Budgeting

Through the years we’ve noticed that some businesses are questioning whether drawing up a budget is worth their time and effort when they suspect – and often know – that the budget will more than likely be wrong, or irrelevant, by the time it’s finalised.

One reason for this reluctance is that budget holders are often area specialists and not accountants, who find operating out of their field of expertise time-consuming and energy-sapping.

We help our clients to move beyond accounting as the basis, enabling them to budget in the way their teams and businesses think. While this is often too much detail for spreadsheets, the IBM Cognos TM1 solution – combined with our experience – empower our clients to draw up functional, intelligent budgets.

A few of the areas in which we commonly add value, are:

Sales

• Budget by customer, by product across areas, in local and group currency.

Payroll/ HR

• Budget by employee, by salary, and other cost to company components, such as SDL, commission, allowances, etc.
• Apply an increase across the business at a certain date for all existing staff, or across categories of staff, and budget for new employees with their own unique business rules.
• Budget more intelligently for employee-related costs other than payroll, such as new employee setup costs (e.g. new laptop and software), training, staff welfare, uniforms, etc. as a percentage or fixed amount per month/year. This will reduce the budgeting time of your teams and increase the accuracy of your budgets.

Travel

• Instead of expecting your team to become travel agents, have them budget where they are going, for how long, and whether or not they need a vehicle –then centrally manage the cost per day for vehicle, flights, etc. and allow for accommodation and subsistence to kick in only from day two.

Property, plant and equipment

• Budget for new assets by name, and get an accurate depreciation charge to your income statement.

Driver-based budgeting

• Certain items can’t accurately be budgeted for by looking at the previous year’s numbers, but are rather driven by activity. Whether the specific item is driven by headcount, revenue, number of workstations, production line setup, or another business activity, we can help you simplify the process of driver-based budgeting.

What-if scenarios

• Getting your first budget out is usually just a starting point. From there, businesses often want to change business assumptions and measure their impact. Spreadsheets are usually flexible in this process, but comparing the different scenarios can become time intensive and, in addition, each new version poses a potential version control issue. We give your business the flexibility to apply different business assumptions to your business plan, and quickly and easily compare the different versions without a folder full of spreadsheets.

These are a few examples, but not the full picture as we can help you in areas that are specific to your business.

Once you have completed your budget the next logical step is to measure your business performance against this plan. A simple way to do so is through the IBM Cognos solution for management reporting. After that you will be able to bring together what has happened (actuals) with what you think is still going to happen. This process of building a more realistic forecast is also part of the IBM Cognos solution, allowing you to be more dynamic as a business instead of only drawing on comparisons to an ageing, and increasingly less relevant, budget.