In this article, I would like to describe a typical business challenge in the context of integrated financial- and cost planning and how they are handled within SAP Analytics Cloud.
Problem definition: In various areas of financial corporate planning, planning processes are realized in a TopDown-BottomUp approach. What does that mean and why is this done in such a way?
In companies, planning processes are often carried out in several steps or sequences.
Starting with a 1. TopDown planning step in such a way, that there is a global target set by the top management. This can be the case, for example, for the area of cost planning or budgeting as well as for sales- or revenue planning. For example, the management specifies globally to reduce costs by a certain percentage or to increase sales/revenue by a certain amount. After the target definition, done by the management, these financial goals are broken down or distributed down to an aggregate level of the organization.
In a 2. BottomUp planning step the several business departments start planning to achieve the financial targets, which were set by the management. One of the major differences between these steps are that the BottomUp planning is done in a much higher granularity. The management set the target globally. For example, only to the region organization level and the business departments starts planning on single point of sales, shops, or cost center.
After finishing the first BottomUp planning phase, the planning results must be balanced with the TopDown targets. If the BottomUp results don´t match the TopDown targets, the whole planning process start again until both results align or match.
Technical Solution: SAP Analytics Cloud supports such TopDown-BottomUp planning processes on different levels of granularity perfectly, with the possibility to define and use alternative hierarchies inside dimensions. In this example inside the dimension “ORGANIZATION” an organizational hierarchy structure named “TopDown” was created for the TopDown planning process to have the ability to spread the management goal down to the region. In addition, a hierarchy structure named “BottomUp” with a higher granularity until the leaf level (for example with point of sales or shops) was created to be able to plan against the management goal.
TopDown Organization Structure:Additional a second alternative more granularity hierarchic with all single point of sales or shops defined inside the dimension for the BottomUp planning (see below)
BottomUp Organization Structure:All the dimension modelling with the definition of the hierarchies can be done in the dimension creation dialog.
Both hierarchies can now be used inside the different planning entry reports for TopDown goal setting and BottomUp planning. In this example we start on a TopDown planning entry report enter a target amount of sales for the whole organization of 10 Million, distributed down to the region level (yellow highlighted column). In the next step we switch to the BottomUp planning entry report to control the results.
In the column with the version “1.TopDown Start” (green rectangle ) we see on the BottomUp entry report the entry results from the 1. TopDown planning step. The entries in this column goes down only to the region level. The leaf level is empty. This is possible because, inside SAP Analytics cloud we have the great function to entry values on consolidated elements without spreading this down to the underlying children elements. Of course, the spreading is also possible, but in this approach, we do not want this.
In the column with the version “2.BottomUp” (gray rectangle) the planning user is now able to entry values on all levels of the organization. Primarily on the leaf level to plan against the management goal from the view and responsibly of the line of business, point of sales or lowers planning level.
This can be done for every regional structure from other departments or responsible business user. Additional in the column “Delta” the variance between TopDown goal and BottomUp detail planning is highlighted. After the entry process in version “2.BottomUp” is finished, the Data Action Trigger “2.BottomUp to 2.BottomUp Back” should be executed to finish this planning process and to transfer the values from version “2.BottomUp” to version “2.BottomUp Back” (visible in the second column in the TopDown entry report.After the execution of the Data Action, the BottomUp planning values copied to the version “2. BottomUpBack” (gray rectangle). Now in the next step the TopDown planning process can start again with the result from the entries from the field in version “3.TopDown” (green rectangle).The results are just again visible in version “3TopDown” (green rectangle) on both entry reports and the next planning step on BottomUp level can follow. Business User entry values in version “4.BottomUp” (gray rectangle) and can transfer the results to version “4.BottomUpBack” with the a underlying Data Action started by the execution of Data Action Trigger “4.BottomUp to 4.BottomUpBack”. The end of this example process is to control the results and the alignment of TopDown goal setting with the BottomUp planning in the TopDown Planning report in the delta column calculated based on the last planning entries.Now this exemplary TopDown-BottomUp planning process is finished. It should be highlighted in which way SAP Analytics cloud can help to support such typical enterprise financial planning processes with the functionality to have alternative hierarchies inside dimensions.
Outlook: In this kind of planning processes normally many different business users in companies are involved. In this regard, it makes sense to carry out these planning inputs tasks in a steering process based on the SAP Analytics Cloud Calendar.