BUDGET MANAGMENT: Achieve Your Business Goals Part Two

1. BUDGET MANAGMENT Achieve Your Business Goals Part Two

2. Introduction Over the last several years, finance executives place high value in budget management. Companies strive to improve their budgeting practices to gain the full benefit of their efforts. Many finance executives say that the most important factor to improve is the ability to analyze information (variance analysis). There is an increasing demand for timely and reliable analytics for volatility in three categories - input, demand, and labor. These include volatility in input prices and availability since market condition is inherently erratic and highly competitive. Others say that the lack of accountability for the budget’s relevance and usefulness to the managers tend to interfere with the company’s ability to obtain the full benefit of their budgeting efforts. Some say that suboptimal budgeting is time-consuming and manual processing is prone to errors - especially in gathering, submitting and reconciling data for budgeting. With these in mind, companies rely on technology and finance applications to improve the effectiveness of their planning, budgeting, and forecasting activities. In Part One of this ebook series, we have identified that continuous budgeting is better than budget based targets. If you haven’t read it yet, you can download it here. In this eBook, we have compiled some articles and tips about ERP systems and Budgeting. 2 Budget Managment: Achieve Your Business Goals (Part Two)

3. This eBook is the second of the series for “Budget Management: Achieve Your Business Goals”. Each eBook contains various tips and articles that will help you achieve your business goals through budgeting. 3 Budget Managment: Achieve Your Business Goals (Part Two)

4. ERP SYSTEMS AND BUDGETING Enterprise Resource Planning (ERP) Systems are great in collecting and storing information but they are left out in terms of budgeting. ERP systems are weak in data analysis and collaboration; thus companies rely on another financial tool to analyze data. But majority of the corporations find it difficult to adopt to the continuous budgeting model because these corporations are hesitant to change things. The familiar saying, “This is the way we have always done things”, will always stay a barrier to change. Some say that performance goals being tied often to budget adherence is another reason where managers are rewarded for staying within the budget guidelines. You may download a reference guide on choosing the best financial solution for 2016 here. However, some ERP systems can be used to analyze data. Collaborative ERP systems are the key to a successful budgeting process and decreases budgeting time from months to merely days. If your budgeting tool is highly efficient like pcFinancials by DSPanel , generating budgets and reports can be done in just a few minutes. Establishing performance payments for being able to achieve the budget targets may be contrary to the health of a business – since it often drives managers to spend the budget in their entirety (even if it’s not in the best interest of the company) as long as they are allocated the same amount in the following years. The way to stop this cycle is through continuous budgeting. Many companies today do their predictions relying on old data; however, with continuous budgeting, companies can make budgets on real data and current market conditions. Since it is now easier to pull the data from the ERP system, finance mangers can make budgeting decisions faster using real-time data rather than from year-old data. With ERP systems accompanied by advanced budgeting tools, continuous budgeting is now possible and can be done in a monthly or quarterly basis. 4 Budget Managment: Achieve Your Business Goals (Part Two)

5. MEET REVENUE AND BUDGET TARGETS The job of the CFO, in many companies, is mainly to monitor the budgets. It is considered a problem when the budget is exceeded while it is an even larger problem when the budget is under-spent implying work not getting done. In small and medium companies, the CFOs are responsible to achieve the budget plans while the CEOs are often distracted with new ideas and find the execution of the plans mundane. That is why CFOs play a critical role in management that even goes beyond merely budgeting and planning. Sure, a business plan is critical but if shoved in a desk drawer – it’s worthless. The leadership team should have KPIs that is part of the annual planning process. Monthly review meetings along with the CFOs that allow the leaders to present results to peers and superiors can be very beneficial for every department. These review meetings will highlight each leader’s performance as well as identifying problems early and enables the management to adjust the plans accordingly. This way, CFOs can formally monitor the plan’s progress. As stated in the previous chapter, many companies are afraid to change course. It is not about changing the annual plan – but it is only to “update” it. There are many budgeting tools in the market today that can make use of your ERP 5 Budget Managment: Achieve Your Business Goals (Part Two)

6. “ We’re on the verge of a financial collapse unless we balance the budget, and that means some really, really tough decisions. - Gary Johnson data and can even generate better and accurate reports than what you currently have. Why wait for a month for data – when you can have access to it in “real time” so you can make plans and changes early on? Creating just enough “pressure” in the workplace can also be beneficial. CFOs can also maintain pressure on the team by measuring the performance of individuals and teams using dashboards and internal reports. Too much pressure and too little pressure is a bad thing, so just knowing how to maintain just “enough pressure” and making it clear what each leader should do makes meeting targets more transparent and successful. CEOs also play an important role in this area by reminding the leaders and members of the team just how important their role is. CFOs may create programs like incentives and rewards for high performance or consequences for under- performance. This is not easy – it takes hard work and patience, but this is how the CFOs can deliver strategic value - by helping the entire team and staying focused on the targeted plans for the year. Monthly review meetings and midyear meetings drives the pathway to success. 6 Budget Managment: Achieve Your Business Goals (Part Two)

7. About Performance Canvas by DSPanel With Performance Canvas we deliver Financial Reporting, Planning, Budgeting, Performance Management and Consolidation in a way that will put your business into overdrive. Based on the ease-of-use of Microsoft Excel and the full power of Microsoft SQL Server we deliver Finance and Performance Management complementing your selected combination of ERP and Line- of-Business systems. Your Finance & Management teams will increase agility, productivity and efficiency within minutes using pcFinancials, pcMobile and pcLegal products powered by DSPanel. The experts behind all Performance Canvas products are the very same experts who designed Hyperion Enterprise, IBM Cognos and Consolidator (frango and IBM), SAP BPC, and Clarity System. Performance Canvas was built from the ground up to answer the unarticulated needs of the market not addressed by previous available solutions. www.performancecanvas.com info@dspanel.com 7 Budget Managment: Achieve Your Business Goals (Part Two)