Best Practices in Budgeting

and Forecasting

Oracle Thought Leaders Series September 2008

Background

The planning process is regarded by many finance and operational

executives 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• The annual budget is out of date before it is complete.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.

Oracle Thought Leaders Series September 2008

Planning lags ERP in process improvements.

ERP
I
m
p
r
o
v
e Planning
m
e
n
t

Time
Oracle Thought Leaders Series September 2008
What are the contributing factors?

ERP Planning
Re-engineered business processes 9 8
Board/executive sponsorship. 9 8
Business driven 9 9
Substantial investment 9 8
IT supported and enabled 9 8
Single vendor not best of breed 9 8
Enterprise and scalable 9 8
Continuous improvement 9 9

Oracle Thought Leaders Series September 2008

The planning landscape is fragmented.

Reporting

Import / Export Planning

Consolidation

ERP

Oracle Thought Leaders Series September 2008

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 economic
environment.
• Headcount, talent and cost pressures
• Technology improvements

Oracle Thought Leaders Series September 2008

Practices which will improve the planning process.

• Develop rolling forecasts extending beyond the current financial year.

• Develop driver based planning methodologies which will allow line
managers 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 and
control.
• Drive collaboration and linkage between functional areas:
• Sales & operations planning

• Projects and new initiatives

• Avoid false precision and too much detail.

Oracle Thought Leaders Series September 2008

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 technology
strategy.
• Solutions to be well though out, architected and implemented.
• Proper development and change controls in place.
• Governance across stakeholders.

Oracle Thought Leaders Series September 2008

Example of planning framework using BI tools

Transactions Analysis Business

Process

Scorecards
Dashboards

ERP
Financial Management
•Forecast Browser
•Consolidate
•Report
Excel
•Analyse
CRM

MES EDW

Oracle Thought Leaders Series September 2008

Actual implementation planning using BI tools
SBU Plan

Currency JV Balance
Tax Profit
Conversion Cutback Sheet

Site Plan
Inventory Plan

Operating Costs

Allocations
Capital Plan
Depreciation
Sales &
Revenue Plan Overheads Manpower
Materials Plan

Labour
EDW

Maintenance Plan Operations Plan Marketing Plan

Oracle Thought Leaders Series September 2008

Planning across budget and forecast

Long Term Plan

2006 2007 2008 - 200nn

2006 2007 2008 December Forecast

2006 2007 2008 February Forecast

2006 2007 2008 April Forecast

2007 2008 Initial Budget

Term Plan
2007 2008 2009 - 20nn

Oracle Thought Leaders Series September 2008

Driver based planning can be flexible and powerful.

Driver X Usage Rate

Variable Consumption Fixed Consumption

+
Quantity Quantity

Total Quantity X Unit Price X Inflation

Result

Input or stored values Calculated results

Oracle Thought Leaders Series September 2008

Increase focus and commitment to improved the planning
process.

ERP Planning
Re-engineered business processes 9 9
Board/executive sponsorship. 9 9
Business driven 9 9
Substantial investment 9 9
IT supported and enabled 9 9
Single vendor not best of breed 9 9
Enterprise and scalable 9 9
Continuous improvement 9 9
Stepped incremental approach 8 9

Oracle Thought Leaders Series September 2008

Significant impovements should be realised.

ERP
Planning

I
m
p
r
o
v
e
m Time
e
n
t

Oracle Thought Leaders Series September 2008

References

• Gartner Research – Extend budgeting and planning projects beyond

finance 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 performance
management: from data to decisions.
• CFO Research Services – Rolling forecasts begin to emerge as a new
standard.
• CFO Research Service – When do companies outgrow their
spreadsheets.

Oracle Thought Leaders Series September 2008