Howard Smith, Former CFO, GT Solar Inc.

For GT Solar Inc., a producer of capital equipment used in the manufacture of solar-energy technologies, an Excel-based planning and budgeting process did a poor job of supporting management decisions. Opacity is not an option in this high-growth industry, so the company turned to a hosted performance management suite. Now it's a shining example of the benefits of BPM.

BPM Magazine: GT Solar is in a very dynamic industry. Has this presented any unique challenges in terms of the company's business performance management (BPM)?

Howard Smith: It has. GT is in an industry where the supply chain has gotten very tight. When I was CFO we began to face shortages of certain materials in the supply chain. Graphite was a key material, for example, and there are only a couple of manufacturers in the world who made the kind we needed. The price kept going up.

At the same time, our customers were trying to buy up our capacity because they knew that if they didn't reserve it somebody else would. So we were getting orders to make deliveries, in some cases, three years out. We had to make sure we were pricing those agreements properly, because when deliveries won't happen for three years, how do we know what our costs are going to be? We spent lots of time getting visibility on our bookings, backlogs, and production requirements.

Two years ago, we started shopping for software that could help us forecast and plan more reliably, where we could project our sales targets, gross profit targets, and gross profit margin targets for the current year and for three years out. We wanted more transparency because investors don't only pay for short-term performance; they are also interested in how well we're doing on a long-term basis.

BPM: What did you find?

Smith: We moved to a pretty neat solution that revolved around Hyperion products. A lot of companies spend millions of dollars on Hyperion consultants to build a planning and forecasting system. And you don't really need to do that.

For us, Hyperion Strategic Finance worked for financial statement forecasting with very little customization. We used Hyperion Planning for our head count and our materials planning and operating expenses, but when it comes to forecasting balance sheets and figuring out what your cash flow looks like, it is the wrong tool for the job. So we would use Planning to do the kind of detail buildup that you would typically see in an operating budget which gives cost structure and that type of thing. We used Hyperion Essbase to calculate our inventory and cost of goods sold. We also used Essbase on the sales side for a very detailed forecast of revenue by product, by customer, by country, by product mix, for a 12- to 18-month planning horizon.

But then for balance sheet and cash flow, we sent all the data over to Hyperion Strategic Finance. One of our financial analysts would then forecast the P&L, the balance sheet, and cash flow for the year in Strategic Finance. And of course we would then roll out that forecast for the next three years to get to the board.

BPM: How frequently did you forecast?

Smith: We used a rolling forecast and created a new forecast every month.