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SABC meets delivery targets with Hyperion Strategic Finance

“Once HSF was installed, it was easy to determine what cash would be needed for the channel. Additionally, we needed to calculate what the mandated changes the corporation needed to implement would cost when implemented over time. To HSF's credit, the system has continually delivered cash flow projections with 85% and higher accuracy," says Robin Nicholson, chief financial officer (CFO) at the SABC.

The SABC has been using Hyperion Strategic Finance (HSF) for 18 months to resolve conflict around meeting social responsibilities and providing outstanding content without breaking the budget.

HSF is a financial modelling and forecasting package supplied and implemented by local distributor Futuresense. It has become an invaluable tool for the SABC's financial department as it is used for long-term financial management, business unit modelling, funding issues and running future scenarios to determine how the organisation can best deliver on its responsibilities.

"It's only a few years ago that the organisation posted a loss of over half a billion rand," says Robin Nicholson, chief financial officer (CFO) at the SABC. "In its efforts to live up to its constitutional mandate, the SABC went too far, too fast, ending up with this enormous financial burden that government (the SABC's shareholder) had to cover."

"The primary concern of the broadcaster is a battle of content versus commercial viability," says Mari Meyer, the SABC's group financial analyst. "The various business units are responsible for providing quality content to their customers, but they are restricted in terms of how much they can spend. In the television market especially, it can take 18 months of work before a new local programme is ready to air and start repaying the investment made in it. Careful planning is required, therefore."

“At the start of 2002 we had a funding gap of R800 million separating what we wanted to do and what we could afford to do. Even our shareholder had had enough and told the SABC to sort out its problems," states Nicholson.

Xhead = The spreadsheet fails

Initially, the organisation relied on spreadsheets for its financial modelling and planning. But these models are complex and only allow for finite planning. If changes are made, users need to ensure that the relevant changes are made throughout the spreadsheet - forgetting to change a single cell can be disastrous.

"What the SABC needed was a high-level, robust tool that would allow it to make accurate five-year cash flow projections," says Steven Hyslop, CEO of Futuresense. "Ideally, the broadcaster would need to be able to run scenarios further into the future, as producing long-term sustainability is vital to the success of the SABC."

Xhead = HSF, the right thing to do

Recommended by its financial advisors at ABSA, the SABC decided to implement HSF, supported by Futuresense. Meyer supplied the information the broadcaster wanted included in the model as well as the structure of the business, and Futuresense was tasked with building a robust model.

Nicholson says: "If, for example, we wanted to launch a new television channel or change an existing one, the model had to allow us to play with the variables and consider various outcomes.

"Once HSF was installed, it was easy to determine what cash would be needed for the channel. Additionally, we needed to calculate what the mandated changes the corporation needed to implement would cost when implemented over time. To HSF's credit, the system has continually delivered cash flow projections with 85% and higher accuracy."

He adds that this is no easy task as there are 54 businesses in the SABC. Each is an independent business unit, but linked to the others, resulting in a complex modelling process.

"Some may believe finance is limiting the SABC, but we are simply preventing another financial trauma."

The HSF model can withstand intense scrutiny by the financial department and executives. The more than R200 million profit produced last year is the first proof of the strategic success SABC has had with HSF.

Due to HSF, the organisation is now in a progressive and sustainable financial cycle. The finance department can project probable outcomes of proposed strategies resulting in better decision-making across the board.

Xhead = Burn the budget

The SABC aims to expand its use of HSF. Nicholson says he wants to switch the corporation over to 12-month rolling forecasts instead of a set annual budget. Rolling forecasts are more flexible and will allow the corporation even better control over its finances.

"HSF has changed our world and allowed us to become better managers, looking after a better corporation that is in a better position to meet its responsibilities than ever before," Nicholson concludes.

Futuresense

Futuresense

Futuresense is an Oracle partner in South Africa that specialises in Oracle Hyperion and BI performance management solutions to enable faster reporting and better decision-making within a company. With the combination of specialised software from Oracle, a vast range of highly valued skills and years of experience in the South African business environment, Futuresense delivers an effective and efficient enterprise financial planning and modelling solution, sets up controlled budgeting and planning environments, and efficiently implements group reporting functions, including consolidations. Web site: www.futuresensesolutions.co.za