Multi-scenario Budgeting and the Risk of Inaccuracy

 

Facts

Annual budget preparation and re-forecasting often involves both accounting and non-accounting personnel and these tasks are often undertaken simultaneously with finance’s usual daily tasks. Often put together with a combination of multiple scenarios and assumptions there is always the potential for mistakes as many different factors like the ones below are taken into account :

 Product mix and profitability examples such as 10% growth in product A , 20% growth in product B, new products introduction, changes in price plans or margin changes to resellers.

 Departmental overhead budgets may vary by location and function, e.g. salary increments.

 CAPEX:Measurement, recognition rules such as depreciation and amortization policies

 Budgeted independent influences such as interest rate, inflation rate, or tax rates.

 Cashflow scenarios such as DSO, creditors days, seasonality of sales and etc.

When each user is required to modify or amend different data sets, the potential is there for the process to get muddled and for errors to occur.

  

Expectations

The system must reduce complexity and its associated risk through the separation of budget computational logic from the data source.

  

Solutions 

FlexCalc offers a full spectrum of computational rules to support group consolidation as well as budgeting. Our approach of setting these rules rather than the usual traditional method of hard coding these rules substantially reduces the time of implementation or modification.

  

Benefits

Benefits The lead time for each budget scenario is reduced significantly and budget data is stored in a more secure environment through a process of data validation and authorization. So, the overall quality of budget reports is improved substantially.

Issues with the Management of a Large Number's of Spreadsheets

 Facts

Different budget variations always involve the amendment of the same spreadsheet and these various iterations increase as the year progresses. This function is not well managed within Excel as each iteration contains small or major differences compared with previous versions resulting in making the process difficult to manage on an on-going basis.

  

Expectations

Proper validation and authorization controls for spreadsheets is critical and should always be done by the system rather than by professional accountants.

 

Solutions

FlexCalc has a built-in sophisticated mechanism to control the process of data collection, data validation, data transformation as well as data storage during each iterative stage. As data files are uploaded by different users it is the system that controls the version numbers and authorization controls for each data file.

 

Benefits

Professional accountants can leverage their core competency to focus on value added activities thus improving overall productivity and continued enhancement to their financial operations.

Not Capable to Include All Valid Amendments

Facts

Budget planning and rolling forecasts usually involve very frequent amendments and problems can arise when there are no proper procedures to govern the process during each stage of preparation. Approved amendments might be missing despite the fact that they have been approved or conversely amendments might be made without prior approval.

 

Expectations

Users always demand the existence of a robust planning management process that governs any changes made by anyone to underlying data.

 

Solutions

FlexCalc is capable of addressing root operational issues of data management for budget planning and rolling forecast processes with every authorized change being rewritten automatically into the central database whilst keeping an amendment log for subsequent audit purposes.

 

Benefits

This achieves a significant saving in time and improves the quality of the underlying data resulting in quality reports.

 

Printing Pivot Table and Re-inputting

Facts

There is little improvement in the budgeting process after the implementation of any new accounting system as users often continue to use Microsoft Excel in the preparation of budget data. Additionally most of these Excel worksheets are designed using pivot table like formatting with users having to re- input budget data back into the accounting system.

 

Expectations

Microsoft Excel remains a great tool for data entry especially when it supports the fast configuration of pivot table like formatting and as a result this data should be able to be auto imported into the accounting system.

 

Solutions

The design principle of FlexCalc is to avoid any duplication of data entry so the ability to auto import spreadsheets, including pivot tables, is a basic function of the system.

 

Benefits

Any seamless integration between your accounting system and Microsoft Excel significantly decreases your investment cost as new and existing finance staff already have prior experience of using Microsoft Excel and uploading files through the email system. FlexCalc is merely changing their existing practice in so far as files are uploaded in the same way but to FlexCalc. 

Collaboration Issues Between Different Departments

Facts

Different departments have acquired different kinds of budgeting systems to support the planning process having realized that although ERP systems provide a firm basis for recording history that they are in fact weak on facilitating any view of the future. Additionally associated costs of managing these different systems are high as these systems are disconnected from each other and of course as a result there is no efficient way for finance departments to automate the consolidation of this data.

  

Expectations

CFO’s expect to acquire a planning system that can support the work of different departments and provide users with data access and approval controls that can enable effective risk management for future planning whilst allowing the existing ERP system to focus on recording historical data.

 

Solutions

FlexCalc provides not only an excellent multi-user planning platform, but is also a departmental collaboration platform through it’s ability to implement access and approval controls that ultimately support any risk management work undertaken by the CFO.

 

Benefits

Most importantly, the function of FESA Planning is not to replace your existing ERP system but rather to leverage the benefits that come from the segregation of duties. This leaves the ERP system focusing on the recording of historical data whilst FESA Planning focuses on the planning for the future noting that any actual’s data from the ERP system can be imported into FESA Planning so that the CFO can undertake quick and efficient variance analysis using different basis of comparison.

Managing Multiple Versions During Budget Planning

Facts

The fourth quarter of any financial year is the busiest time for budget planning and involves substantial and detailed review work all of which is on top of the normal and typical monthly business routines. Ever increasing daily workloads are exacerbated by frequent amendments to budget data which continue at speed in both a forward and backward direction as different versions are explored and as KPI’s are examined for compliance with corporate guidelines. Switching between these different versions can be a very tedious and time consuming task and it can be very difficult to avoid errors when data is so interconnected and dependent on other computational relationships.

 

Expectations

If different versions of financial budgets can be maintained and monitored by the system automatically, users are able to switch amongst different budget versions very quickly.

 

Solutions

FlexCalc is equipped with strong capabilities, across different user groups, to offer automated services in respect of data collection, data validation, data transformation and data storage of budget data. Switching amongst different budget versions becomes a simple task as FlexCalc has a built-in mechanism to keep track of different versions of all incoming data files.

 

Benefits

After implementation of the system, you can obtain consolidated financial forecasts more quickly than ever before and additionally any analysis of variations between different versions of forecast becomes an easy task.

Challenge of Multiple Formats

Facts

Over time external and internal changes require additional levels of budget data to be collected throughout the organisation driving fragmentation and changes to budget models during the process.

  

Expectations

CFO’s demand for a budget consolidation system that can proactively support any changes in budgeting methodology with minimal disruption.

 

Solutions

Data collection using the Rules Processor is a core design strength associated with FlexCalc and the system is able to handle any unique formatting issues. Most importantly no programming is required and there is no need to use Macro’s or VBA to support the automatic import of data.

 

Benefits

The ROI for the new budget consolidation system becomes increasingly significant when the system is continuously able, over the months and years, to adapt to changes in user requirements.

Staff Turnover of Group Finance Team

Facts

Consider a Group where during the last decade it has expanded to over 100 geographical locations and as a result the very tedious work of budgeting at headquarters has now become a critical management issue especially at times of staff turnover within the group finance team.

 

Expectations

Management confirms that merely recruiting more finance staff does not solve the problem and that migration away from labor intensive budgeting consolidation tasks to advanced automation is the way to go.

 

Solutions

No matter the rate of business expansion or contraction, FlexCalc supports scalability through the elimination of data manipulation work undertaken at headquarters.

 

Benefits

The group finance team can enjoy the use of the new system and have room to upgrade themselves from any clerical work to that involving analytical thinking.

 

Significant Increase in Number of Budget Owners

Facts

Empowering your staff at an individual level to create and upload data files and ensuring that all submissions have been processed can be a painful experience not to mention very time consuming.

 

Expectations

Top management, irrespective of growing staff numbers, expect an advanced budgetary control system that is capable of directly supporting all budget owners without relying upon data manipulation by middlemen.

 

Solutions

When there are a sizable number of budget owners, FlexCalc can be deployed over the web so as to eliminate the need for installation and additionally through the use of a web browser, users can operate the system from updating data files to receiving variance analysis reports.

 

Benefits

The benefits derived from this implementation are significant as most of the planning overhead is eliminated thereby allowing not only for every budget owner to directly contribute their work but also for management to obtain relevant budget analysis on a timely basis. In addition, the internal control over the whole budgeting process is dramatically improved when management can allow for an optimized segregation of duties matrix that is supported by the system.

120 Months of Rolling Forecast

Facts

Some industrial sectors require for ultra-long term planning. The financial services sector is a typical example as is Oil and Gas but with planning periods more than 36 months it becomes increasingly more difficult to manage the process effectively.

 

Expectations

Planning accountants demand for a system that can allow a user-defined planning period down to weekly, monthly or yearly basis without involving programming or customization.

 

Solutions

FlexCalc supports a user-defined accounting period table up to 9,999 years allowing for 99 periods for each of those years and additionally users are allowed to post data to these different periods within the same processing session.

 

Benefits

The automation of multi-period rolling forecasts for 120 months, allows management to receive more meaningful and detailed planning reports on a cost effective basis.

 

Cost of Maintaining Business Analytics

Facts

From time to time senior staff develop new business analytics to support business operations through knowledge management and these often require a lot of manual work for each subsequent reporting period.

  

Expectations

Management want to maintain detailed business analytics and will be more receptive to introduce new ones when systems are ready to automate the relevant updating process on a daily basis.

 

Solutions

FlexCalc has an integrated Rules and query processor that supports both automatic updates and for the ability to create new business analytics. Most importantly, the system also supports scheduled report generation based on user-defined time criteria.

 

Benefits

Maintaining an excellent and easy to use design for business analytics really benefits accelerated knowledge management and the cost of this is now reduced significantly to the point where new analytics can be created and maintained very easily.

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