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Planning Your Budget and Reducing Cycle Time
Rajesh Shewani, Pre-Sales Leader
IBM Business Analytics – India/SA Cognos & SPSSrshewani@in.ibm.com
What’s Important to the CFO? Everything.
2
Source: IBM Global Business Services, The Global CFO Study 2008
ImportanceEffectiveness
57%
55%
61%
62%
63%
64%
66%
70%
76%
80%
63%
68%
70%
67%
71%
73%
71%
73%
77%
86%
Unified Communication
SOA/Web Services
Business Process Management
Application Harmonization
Self-Service Portals
Customer and Partner Collaboration
Mobility Solutions
Risk Management and Compliance
Virtualization
Business Intelligence and Analytics
And to the CIO?
Ten Most Important Visionary Plan ElementsInterviewed CIOs could select as many as they wanted
High growthLow growth
Source: IBM Institute for Business Value, The Global CIO Study 2009
Why is this Significant?
2008 BOOK OF NUMBERS™ Research Series: Aligning Forecasting Practices with Market Dynamics
Extent of variance between forecast and actualresults for earnings two quarters out, 2007
0-5%variance
17%
6%-10%variance
38%
11%-20%variance
26%
21%-30%variance
11%
>30%variance
8%
Research by The Hackett Group shows that 83% of firms are unable to provide an accurate earnings forecast
The Challenge with Decision-Making Today:Elevated Finance & IT Demands
5
FINANCE FINANCE EXECUTIVESEXECUTIVES
Inform, engage, and align the business user community in PM process to drive better
business outcomes
ITITEXECUTIVESEXECUTIVES
Empower the business users while cost-effectively meeting
requirements for performance, conformance scalability and
compliance.
Finance Function Faces Challenges
Spreadsheets Failing“there have been well-documented cases of errorsand losses resulting from spreadsheetmanipulation errors and accidents.”Source: Gartner, August 2007
Disparate Systems“Average finance organizations operate11 finance systems per billion dollarsof revenue.”Source: Hackett Group, 2007
Business Risks“62 percent of enterprises …encountered a major risk event … 42 % of theseenterprises were not well prepared for the event.”
Source: IBM Global CFO Study 2008
CFO
ControllerTax/Treasury
FP & A
IT
Finance Function Makes a Difference
Driving Performance“68% anticipate serving as the performance
management experts for the rest of the company.”Source: CFO Research, Feb 2008
…Enterprise Rewards“ World-class EPM organizations
deliver 2.4 times the equity market returns of industry-peers companies.”
Source: Hackett Group, 2008
…with Professional Upside“Corporate performance and CFO performance are
inextricably linked; CFOs that deliver shareholder value are most likely to achieve the next career step
they desire.”Source: CFO Executive Board, Strategies
for Inflecting CFO Performance, 2004
CFO
ControllerTax /Treasury
FP & A
IT
New Areas
• GAAP, IFRS
• XBRL
• Fast Close
• Scenario Planning
• Rolling Forecasts
• Actuals v Budgets
• Management Reporting
8
9
The Decision Making Challenge
• Is everyone in the organization getting the reports they need?
• Are decisions made with benefit of all the information?
• What is typical turnaround time for a report request?
• Are your business users able to create their own reports?
• Are current reports actionable?
• Are you able to report off of any data?
PAIN: IT needs a better way to satisfy information needs of business users to drive more informed decisions.
Report backlog. Takes too long to create
reports.
Report backlog. Takes too long to create
reports.
Lots of reports but not the reports needed
Lots of reports but not the reports needed
Key decisions made using personal spreadsheets
Key decisions made using personal spreadsheets
Business can’t get the information they need
Business can’t get the information they need
ITITBUSINESSBUSINESS
Business Intelligence
10
The Planning & Budgeting Challenge
PAIN: Inability to deliver timely, reliable forecasts & plans that align operational tactics with financial targets.
PLANS & FORECASTSInfrequent Unreliable Forecasts
Weak Top-Down& Bottom-up Coordination
DisconnectedPlans
• Do you rely on Excel for creating budgets and reports?
• How long does the budgeting process take?
• Are you using spreadsheets to manage the planning process?
• Are your budgets and forecasts as reliable for decision-making as you would like?
• Is planning and budgeting an exercise to be endured rather than a strategic corporate tool?
The Closing Cycle, Financial Consolidation Challenge
• Financial and management data collection is difficult
• Data quality/error checking
• Lack of audit ability
• Lack of visibility
• Difficult to produce GAAP and management reports
• Hard to manage business and accounting changes
IncompleteFunctionality
Business Changes
Disparate Data
12
The Solution - Business Intelligence & Performance Management
Financial Management
Expense
Revenue
Asset Management
Scorecard or dashboard shows Branch Profitability for current
quarter is below plan
Report shows Branch XYZ is unprofitable due to a particular customer segment and product
combination
Plan is updated to adjust for new targeted marketing programs which
will alter the expenses and profit
Identify IssuesExplore and Understand Issues
Resolve Issues and Plan for the Future
A complete platform to Plan, Understand & Optimize Performance
Updates are delivered to the appropriate people via the Mobile
device so they have immediate insight to the new plan
13
Solution - Single Platform for Performance Management
Single Platform for Decision MakingSingle Platform for Decision Making
Enterprise PlanningPlan, Understand & Optimize Performance
PLANNING
CustomerService
Sales MarketingHuman
ResourcesProduct
DevelopmentOperations IT/Systems
Incentive Compensation
Unit Volume Forecast
Campaign Planning
Pipeline Coverage
Initiative Planning
Staffing
Expenses
Revenue
Capital Expenditures
New Product Introduction
Investment Funnel
Production Planning
Capacity Planning
Inventory Planning
Compensation Planning
Workforce Planning
Service Level &Capacity Planning
Initiative Planning
Finance
Challenges with Plans and Forecasts
15
PLANNING
CustomerService
Sales MarketingHuman
ResourcesProduct
DevelopmentOperations IT/Systems
Incentive Compensation
Unit Volume Forecast
Campaign Planning
Pipeline Coverage
Initiative Planning
Staffing
Expenses
Revenue
Capital Expenditures
New Product Introduction
Investment Funnel
Production Planning
Capacity Planning
Inventory Planning
Compensation Planning
Workforce Planning
Service Level &Capacity Planning
Initiative Planning
Finance
Infrequent Unreliable Forecasts
Weak Top-Down& Bottom-up Coordination
DisconnectedPlans
PAIN: Inability to deliver timely, reliable forecasts & plans that align operational tactics with financial targets
Data governance risk of spreadsheet ONLY
based systems in Finance
Increased support compliance-driven Finance initiatives
Financial Statements
16
PLANNING
CustomerService
Sales MarketingHuman
ResourcesProduct
DevelopmentOperations IT/Systems
Incentive Compensation
Unit Volume Forecast
Campaign Planning
Pipeline Coverage
Initiative Planning
Staffing
Expenses
Revenue
Capital Expenditures
New Product Introduction
Investment Funnel
Production Planning
Capacity Planning
Inventory Planning
Compensation Planning
Workforce Planning
Service Level &Capacity Planning
Initiative Planning
Finance
Timely, ReliableForecasts
Top-Down& Bottom-Up
Alignment
ConnectedPlanning Models
Improved data governance with replacement of
spreadsheet ONLY based systems in Finance
Increased support compliance-driven Finance initiatives
Financial Statements
Benefits of a Enterprise Planning SolutionIMPACT: Timely, reliable forecasts & plans that align operational tactics
with financial targets. Better, confident resource allocation decision-making.
Planning, Budgeting and Forecasting:Determining What you “Should be Doing”
Replaces spreadsheet based, manual budgeting and planning
Connects operations and finance
Engages the whole organization to make better informed decisions
Replaces rigid, annual budgeting with continuous planning for higher responsiveness
Supports best practices (e.g. driver based planning, rolling forecasts)
Offers packaged best practice Blueprints for processes inside and outside of Finance across industries
Rich client for improved user experience and personalization, and simplified deployment
IBM Cognos Solutions for Enterprise Planning
18
PLANS & FORECASTSPre and Post-PlanningAlternative hierarchies, Allocations, Reporting and Analysis
CollaborativePlan & ForecastEmphasis on user experience; workflow; auditability and process control
IBM Cognos Solutions for Enterprise Planning
Post-PlanningGoal seeking, Allocations
High Participation Plan & Forecast
Pre-Planning AnalyticsAlternative hierarchies, trending
Planning Areas
Primary Use Horizon/Frequency Who?Strategic Plan Define vision, SWOT, high level
corporate goals and objectives and strategies for how to attain them
Horizon: 3-5, sometimes 10 yearsFrequency: 1/year
Corporate ExecsSenior Mgmt. StrategyFinance
Budget/ Annual Operating Plan
Financial guide for the current year: control expenses, evaluate performance and determine bonus compensation
Horizon: 1 year, across months, Qtrs, weeksFrequency: 1/year Infrequently updated
Corporate Planning LOB Managers Cost Center mgrs
Forecast Provides the most current estimates for the balance of the year/horizon
Horizon: Balance of the year or Rolling week, month, quarter, Annual. Frequency: Refreshed often
Corporate Planning LOB Managers
Modeling What-If AnalysisAcquisition modelingScenario AnalysisDefine contingency plans
• Ad-hoc Corporate Planning StrategySales/HR/IT
Reporting Comparison with actualCause & effect Analysis
Horizon: Various Frequency: Monthly, Qtrly, Annual, Ad-hoc
Corporate PlanningReviewed at all levels
20
Performance Management Roadmap
Visibility
• “Spreadsheet Hell”
Cycle Time
• Plan cycles exceed business cycles
21
Accountability
Debating the numbers
Predictability
Owned by Finance
Embrace and Extend Your Existing Infrastructure
ADDRESSInitial Needs1
EXTENDEnterprise-
Wide
ADVANCEPerformanceManagement
AUTOMATION ---------------------------------- TRANSFORMATION ----------------------------
DRIVE Best
Practices2 3 4
Performance Management Roadmap
22
ADDRESSInitial Needs1
EXTENDEnterprise-
Wide
ADVANCEPerformanceManagement
AUTOMATION ---------------------------------- TRANSFORMATION ----------------------------
DRIVE Best
Practices2 3 4
Cognos Innovation Center Performance BlueprintsSupport Best Practices
Driver based Planning
Rolling Forecasts
Timeframe appropriate Plans
A Wider and deeper view
Performance Blueprints: Functional Solutions
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FUNCTIONAL SOLUTIONS
• Strategic Financial Planning & Forecasting
• Strategic Long Range Planning
• Risk Analysis
• Sales Planning& Forecasting
• Sales Compensation Planning
• Workforce Planning
• Expense Planning & Control
• Allocations
• Capital ProjectPlanning
• Discretionary Capital Expenditure
• Initiative Planning
Pre-configured solution building blocks that:
• Pool collective best-practice knowledge
• Accelerate time-to-value• Increase project success rate
WORKFORCEPLANNING
SALESPLANNING &
FORECASTING
STRATEGICFINANCIAL
PLANNING &FORECASTING
EXPENSEPLANNING
& CONTROL
CAPITALEXPENDITURE
PLANNING
HUMANRESOURCES
SALESFINANCEFINANCE
OPERATIONS,MARKETING,
ETC.
DepreciationExpenses
Reports• Income Statements
Balance Sheet• Cash flow• Financial Ratios
Cap
Ex
Ope
rati
ngEx
pens
es
Headcount& CompensationExpenses
Reve
nue
Plan
Mar
ketD
eman
d
Financial Services Blueprints
• The IBM Cognos Branch Performance Blueprint
• The Retail Banking Customer Segment Performance Blueprint
• The Business Banking Customer Performance Blueprint
• The IBM Cognos Client Servicing Blueprint
• Relationship Pricing Blueprint for Commercial Banking
• Product Cross Sell Analysis
• The Insurance Product Performance Blueprint
• Investment Banking Customer Profitability
• The Risk-Adjusted Return on Capital (RAROC)
24
Cognos Strategic Finance Performance Blueprint
• Complete PM framework for strategic financial planning
• Supports a web-based process for the systematic evaluation of long-range plans and strategies
• Additionally, it...... – Facilitates long-range strategic planning – Evaluates the impact of multiple strategies– Allows for comparison & analysis of what-if growth scenarios – Facilitates evaluating internal or external growth opportunities– Enables divestitures, mergers & acquisition (M&A) planning– Provides an assessment of the current portfolio - allowing for
analysis and impact of divestitures– Includes tax, funding, and credit rating impacts– Includes a full set of consolidated financial statements with
distinct views for base growth, acquisitions, and divestitures.
25
Financial and Legal Consolidation Performance Blueprints
Group Consolidation and Corporate Reporting Blueprint
Best practice template and reports for delivering IFRS and Group reports in IBM Cognos Controller
Deloitte Close, Consolidate, Report Blueprint
Best practices for internal controls and financial consolidation
Management & Financial Reporting Blueprint
Best practice examples and templates for reports, scorecards & dashboards in Cognos 8 BI
IBM Cognos & SemansysPartner Blueprint for XBRL
Partner solution for delivering XBRL reports with Cognos Controller
Deloitte & IBM CognosInternal Controls Blueprint
Integrated internal controls assessment and reporting in IBM Cognos Controller
EXTEND Enterprise - Wide
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Link operational plans
to financial plans
Increase forecast reliability
Performance Blueprints
accelerate implementations
ADDRESSInitial Needs1
ADVANCEPerformanceManagement
AUTOMATION ---------------------------------- TRANSFORMATION ----------------------------
DRIVE Best
Practices
2EXTEND
Enterprise-Wide
3 4
Cognos Solution Map Industry Performance Blueprints
Model the Whole Business
Financial Services
Life Sciences
Retail
Public Sector
Manufacturing
Advance Performance Management
ADDRESSInitial Needs1
AUTOMATION ---------------------------------- TRANSFORMATION ----------------------------
DRIVE Best
Practices
2EXTEND
Enterprise-Wide
3ADVANCE
PerformanceManagement
4
Cognos Performance Management Platform
Continuous Business AlignmentPervasive Performance Management
Applications & Blueprints
Access & Interactivity
Universal Capabilities
Business Modeling
Performance Management Platform
Information Infrastructure
Real World Benefits: Efficiencies
2 to 3 weeks2 to 3 weeks2 to 3 weeks2 to 3 weeks
3 to 4 days
3 to 4 days
3 to 4 months3 to 4 months
3 to 4 weeks3 to 4 weeks
3 to 4 months3 to 4 months
Today-1Q +1Q +3Q+2Q-2Q-3Q
Financial ConsolidationFinancial Consolidation Planning, Budgeting & ForecastingPlanning, Budgeting & Forecasting
Real World Benefits: Effectiveness
30
Today-1Q +1Q +3Q+2Q-2Q-3Q
REPORTING, ANALYSIS, AND SCORECARDINGREPORTING, ANALYSIS, AND SCORECARDING
Financial ConsolidationFinancial Consolidation Planning, Budgeting & ForecastingPlanning, Budgeting & Forecasting
Top-Down& Bottom-Up
Alignment
Timely, ReliableForecasts
Complete,Auditable System
Adaptable &Finance Owned
Uniform,Consistent Data
ConnectedPlanning Models
Complete, Consistent View
Example – High Frequency
Process
Annual Operating Plan
Quarterly Forecast
Monthly Estimate
Forecasting Process
Before After
Could not do
6 days
4 weeks
Replacedby
monthly
9 mos. 1.5 mos.
18 MoRollingAnnual
Before After
Could not do
4 days
6 weeks 1 week
18 mos. 2 mos.
Quarterly RollingAnnual
Before After
4 mos. 2 mos
18 MoRollingAnnual
~ 3 wks < 1 wk.
Replacedby
monthly
Before After
3 mos. 6 weeks
Monthly RollingAnnual
Didnot do
< 1 wk.
Replacedby
monthly
32
Marico• Brief profile
– Present in almost every FMCG market segment – hot oils, hair, skin, weight management, beauty and wellness amongst others
– Marico has also been rated one of India’s ‘Top 8 Global Challengers’ by Standard & Poor
Challenge Solution Results
Inflexible planning through spreadsheets
Seamless integration across multiple data sources including mySAP and SAPBW
Cognos TM1 Reduces the time required for budgeting, planning and reporting.
Increases flexibility, accuracy and efficiency.
Easy to use and maintain.
“IBM Cognos TM1 has helped usstreamline and take our planningand budgeting processes to a newlevel. This tool has enabled us toshift our focus from data crunchingto data analysis.”Girish Rao, IT Head , Marico
HDFC Bank Objectives of B&P solution• The broad objective of the software implementation is as follows:
– To automate the current process and make it more process driven and efficient without compromising on any current functionalities budgeting methods, granularity of our existing process.
– Standardization of data and creating a workflow in the budgeting process.
– Real time submission, consolidation and review of all plans across business divisions, branches/ locations, Cost centers etc.
– Handle Cost Allocations, apportionments effectively.– Reducing the current planning time and associated costs including
manpower.– Simulating the process with various scenarios, including comparison of
Budget V/s Actuals on a real time basis across a distributed environment. – Scenarios will be built only at the to level and Budget v/s Actuals variance check was decided as being a separate application given the data volumes
– Arrive at a Budgeted Income Statement (P&L) / Balance Sheet by business divisions and Bank Level. Client Profitability across Revenue Modules, CAPAD Summary
In Summary - IBM Cognos Financial Performance Management
Strategy Management and Scorecarding
• Strategy Communication• Strategy Execution• Strategy Measurement
Enterprise Planning and Analysis
• Strategic Finance• Revenue Planning
and Forecasting• Expense Planning
and Control• Workforce Planning • Capital Planning
Financial Analytics• Financial Performance
Analysis• Profitability analysis• Product, Operations,
Customer, Channel, Market analysis and optimization
Financial and Management Control
• Financial Consolidation• Financial Reporting• Corporate Reporting
3636
© Copyright IBM Corporation 2008 All rights reserved. The information contained in these materials is provided for informational purposes only, and is provided AS IS without warranty of any kind, express or implied. IBM shall not be responsible for any damages arising out of the use of, or otherwise related to, these materials. Nothing contained in these materials is intended to, nor shall have the effect of, creating any warranties or representations from IBM or its suppliers or licensors, or altering the terms and conditions of the applicable license agreement governing the use of IBM software. References in these materials to IBM products, programs, or services do not imply that they will be available in all countries in which IBM operates. Product release dates and/or capabilities referenced in these materials may change at any time at IBM’s sole discretion based on market opportunities or other factors, and are not intended to be a commitment to future product or feature availability in any way. IBM, the IBM logo, Cognos, the Cognos logo, and other IBM products and services are trademarks of the International Business Machines Corporation, in the United States, other countries or both. Other company, product, or service names may be trademarks or service marks of others.
Thank You
Finance Functions Faces Challenges
37
Need for Efficientand Sustainable
Compliance
Insatiable Drivefor Predictable, Profitable Business Performance
CFO’s Perspective
38
Forecast
Enterprise Planning Solution• Cognos 8 Planning• Cognos TM1• Cognos 8 BI• Performance Blueprints
Financial Consolidation Solution
• Cognos 8 Controller• Cognos 8 BI• Performance Blueprints
Actual BudgetFinancial AnalyticsSolution
• Cognos TM1• Cognos 8 BI• Performance
Blueprints
Variance AnalysisController-ship
Financial Planning & Analysis (FP&A)
Strategy Management & Scorecarding Solution
• Cognos 8 BI – scorecarding• Performance Blueprints
Targets
What‘s holding Finance back today?
• Business processes under tremendous stress
– High business volatility
– Fast pace of business
• Technology is straining:
– Spreadsheets: 60-70%
39
.....90 percent of the spreadsheets analyzed contained significant errors.“ -PriceWaterhouse Coopers
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