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How To Use Power BI For Planning, Budgeting, And Forecasting

9 August 2023

How To Use Power BI For Planning, Budgeting, And Forecasting

With rising data volumes and the need for agility, organizations are adopting modern platforms like Power BI to streamline financial planning and analysis (FP&A). Power BI allows FP&A teams to tap into a range of data sources, build interactive models, and collaborate in the cloud - enabling continuous, insightful planning. If you are interested in learning Power BI, please do take a look at our courses.

This article will explore key capabilities that make Power BI an ideal solution for budgeting, forecasting, and scenario planning.

An Introduction to Using Power BI for FP&A

Financial planning is a forward-looking process that helps organizations allocate resources efficiently. Core FP&A activities include:

  • Budgeting: Building comprehensive financial plans for the upcoming fiscal period. Budgets set targets for revenue, costs, capital expenditure, and other items.
  • Forecasting: Estimating future financial performance based on metrics like sales pipelines, production schedules, and macroeconomic factors.
  • Scenario modeling: Creating hypothetical scenarios like "best case" and "worst case" to analyze possible outcomes.

Traditionally, FP&A teams relied on Excel, legacy on-premises systems, and manual processes. But modern Power BI solutions unlock real-time, collaborative FP&A with features like:

  • Connecting countless data sources from ERPs to individual Excel models
  • Interactive dashboards that allow drilling into details
  • Built-in AI for accurate predictions
  • Real-time data with refresh scheduling
  • Cloud-based model sharing and discussion

These capabilities let FP&A teams continuously access, model, analyze, and share the latest information for rapid planning cycles.

Importing Data from Across Systems into Power BI

Power BI’s broad data connectivity lets FP&A analysts consolidate information from all the systems relevant to planning:

ERP platforms like SAP, Oracle, and Microsoft Dynamics contain historical trends across the chart of accounts, sales, procurement, inventory, and human resources.

CRM systems provide sales pipeline and forecast data that ground revenue projections. Leading CRMs like Salesforce integrate seamlessly with Power BI.

HR information systems offer employee headcount data to inform cost projections tied to staffing.

Industry benchmarks can feed market condition estimates into forecast models.

Excel spreadsheets are common for supplemental models built by finance teams. Power BI easily ingests outputs and assumptions housed in Excel.

With the right connectors installed, Power BI can pull data from these sources automatically via scheduled refreshes. This consolidates the latest information in a single model.

Transforming Source Data into Effective Planning Models

Connecting to sources is only the first step. To work with the data, FP&A analysts need to wrangle it into an analysis-ready state using Power Query:

  • Reshaping data from wide to long format so that attributes become dimensions for trend analysis.
  • Standardizing category schemas across tables to support unified modeling.
  • Aggregating data points like individual sales records into summary views like total sales per region.
  • Enriching data by merging in supplemental reference tables like customer segments or seasonal multipliers.
  • Removing errors and anomalies that would distort analysis if left unchecked.

Proper shaping and refinement ensures clean data flows into well-structured models. The resulting data framework lends itself to intuitive interactive reporting.

Building Power BI Reports and Dashboards for Planning and Analysis

With a sound model in place, rich FP&A reporting capabilities come alive through Power BI’s visualizations:

  • Tables and matrices to break down budget and forecast line items across multiple dimensions like departments, accounts, products, and time periods.
  • Charts and graphs to quickly highlight trends, variances from targets, period-over-period changes, and forecast vs. actual comparisons.
  • Slicers and filters to adjust the view by attributes like business units, cost centers, and time ranges.
  • Drill downs to navigate from high-level aggregates to detailed underlying transactions as needed.

These features create interactive dashboards that allow FP&A teams to dynamically segment and analyze plan data their own way. Integration with Office 365 enables commenting on reports to discuss insights and actions.

Increasing Forecast Accuracy with Predictive Modeling

Raw forecasts based solely on subjective human estimates often prove inaccurate, leading to suboptimal plans. Purpose-built AI in Power BI provides more reliable statistical forecasts through techniques like:

  • Time series algorithms that detect seasonal, cyclical, and trend patterns in history to better predict cycles.
  • Regression methods that quantify correlation of metrics like sales to economic drivers.
  • Neural network models that uncover subtle multivariate relationships missed by humans.

Integrated AutoML capabilities streamline development of custom predictive models tailored to the organization’s unique data patterns. The entire predictive modeling process occurs through Power BI’s visual no-code interface.

These innovations yield forecasts grounded in objective data analytics vs. guesswork, improving planning quality.

Modeling Different Scenarios with Power BI’s “What If” Analysis

Even with rigorous base forecasts, the future is uncertain. FP&A analysts need to model hypothetical scenarios to assess potential outcomes under different assumptions.

Power BI’s “What If” parameters allow quick scenario creation without altering the base data model. Analysts can:

  • Adjust assumptions like sales growth, commodity prices, interest rates.
  • Set target values for KPIs like revenue, margin, cash flow.
  • Switch input drivers across scenarios to stress test plans.

Each scenario feeds through the data model to project full financial statements. Comparing these simulations helps identify top risks and opportunities to inform smarter planning.

Building Sophisticated Financial Models with DAX

Data Analysis Expressions (DAX) is Power BI’s formula language for creating custom measures and logic. FP&A analysts can enrich analysis by adding:

  • KPI formulas like margin %, revenue per customer, earnings growth %, and variance to budget.
  • Time intelligence like year-to-date, period-over-period growth, and rolling averages.
  • Allocation logic that distribute costs or revenue by percentage splits or custom weights.
  • Statistical measures like standard deviation, Z scores, rankings, and percentiles.

These DAX expressions unlock a breadth of analytical measures tailored to the organization’s business model and planning needs.

Linking Forecasts to Business Drivers for Realistic Modeling

Best practice FP&A modeling ties projections to operational drivers like:

  • Basing sales forecasts on deal pipelines, product demand, and market conditions.
  • Tying staff costs to headcount projections from HR systems.
  • Linking inventory budgets to demand forecasts and production schedules.

Power BI allows establishing driver-based models by:

  • Importing operational data like CRM pipeline metrics as model inputs.
  • Mapping assumptions to base forecast drivers via measures.
  • Flowing drivers through related projections using DAX formulas.

Driver models inject operational realism into planning vs. vague assumptions and guesswork.

Integrating Power BI with Existing FP&A Systems

While Power BI excels as a standalone FP&A platform, it can also augment legacy solutions like:

  • Anaplan for large-scale enterprise planning
  • Oracle Hyperion for consolidated finance functions
  • OneStream for unified financial planning
  • Workday Adaptive Planning for cloud-based FP&A

Power BI integrates with these through:

  • Live direct database connections to enable hybrid models
  • Importing data from internal systems via connectors
  • Embedding Power BI visualizations directly into FP&A apps

This flexibility allows organizations to leave core systems in place while infusing advanced Power BI capabilities.

Driving Collaboration with Commentary and Annotations

Finance planning requires input across the organization to align on numbers, assumptions, and actions. Power BI accelerates collaboration through:

  • Comments appended directly to reports and visuals to discuss insights
  • Highlighting using shapes and stuck notes to call attention to key items
  • Sharing interactive reports to extended team members
  • Track changes to record the evolving plan over time
  • Office integration to open reports in tools like Excel and PowerPoint

These features keep everyone on the same page by capturing insights and decisions within the reports themselves.

Streamlining Processes with Automation and Administration

As FP&A mature in Power BI, teams can streamline recurring planning cycles by:

  • Automating report delivery to eliminate manual distribution
  • Scheduling data refreshes to always pull the latest data
  • Using templates to kickstart common planning deliverables
  • Managing environments across dev, test, and production
  • Applying row-level security to restrict access as needed
  • Establishing DevOps pipelines to systematically develop and release new report packages

These disciplines introduce efficiency, consistency, and governance into the ongoing planning process.

Power BI empowers organizations to transform cumbersome spreadsheet-based financial planning into an agile, collaborative data-driven discipline. For FP&A teams ready to leverage the latest in business intelligence technology, Power BI is the obvious choice.

Frequently Asked Questions About Power BI and FP&A

What are the main benefits of using Power BI vs. traditional Excel planning?

Key advantages are real-time data, automated updates, interactive dashboards, predictive modeling, collaboration features, and cloud access. It brings FP&A to the cutting edge.

What Power BI licensing works best for planning use cases?

Power BI Premium adds capacity for larger models, incremental data refresh, and enhanced sharing features. Premium Per User licensing also unlocks the full collaborative capabilities.

Can Power BI integrate with my existing ERP system?

Yes, Power BI provides live connectors to most major ERPs like SAP, Oracle, and Dynamics to incorporate available operational data.

Does Power BI comply with financial data regulations?

Power BI offers security features to help comply with regulations like Sarbanes-Oxley including row-level security, data encryption, and auditing. Microsoft also manages data residency.

Can Power BI scale to handle large, complex models?

Yes, Premium capacities allow for large datasets and user concurrency. Features like aggregation, DirectQuery, and AS tabular models provide tuning options to enhance performance.

Check out our other articles on Power BI for the latest information and help. This is a very popular article: 7 Vital Roles and Responsibilities of Power BI Developers in Business Analytics, and indeed, How to Become a Power BI Developer.

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