Sustainable.Enables the redesigned budgeting and reporting processes to eas- ily adapt to changes in the business and industry. In this part you will read interviews with experts who have analyzed and improved budgeting and reporting processes.
INTRODUCTION TO BUSINESS PROCESS IMPROVEMENT
ABOUT BUSINESS PROCESS IMPROVEMENT
But, the processes that drive a company’s budgeting and reporting activities have not changed much, except for more recent technology advances. Following the introductory chapters, this book discusses in detail how to improve your budgeting and reporting processes.
WHEN BPI IS VALUABLE
Another access-related bottleneck occurs in the distribution of reports to man- agers across the organization. Create budgeting and reporting • Account structure (chart of accounts) processes that can easily be altered • Technology.
SMALL AND LARGE PROJECTS AND ASSOCIATED RESOURCES
Larger Company Need to include key people from each related area: accounting, finance, analytics, senior management. Larger Company Expect to include 5 to 10 people at different stages, and most likely an outside consultant to drive the project, mediate, advise, and so on.
RETURN ON INVESTMENT OF BPI PROJECTS
BEST PRACTICES, TRENDS, AND TECHNOLOGY
Historically, it has been the job of the company’s IT department to move data from one system to another. Another key focus of the Balanced Scorecard approach is to link employee compen- sation to the performance metrics.
SELLING CHANGE TO YOUR ORGANIZATION
Top management, the project team, and the members of the organization each need a customized version of your sales pitch for maximum effect and support. Small BPI projects (such as changing the chart of accounts) clearly require a lot less involvement from the organization and less preparation to sell the project to de- cision makers. Reduce potential risks to team by defining as clearly as possible the scope of the project.
Improved personal work Job security Present the project concisely tasks (e.g., less data Wasted time (extra work) or distribute information entry, earlier reporting) Fear of the new and document; have personal.
BUSINESS PROCESS
IMPROVEMENT PROJECT
GETTING STARTED
As stated, in this part of the book we take a close look at budgeting and reporting processes and how they can be improved, to arm you with knowledge and a set of useful tools for your own financial BPI project. However, before you dive into the budgeting and reporting processes, you should develop a clear picture of the roles that end users, administrators, and man- agers play in the budgeting and reporting process. As you will see, all of the improvement enablers are im- portant for maximizing the potential results of your BPI project.
If your BPI project is a small one, you might be doing most of the work yourself, sup- plemented by some discussions and meetings with end users and decision makers involved with the budgeting and reporting processes.
DUE DILIGENCE
Your company’s value state- ment alone will not help; but if the company practices what it preaches, then it can smooth the process. This is the uncertainty regarding a company’s capability to earn a reasonable return on its investment in light of the revenue and cost factors, which include competition, product blend, and management aptitude. These changes can be better managed if the leaders are aware of the company’s strengths and weaknesses before changing the dynamics of its organization.
The company’s strengths were in software, but it also had tremendous strengths in marketing, so it acquired a company that was creating videogame software and designed a videogame for the home.
IMPROVING THE
BUDGETING PROCESS
It is also beneficial to have an assessment meeting at the end of the budget process to determine how the process can be im- proved in the future. It will cause many delays if managers ask for additional information in the middle of the budget process. Explaining the budget process to the necessary employees to ascertain that the budget process is consistently followed.
If your employees are going to participate in the budget process, then they should be responsible for their numbers.
REVENUE BUDGETING
It should be determined how the employees and managers will use this data for the bet- terment of the company; employees, managers, and directors obviously will have dif- ferent needs. It would benefit them to view last year’s revenue and to know the vision and goals of the management. A bottom-up approach works best when doing revenue budgeting, since the man- agers will have the most intimate knowledge of the company’s customers and prod- ucts.
To create an accurate budget, you must be aware of the vision of the company.
EMPLOYEE BUDGETING
Management should be able to determine the bonuses, based on a departmental estimate received from the corporate offices. There should be an annual percentage set for all employees, which can be adjusted by the managers if need be. Some companies have more than one bonus month, but the month(s) should be consistent across employees.
After all of the preceding information has been entered, the system that you are using should be able to calculate a monthly salary, the bonus, and all benefits.
COST OF SALES AND OPERATING EXPENSES
Thus, if revenue is budgeted by product and region, then it would be beneficial to budget similarly for cost of sales. You may take either a top-down or bottom-up approach to cost of sales budgeting. The costs of sales and expense assumptions will be based on how you will enable the users to budget this data.
Then the system should be able to calculate the total cost of sales by account.
CAPITAL EXPENSES
The total is the amount that will be amortized over the life of the project. This calculates whether the present value of cash flow is greater or less than the initial cost of the project. The cutoff rate is determined by the cost of financing for the company and the risk level of the project.
The form will then automatically calculate the depreciation for the income statement, and the cost of the product will be stored for the balance sheet.
BALANCE SHEET AND CASH FLOW STATEMENTS
We are going to assume that the cash flow is calculated from the balance sheet and the income statement budget; therefore, all assumptions will be solely for the balance sheet budget. You first need to decide whether cash flow will be determined from the balance sheet and income statement or will be prepared separately. The balance sheet should be the only area on which the executives will enter numbers; the cash flow will be calculated from the income statement and the balance sheet.
Ideally, the cash flow will be determined from both the balance sheet and the income statement.
ALTERNATIVE BUDGETING APPROACHES
The manager will determine the costs associated with the sale process, rather than determining the costs of the entire department. There will be an improved understanding of the company’s activities and how they are linked to the costs of those activities. For one, it is very difficult to find the key measures that drive approximately 80 percent of the organization, so many managers will throw in too many measures.
Many managers will also ignore the nonfinancial measures, but this is one of the main benefits of the Balanced Scorecard.).
IMPROVING FINANCIAL REPORTING PROCESSES
Workflow • We have several approval steps for journal 4 Improve entries; if a manager is unavailable, the process. Technology • We have more ERP instances than we need, and 4 Improve the chart of accounts is not consistent between. Best • We don’t have agreement on the key metrics 5 Improve Practices that matter throughout the company.
Technology • We rely on spreadsheets for reporting on 4 Improve key indicators such as market share, number of.
HUMAN RESOURCES, TRAINING, STRATEGY, AND WORKFLOW
A lot of the delays that emerge in the con- solidation and preparation of financial reports originate in transactional systems, where postings can easily be made to the wrong accounts. Alignment of financial and reporting systems with the company’s strategy requires not only fast delivery, but delivery of the rightmetrics. EVA is the net operating profit less a charge for the opportunity cost of the capital invested to get that profit.
Again, much of the inefficiency in the reporting process arises from problems of data quality.
BEST PRACTICES
Part of the virtual close concept is that closing become an ongoing activity rather than a period-end crisis. One of the benefits of technology enablers such as database query tools is that information on variances can be found in advance. This will facilitate reporting of subsidiaries in local currencies, as well as of the parent company.
This team should meet regularly to review the effectiveness of the KPIs on the list.
TECHNOLOGY
You (or your application vendor) will probably decide to use a combi- nation of relational and OLAP databases as the physical structures of the data ware- house. The task of organizing the data in the relational database model, also known as normalization, seeks to eliminate redundant data by separating related sets of attrib- utesinto separate tables (where an attribute corresponds to a column in a table). The data evaluation will yield a collection of information about source systems and their content that will facilitate the correct use of data, in the proper context.
Do you need to add special characters such as quotes, commas, or dashes to make the data more readable to the user.
BPI MAKEOVER
To represent this future state graphically, you can follow the same workflow charting conventions that you used to frame the as-is process. Exhibits 20.1 and 20.2 are examples of how processes might change as the result of a BPI initiative. By identifying weak points in the process—those tasks where errors and delays are introduced—you can identify the enablers involved in those tasks and start thinking about ways to enhance them.
What information technologies do we know well, and how can we take advantage of that knowledge.
DESIGNING THE ULTIMATE CHART OF ACCOUNTS
CHART OF ACCOUNTS REDESIGN
