20 Mar What does the term ‘Budgeting’ mean to you? How do you think it helps business and companies? ?Do some research online, and share what you find.? Challenges in Bu
Budgeting (DISCUSSION)
What does the term "Budgeting" mean to you? How do you think it helps business and companies? Do some research online, and share what you find.
Challenges in Budgeting (DISCUSSION)
2
Study the attached powerpoint discussing budgeting. What are some common challenges in budgeting and planning? Why do you think these are challenges? 10 points
Best practice in the budget and planning process
June 2017
Robert Lanzkron Management Consulting, PwC Israel
www.pwc.co.il
PwC Israel
Top 10 reasons why budget and planning stakeholders hate the process
1. It takes too @“!%?# long!
2. Doesn’t help me run my business
7. It involves too many
people
3. It’s out of date before it’s even finished
4. Too much game playing
5. Too many iterations
10. Doesn’t match the objectives to which I’m held
accountable
6. Cast in stone although business
conditions are always changing
9. By the time it’s done, I don’t even
recognize my numbers
8. Includes allocations that I can’t control
PwC Israel
Common Challenges in Planning
Strategically disconnected
• Most companies report either “no link” or a “weak link” between the strategy and budget processes…
• Whereas more than half reported that creating closer links between strategy and operations was one of their top two priorities.
Slow
• Completing an annual budget can take too many months (best practice is 28 days*)
Expensive
• Finance departments alone spend considerable corporate revenue on budget creation each year
• Yet less than 50% of the budget and forecasting process is spent on analysis, strategy development and target setting.
Unreliable
• Management and investors are routinely surprised by the variances between communicated expectations and results …
• No wonder if you have a high prevalence and dependency on spreadsheets for example.
*APQC 2016 survey: Cycle time in days to complete the budget
PwC Israel
What happens when the planning process is broken?
Inaccurate financial projections leading to
• PROFIT WARNINGS
• INACCURATE INFORMATION TO INVESTORS
• INABILITY TO RAISE FUNDING
Functional plans out of sync with business strategy
Poor customer service
Too much inventory – but never where or when it’s needed
Lost sales resulting in missed revenue goals
Inability to respond to changes in the market and new sales opportunities
Lack of financial insight to make effective decisions
Cash flow and/or working capital crisis
PwC Israel
Every business is different and we do not propose or support a one size fits all solution to planning and budgeting
3.0 3.5 5.55.04.5
4.0
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4.0
3.5
3.0
2.5
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1.0
0.5
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1
9
13
6
5
# E
M P
L O
Y E
E S
4
2
INDUSTRY
1
1 1
5
6
2
3
2
2
5
12
Industrials4Financial services3Healthcare2Technology1Retail
1,000+
200 – 1,000
50 – 200
1 – 50
1 Includes software / semiconductors / electronics / IT / analytics / cybersecurity / online marketing, 2 Includes biotechnology / medical devices / kuppot holim / pharma 3 Includes banking / insurance / investment advisory / fintech 4 Includes energy, chemicals & mining / industrial manufacturing / construction & engineering
Sample size is 80 companies
PACE OF PRODUCT CHANGE
S C
A L
E &
C O
M P
L E
X IT
Y
…there are common processes and principles that apply
PwC Israel
Commercial Function
Finance Function
Operations Function
Strategic planning and target setting process • Three to five years time horizon with clear alignment to the business strategy • Includes non financial and relative metrics • Targets set with clear guidelines on how business units work to the targets
Budget process
• Strategic, operational and financial plans are integrated • Driver based plan blended with bottom up • Integrated system used is focused on modelling and analysis
Forecast process
• Forecasting is event driven and therefore by exception • Is summarised and rolling beyond the fiscal year for key account lines • Is integrated with monthly performance reporting
Our view on the framework for Integrated Business Planning in Practice “Put simply it’s about improving performance by integrating the business plans, budgets, and forecasts, across functions and business units. ”
PwC Israel
How do we work with our clients to improve their planning process?
• Start with aligning on the purpose, use and value of the budget process
• Reduce and remove complexity
• Standardisation of process and systems
So why do we Plan, Budget and Forecast?
• To control costs?
• To forecast revenue?
• To set targets for the bonuses?
• To adjust direction?
• To influence behavior?
• To drive action?
• To beat the competition?
• To create value more effectively?
PwC Israel
Key characteristics of best practice processes
• Control the number of budget iterations developed
• Reduce the number of budget line items
• Flexibility modelling of scenarios based on differing business assumptions
• Standardize budgeting methods with the rest of the company and what senior management is expecting to see
• The link to strategy needs to be clear and clearly linked
• Base budgets on business drivers
• Align incentives and rewards to strategic objectives
• Link the annual planning process to rolling forecasts and management reporting
• Active engagement of the business in the budget process • Done by them and not to them, Controlled process and communication
• People are key • The right team – finance and business • Analytical capabilities • Big picture and the detail
PwC Israel
And what about systems…?
PwC Israel
Does this look familiar??
FINANCE MARKETING
SUPPLY CHAINSALES V1
V2 V22
Expensive IT solution
PwC Israel
Why does effective planning need more than Excel??
• Enabling trust and confidence in the data that informs business decision making
ONE version of the truth across ALL functions
• Enabling accumulation and analysis of huge amounts of data from different sources (e.g. ERP(s), ePoS, customers, consumers, market analysts, suppliers …)
BIG data
• Enabling a fast and reliable data-based assessment of different options taking into account a variety of inputs SCENARIO planning
• Enabling the collaboration between Finance, Commercial and Operations • Enabling visibility of the “so what?”
FINANCIAL evaluation
• Enabling transparency and accountability for performance • Enabling management of performance (“if it’s not tracked, it does not exist”)
Powerful and automated REPORTING
• Enabling trust and confidence in the process and the data • Enabling collaborative decision making with traceability of actions and resultsGovernance and CONTROL
• Enabling mobility and visibility; engaging the decision makers, removing the need for taking decisions “offline” because data is not available there and then
Real time access, anytime, ANYWHERE
PwC Israel
Key characteristics of best practice systems
• One system and one method of input and analysis
• One language: common assumptions, input, terminology – making it as easy as possible
• Single charts of accounts and consistent costing methodology
• Ensure it is readable and usable in the ERP – to understand, measure and reforecast
• Single system not requiring constant tailoring – ‘interfaces’ are waste by their very nature
PwC Israel
Thank you
Robert Lanzkron Senior Manager Management Consulting,PwC Israel Office: 972-3-7963809 Mobile: 972-54-4954194 Email: [email protected]
© 2017 Kesselman & Kesselman. All rights reserved.
In this document, "PwC Israel" refers to Kesselman & Kesselman, or, as the context requires, PricewaterhouseCoopers
Advisory Ltd. or PwC Trust Company (1971) Ltd., which are member firms of PricewaterhouseCoopers International
Limited, each member firm of which is a separate legal entity
This content is for general information purposes only, and should not be used as a substitute for consultation with
professional advisors
,
Budgeting (DISCUSSION)
What does the term "Budgeting" mean to you? How do you think it helps business and companies? Do some research online, and share what you find.
Challenges in Budgeting (DISCUSSION)
2
Study the attached powerpoint discussing budgeting. What are some common challenges in budgeting and planning? Why do you think these are challenges? 10 points
,
Lecture – Notes and Highlights
This pandemic has caused a lot of issue for companies and business who drive their productivity on sales and volume. This class, discusses budgeting and other financial metrics that introduce you to how bottom line figures are affected by the performance achieved in overall business goals. So, we have to study and learn how a budget that was created in the beginning of this financial year for most companies, took a drastic hit due to an "unforseen variable" experienced by the Coronavirus. The following types of business and organizations are having challenges at the moment, due to this pandemic:
· Companies sell online products for revenue
· Companies that sell products in traditional brick and mortar stores
· Businesses that offer services to clients, and need clients to drive business revenue
· Restaurants, that interact with customers in the food industry, needing customers to drive business revenue
These are just a few types of business models that are having tremendous challenges due to the global pandemic, the coronavirus. Corporate Finance is understanding all of these metrics, and understanding when financial positions have changed for companies and businesses is important to manage the financial operations of any business or organization.
DISCUSSION
How has this virus affected our economy? What issues do you feel the coronavirus has caused business and companies financially? How do you think Entrepreneurs dealt with these financial challenges?
Case Study – Community Business Report
Write a case study, (NO LESS THAN 500 WORDS, AND ANYTHING LESS WILL AFFECT YOUR GRADE) of a business you know in your community where you live, that has had to change the way they do business because of the coronavirus. Also, discuss in your case study how this has potentially affected their financial position. As business owners and being our own financial analysts, we can predict and draw conclusions based on variables presented to us. What does this mean Dr. Ross? This means you do not have to talk to the owners or workers of the business to find out how they are POSSIBLY doing, but you can take the following variables an draw an educated assumption to help your response for your case study assignment:
· What type of services do they offer?
· What type of business is it?
· Do they have clients they give services to?
· What type of products do they offer?
· Do they need human interaction to drive their sales?
These following variables, you can use to determine how the virus is affecting your selected business for your case study.
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