Zero Based Budgeting

And Why

Are you budgeting your costs based on last years actuals plus a bit for inflation or, are you looking under every stone to release potentially more profit. In most cases, probably the former because culturally and practically, unless directed otherwise, it is an easier option in what is, anyway, a challenging and time consuming political process.

Yet starting with a blank piece of paper and assessing value for money is exactly what adds significant value to your business and arguably today the changes in underlying technologies are drastically more improved to allow for this approach.

The resultant change, to you, of these underlying technology improvements is simple, and that is today’s “Budgeting” systems now solve two main core issues 1) the ability to practically manage the whole process at every level and 2) providing you a basis to validate very quickly underlying information, including the tracking and audit of iterative changes, due to there being more clarity surrounding each data entry. If you are skeptical, then this would not be a surprise as, for so many years vendors have come up with solutions that worked in theory but which were perhaps too inflexible, in what is a challenging process, perhaps due to technologies not quite being there.

Today’s new systems are helped further by technology and are different in that solutions can be rolled out iteratively, are faster and can handle the entire process against “One Button” to get all information on “One Page” with appropriate segregation of duty. These processes can include data entry from smart forms, data feeds or even from email including those having zipped attachments, through all necessary data transformations to reporting, including “Continual Monitoring” and “Business Simulations”.These processes are repeatable, auditable and can handle :-

  • Complex budget calculation tasks performed by a few specialists where order of processing may be important; examples HR Compensation that may require complex calculations involving margin, product mix and cash offset rules; Inventory Management ; Loan Management; Lease Management; Facebook Marketing Analysis.; Minority Interests, Reconciliations; etc

  • Complex processes across many stakeholders; Budgets; Consolidation processes; Closing; Cash Management; Project Management, Supplier Management etc

  • Transparency and oversight from Virtual Assistants with support for Complex Event Processing (CEP) but which can help in oversight and reporting in your overseas operations.

The depth of technology changes, that facilitate this, are described further below but looking at the budget process can reveal what can be done:-

Preliminary Budget Iteration :- The end-user is able to define the budgeting process from data collection, through all process flow transformations to final first reports / visualizations.

  • Contracts can be exploded to underlying transactions with any amortization flows.

  • Data can be input from structured and unstructured data source sheets

  • Smart forms can be deployed to collect any required data. These can self render to create forms with only the fields required for that process. They can also be designed by the end user.

  • Segregation of duty can be implemented for the preparation process to have appropriate sign off and controls.

Ongoing Budget Iterations Up to Completion :-

  • All underlying changes can be tracked at all times until the budget is completed.

  • Any allocations can be annotated meaning that it is easier to track allocation entries that may have been included on specific accounts.

  • All transactions exist and can be reported on, drilled down on etc because, during the collection process, journals have been created for each budget entry, meaning that subsequent changes can be tracked, a task which is challenging and time consuming at the moment.

  • Easy to review and reconcile to actual end of year results prior to starting the new budget year, meaning that decisions can be taken as to what to change or not change for that matter.

Monthly Reporting cf Actuals

  • Can be automated to produce rolling actuals / budgets with auto report rankings of key variances noting that it can be done on a rolling basis each month.

  • Cash flows can be instantly updated and rolled forward so are more accurate.

  • Same technologies can be used for actuals to reduce friction in any process bringing your business more towards real time and therefore projections are based on more timely numbers.

Business Simulations

  • Extensive “what if “calculations can be undertaken to work through complex scenarios and processes to find, for example, the best product mix that gives the highest bank balance.

  • Processes can be costed and optimized based on current operating conditions.

Continual Monitoring

  • Complex Event Processing (CEP) across remote operations to get transparency and notifications as to key events eg staff attrition, bank balances etc. Key point here is that the alerts are contextual and actionable. In other words the relative “size” of an event can trigger different supporting reports or workflow(s).

  • In the event of further scrutiny, data files can quickly be accessed and downloaded with appropriate permissions and security, even for overseas operations. The way that the data is accessed means that this type of transfer is quick to process..

  • Systems can work on-line, off-line, centralized or decentralized allowing for processes to work in the same way ie although processed off-line anything requiring eyeball scrutiny will wait until “eye ball” processed.

Virtual Assistants

  • Can help in auto-receiving, validating, and processing data files sent from operations. Invalid files can be auto returned and non receipt of files can be auto actioned with an email chaser.

  • Ad hoc or planned contextual actionable alerts or workflows can be created based on actual results.

  • Can rank results on the fly for constant or regular review. For example top XX best selling and worst selling products by entity and/or by region etc.

In order to achieve the above there has been a lot of change, especially when it can be achieved on fairly typical hardware infrastructures. These changes come together to make program files and data files very small and therefore very easy to execute. Being optimized for management accounting also means fewer lines of code for the same output and more stability. The key point though, is the ability to automate both simple or complex tasks, as the system can handle extreme process logic and flows. The end result are ultra high speed processes which means that productivity increases and operations are at or near real time processing meaning that projections are based on latest information.

Underlying technology changes that have enabled this are as follows :-

Software

This is where there are fundamental changes, which are further leveraged from all the other technical changes and when combined bring real value.

  • Software is becoming more end -user driven, even for complex tasks from 1) data collection through data feeds, smart forms containing zipped attachments to 2) processing transformations that take data from multiple systems with the required associated transformations and 3) that result in reporting that includes visualisation, “Continual Monitoring” and “Business Simulations”.

  • “Continual Monitoring” capability, once the domain of expensive systems, is fast becoming a reality, facilitated by a combination of hardware and software changes. Not only that, but these can cross multiple systems and once triggered can generate contextual alerts / notifications and workflows that are themselves dependent on any complex event that has been detected. Actions can be executed in line with the severity of the event.

  • “Business Simulation” that allows processes to be tested using existing data. Speed of execution is the differentiator here as simulations can be tested quickly and measured. They can be complex and models can populate in real time. ie best product mix to give highest bank balance etc

  • Software is now being written to leverage the cores and threads of today’s processors, meaning that more can be done at the same time. Note here that for this to happen that software from vendors has to be be specifically re-written to support this, meaning that this optimisation is not generally available at this time for all applications.

  • Uses compression for both storage and execution which adds more speed and leverages your existing hardware though the processing of smaller files.

  • Robots or “Virtual Assistants” that can work for data collection thus ensuring that data is collected, validated and subsequently processed or rejected. “Continual Monitoring” for “CEP” with “Virtual Eyeballs” looking at reports and performing rankings of highest variances eg fast and slow moving stock movements, process execution times, social media analysis etc

  • Off line, on line, centralised, decentralised processing giving flexibility.

  • Cloud bursts to leverage an on-premise process using the public cloud.

  • Of course data volumes need further explanation. For data handling and transformational disciplines you should assume that both cannot be handled by your current system until tested, because, as you can see herein, a vendor has to embrace and leverage the many underlying changes to gain the necessary performance gains for these higher volumes. It is not just simply about larger volumes taking proportionately longer, but about how that process executes within the available resources to process that higher volume.

  • Document Management systems (DMS) facilitate processes and reporting and where relevant allows you to access and search underlying documents for key information. Systems can be workflow based or can operate in parallel giving you the ability to refer to source documentation.

Database

  • Moving from SQL to NOSQL. SQL databases are optimised for speed and can bring significant performance advantages

Hardware

  • Systems are moving from 32 Bit to 64 Bit which means that more memory can be devoted to processing. Theoretically the maximum for 32 Bit is 4GB RAM but this is often reduced by other hardware components. This is against a background of faster processors meaning that more can be done more quickly.

  • Mobile processor power is at a point where it is both 64 bit and as powerful as some PC’s making some wonder how that power can be harnessed ,but in reality, again it will be down to a combination of factors. Security, bandwidth and task in hand for sure will give you more options to use mobile for “on-the-fly tasks” such as data entry, reporting etc

  • Disks moving to SSD ( mobiles are using already ! ) , which are fast and have no moving parts but which today are very expensive, give more incremental performance. Although this will be in all systems over time it is a good example of an iterative change which is more easily explained to users as opposed to some internal hardware changes which are many !.

  • General reduced costs for hardware, operating with compressed and optimised software writing, combines to be a real leap forward in performance, now or in the making over time, depending on vendor speed.

Security

  • New options emerging like cloudburst technology allow for public clouds to be leveraged for compute resources only with storage taking place on premise. So read hybrid processes as opposed to applications.

  • Most software vendors offer a basket of security options that might be proprietary or based on industry standards.

Consumerisation

  • Ease of Use. In this era, consumers are king and having enjoyed in their personal lives the ease of use of applications, are pushing back against enterprise applications that are clunky and hard to use and that require multiple clicks to make changes.

As can be seen from the above, changes in underlying technologies have enabled vendors to progress forwards with some very tangible changes, with “Budgeting” solutions that allow your business to become more nimble, and which solve key task and process issues to reduce friction and which move your business towards real time. The anecdotal 80% of time on process and 20% on management can therefore be reversed, allowing users to tackle issues at both a budgeting and monthly processing level to reduce friction. This gets an enterprise towards real time meaning that any forward rolling projections are based on latest information and because budgets have been built on repeatable, auditable processes then the variances should be tighter than previously attained in practice. At last the process itself becomes manageable allowing you to leverage from Zero Based Budgeting!

#ActionableAlerts #ActionableAnalytics #ActiveDashboards #ActiveWorkspace #BigData #BusinessProcessManagement #BusinessSimulation #CEP #CloudBurst #ComplexEventProcessing #ContextualAlerts #ContinualMonitoring #DataRanking #EnterpriseBudgeting #FinancialManagementSoftware #HRSoftware #InternetofThings #IOT #RealTimeAnalytics #RealTimeEnterprise #RetailReporting #SoftwareRobots #TransactionLevelReporting #VirtualAssistants #Visualisation #ZeroBasedBudgeting

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