Malcolm ACCA

8/14/2019 Malcolm ACCA

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Oracle Thought Leaders Series September 2008

Best Practices in Budgetingand Forecasting


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The planning process is regarded by many finance and operationalexecutives as not delivering value. Typical concerns include:

Time consuming and resource intensive. The annual budget is out of date before it is complete.

The relevance of fixed single value budgets.

Fragmented processes with a heavy reliance on spreadsheets, manual

intervention and e-mail . Insufficient time to analyse and understand the results.

Background


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Planning lags ERP in process improvements.

Impro

vemen

t

Time

ERP

Planning


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What are the contributing factors?

ERP Planning

Re-engineered business processes

Board/executive sponsorship.

Business driven

Substantial investment

IT supported and enabled

Single vendor not best of breed

Enterprise and scalable

Continuous improvement


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Import / Export

The planning landscape is fragmented.

ERP

Reporting

Planning

Consolidation


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Drivers for improvement.

Finance executives expect forecasts:

To have greater accuracy and be more evidenced based.

Be more timely.

The need for agility in responding to change in markets and the economicenvironment.

Headcount, talent and cost pressures

Technology improvements


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Practices which will improve the planning process.

Develop rolling forecasts extending beyond the current financial year.

Develop driver based planning methodologies which will allow linemanagers to plan around their key metrics and activities.

Allow for different scenarios to be modeled, stored and reported.

De-emphasise the annual budget as the main vehicle for planning andcontrol.

Drive collaboration and linkage between functional areas:

Sales & operations planning

Projects and new initiatives

Avoid false precision and too much detail.


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Technology which works with users is a key enabler.

Business users need technology with is..

Owned and managed by them with little IT dependence.

Familiar and easy to use interface using MS Office and WEB browsers.

Workflow during plan preparation, submission and review processes. Tracking status during the planning cycle.

Flexible and intuitive reporting.

Integrates with wider performance management initiatives.

But the enterprise and IT needs

A stable and scalable platform which complies with the overall technologystrategy.

Solutions to be well though out, architected and implemented.

Proper development and change controls in place.

Governance across stakeholders.


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Example of planning framework using BI tools

ERP

CRM

MES

ForecastConsolidateReport

Analyse

Financial Management

ScorecardsDashboards

EDW

Browser

Excel

Transactions Analysis BusinessProcess


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Driver based planning can be flexible and powerful.

Driver Usage RateX

Variable ConsumptionQuantity

+ Fixed ConsumptionQuantity

Total Quantity Unit PriceX X Inflation

Result

Input or stored values Calculated results


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Increase focus and commitment to improved the planningprocess.

ERP Planning

Re-engineered business processes Board/executive sponsorship. Business driven

Substantial investment IT supported and enabled Single vendor not best of breed Enterprise and scalable Continuous improvement

Stepped incremental approach


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Significant impovements should be realised.

Improvemen

t

Time

ERP

Planning


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References

Gartner Research Extend budgeting and planning projects beyondfinance to maximize benefits.

Gartner Research Best practices in implementing CPM budgeting,

planning and forecasting.

The Hackett Group Aligning forecasting practices with market dynamics

The Sonax Group Best practices in planning and performancemanagement: from data to decisions.

CFO Research Services Rolling forecasts begin to emerge as a newstandard.

CFO Research Service When do companies outgrow theirspreadsheets.

Malcolm ACCA

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