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Most companies currently employ sophisticated ERP systems to support their operational processes. And many of them also have a BI environment with which they are able to generate a historical view on their performance by means of standard reports, dashboards, ad hoc queries etc.

But most of them find themselves struggling each month, each quarter, each budget year to create some view of the future that enables them to react on changing markets, competition, technologies, environmental and fiscal laws etc.  Let alone that they would have a planning system with which they can quickly and efficiently evaluate changes in plan, budget, policy or strategy.

The pressure on their planning process is increasing. Management is confronted with customers and stakeholders that are demanding more detailed and more frequent updates on short term expectations. These questions can less and less be answered by management themselves. Changes in the environment are felt in the roots of the organisation. And only from there the consequences of these changes can be foreseen and the results of policy changes (or no changes) predicted.

 

This is what is happening …

 

Graph Bjarte Bogsnes, Chairman Beyond Budgeting Round Table Europe 

… budgets (or other plans) lose their significance soon because their starting points for expected financial performance loose validity: sales volume, commodity prices, wages, productivity etc.  Business have to react immediately and therefore need revised forecasts and adjusted planning.

 

Planning systems are around a long time, but can they do the job? Some of them are related to an ERP or BI system, others are best of breed, most of them are Excel. This blog is not meant to evaluate the different solutions. We are focussing on what generally in the market is recognised as being a top planning product: Business Planning and Consolidation (BPC) of SAP Business Objects. BPC can be used stand alone in the SQL version or be fully integrated with SAP in the Netweaver version. SAP is heavily investing in this product and has recently released BPC10, a version that many EPM consultants are very happy with because of its user friendly interface.

A prerequisite for any planning system is reliable, up-to-date financial and operational data. As we put in the beginning: most companies nowadays have good ERP systems that on a real time basis give access to the status quo. The missing link in the management cycle is planning information. Only with that information management can do what it is hired for: manage.

That information needs to be readily available. A planning system must tell the manager on any moment what is the actual situation and what will happen if he “does nothing”, i.e. unchanged policy. Next it must tell him what happens if he does act and help him evaluate different courses of action (scenarios).

BPC can do such things and what is attractive to many managers and controllers: BPC can do it via this powerful, flexible and generally known interface called Excel and with no involvement of IT in the business of planning  itself (of course the infrastructure must be there in the first place and IT makes sure that the actuals are available in BPC). Summarizing the BPC advantages:

  • Planning is created, maintained and run by the business user
  • unified planning and reporting (and, if you wish, financial consolidation)
  • Web interface for data entry and other common planning tasks
  • Familiar and flexible user interface Excel (for more advanced planning taks)
  • Immediate time-to-value with fast end user acceptance

And most important: an agile planning process, driven by end users! 

With this and upcoming blogs we will demonstrate the simplicity and yet powerful capabilities of BPC by means of a planning scenario that contains relevant planning concepts and that you can easily implement in your system. You find:

  1. the scenario of the planning process
  2. a step-by step guide how to configure your system (model and connection, dimensions and properties, users and teams, tasks and task profiles, work status, reports, input schedules) in Web or Excel
  3. an excel file with the demo configuration data

 

Planning scenario

Planning and budgeting is a process of cooperation where planning persons propose actions that generate revenues, costs etc. Managers cq controllers review and return or approve and forward these proposals.  This process is basic for all organisations and BPC offers built-in functionality to support this process, a valuable and ease-to-use feature.

ABC holding has two sales companies, Mode and Fashion, both operating in the fashion market. Mode has two sales regions and Fashion idem.

  1. ABC holding ask their subsidiaries to plan Turnover and Sales Volume per product.
  2. Regional sales reps of Mode and Fashion plan their sales portfolio, volume and prices and send the results to the company sales manager.
  3. The sales manager reviews the proposals and may ask for changes. After approval he sends the company budget to the controller of the holding company.

This process is executed in cycles until final approval of the current version by the controller. This version is then fixed and reported to the Board. In case changes are needed this will be done in a new version.

When you have finished this first scenario you will appreciate how easy it is to create cq maintain a planning screen and to input basic planning information. With one click you can forward your plan for review cq approval. A manager can comment on a proposal and ask for an update or can approve it and forward it to the next level.

We will see in the next blogs how we can model a complete business planning process, perform calculations, f.e. Revenue as Volume * Sales Price, Cost of Sales as Volume * Product Purchase Price * General Logistics Cost %. And how we can present relevant historical data for a specific planning task.

After that we will turn to forecasting and extrapolation of historical data and generation of budget proposals.

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