files). This includes aggregated revenues and costs, as well as detailed costs down to the level of an individual document.

Then, this data is transferred up the architecture, reaching individual components for which the appropriate business areas are responsible. In order to report everything by revenues and costs, revenue and cost planning models to be included in the P&L model were created. This is a classic example of bottom-up planning.

It is very important for the CCC Group to be able to carry out top-down scenarios. Therefore, it is possible to enter plans in scenario changes at the superior P&L level and transfer this data back to individual modules so that each team can see their data processed as agreed.

Importantly, each level of the solution architecture allows you to move from the general level to the detail level. If you report real data, you can switch to detailed data reports based on the level of detail of a single document.

Challenge: planning acceleration and simplification

Solution: admin cockpit

The planning process is complex and requires many sequences of activities performed by planners and key users. Many of these elements have been automated in the admin cockpit. This is the place where the entire process is currently managed (loading data, currency conversions, creating scenarios).

In the scenario creation, each planning model is responsible for a certain amount of data that is collected in the P&L model. Previously, the creation of scenarios and their allocation to individual teams was done manually. A panel has been created in the admin cockpit that allows you to automate this task and create such scenarios simultaneously at any point in the planning process.

And if there is a need to make changes to only one element of the planning landscape – it will be possible to use the prepared model management panel that allows for performing individual process steps within a single data source.

Challenge: quick scenario analysis

Solution: top-down modeling from the P&L level

A clear way to perform top-down scenario analysis from the P&L level is provided by the functionality called Value Driven Tree. The graphical data representation shows how the changes will affect the individual components of P&L and the final result.

Challenge: rapid management information in a changing business environment

Solution: currency conversions, including at consolidation rates

The CCC Group is present in 28 countries where it operates in local economic conditions, including local currencies. The need to create financial statements and aggregate reporting in one currency (specifically in Polish zloty) is an obvious condition, and also results from the presence of the company on the Warsaw Stock Exchange.

The table of exchange rates with actual and assumed rates is available in the system. The planner can select the exchange rate type when creating a data version. The data is converted at the consolidation rate calculated on the basis of the year-to-date mechanism. Such manual calculations are very time-consuming and involve the risk of human error. In the solution for the CCC Group, this entire process was automated and made available “under one button". The real data is converted according to a prepared mathematical formula, which gives the total result.

Challenge: better visibility of costs

Solution: analysis of profitability of retail outlets

The data is stored in an aggregated manner, however, its reporting requires an appropriate form. Therefore, it is presented in a hierarchical manner, with the possibility of user intervention, so that it can be broken down to the level of detail that interests the user.

It is possible to view the level of individual data cells or even a single store. The results can be compared in monthly, quarterly statements or in the form of year-to-date results, taking into account the availability of a retail outlet in the analyzed period.

During the implementation, several business challenges and needs were identified and handled outside the SAC standard. Extensions were developed in accordance with the specific expectations of the company.

One example of such solutions is the like-for-like dynamic reporting automation, which allows revenues and margins to be divided into those that come from the organic development of the store chain and those that result from expansion. Like-for-like growth is an important KPI and a success factor for the group. The tool has a specific logic that, based on the entered data, interprets whether a given store or a given revenue meets the like-for-like criteria. This shows how the group is growing on this metric.

Another important issue was the way of presenting data (personal data from individual stores, total cost data). It was assumed that each recipient (group of recipients) should be provided with data in an individual, personalized way. For this purpose, a dozen or so dashboards presenting data, including cell-level conversions, were prepared to meet specific business needs.

Another challenge was the FIXVAR analytics, i.e. the breakdown of costs into fixed and variable ones. In the group, this breakdown is based on a rather complex logic, which is why the aim was not to burden planners or other users with responsibility. Also this task was automated. The planner only enters the data, and the system assigns it to the appropriate category based on the implemented algorithms.

This functionality complements the previously mentioned value tree. Value Drivers Trees work well with factors that influence margin, but then the question arises how costs will behave if a given factor changes. FIXVAR analyses allow for simulating the impact of selected volatility factors on EBITDA. This solution addresses an important business need complementing the requirement for top-down scenario creation and analysis.

From a controlling perspective, the implementation of SAP Analytics Cloud is a process of continuous development. Business requirements are changing and new reporting and analytical needs are emerging.

We assume that the most dynamically developing area will be reports and dashboards. A list of needs and expectations to be gradually met has already been prepared. First of all, a logistics dashboard is planned. It combines logistics costs with operational indicators derived from the group’s IT systems. Another one is a dashboard for the e-commerce channel. It also combines financial data with a large number of operational indicators relevant to this business. Another report needed by a company that is investing and growing through expansion is the CAPEX report, which allows for keeping track of capital expenditures.

In a complex and long-term implementation project, there are several important factors that can determine its success. The most important one is good communication. What seems to be a cliché: that the most important thing is the conversation – is critical in such projects. The success of the project is determined by a good recognition and precise articulation of business needs (current and future ones) by one party, and a thorough understanding of them, followed by translation into the language of the system and mapping of processes into solution functionalities by the implementation partner.

Another important aspect is to define the scope of implementation of planning functions and to prepare a schedule.

A responsible partner supports the client with their experience in the process of planning and automation of processes and helps define repeatable elements that can be automated.

It is a good practice to plan the implementation in sprints, which allows you to verify the correctness of the implementation at the early stages, avoid major troublesome changes, and best reflect the business needs.

Finally, the importance of involvement in the project on the part of the client – clear definition of roles and assignment and responsibilities, identification of decision-makers responsible for the substantive part of the project and timely completion of individual steps – should be emphasized.