presentation final amadou december 2016
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Did Rolling Forecast kill Traditional Budget ?
2TRADITIONAL BUDGETINGPrepared for a 12 months period
Iterations x assumptions gathering
Budget Approval
Forecast and Estimates
3QUOTES“The budget is the bane of corporate America. It should never have existed. Making a budget is
an exercise in minimization, i.e., showing how little you can do.”— Jack Welch, former CEO, General Electric (February 2006)
“The budget evolved from a management tool into an obstacle to management . Charles Edwards
“If companies would invest as much time in their strategy cascade as they do in their budgeting process, most would perform a lot better”
4INDUSTRYPULSE-Accuracy
2/3
28%
70%
Our Budget would be obsolete within 6 months of
the fiscal year
We cannot forecast more that a single quarter out
Our Budget is irrelevant before the year even begin
Most conventional budgets are not as
accurate as perceived. Many budgets become
obsolete before the fiscal year begins.
5INDUSTRYPULSE - Process
4
17%
44%
32%
We are very satisfied with our budgeting process
The company budgeting process is aligned with the actual performance
Linking budget and strategy needs strong improvement
6
COSTLY AND TIME CONSUMING
12M$
60%
12%
annual budget cycle in less than two months
budget cycle exceeding three months
annually for organizations with $10 billion or more in revenue
7
CHANGING ENVIRONNEMENT
• Annual budgets cannot keep pace with the constantly evolving business environment, making annual budgets obsolete.
• Tendency to leverage N-1 numbers.
• Rapid change is the new norm
8
WRONG FOCUS & BARRIERS
Compensation
Sponsorship
Technology
Compensation should be linked to how employees contribute to the bottom line rather than how they perform against budget
Significant change requires strong corporate and business-unit sponsorship
Technology can either impede or enable progress
9TRANSITION TO BEYOND BUDGETFive Core Components
5
4
3
1EXTENDUPDATES
EMPHASIZES
RAPID FORECAST
BLENDS PERFORMANCE
2
• Extends beyond the calendar/fiscal year and covers a standard number of periods
• Updated on a regular and pre-determined basis
• Emphasizing on key business drivers
• Enables Rapid forecast creation
• Blends actual performance along with the updated forecast
10
Implement a driver base model
Retain prior-period forecasts for back testing
Ensure cultural shift
Technology support
Select the accurate forecast horizon
RECOMMENDATIONS
11
• Resources availability
Select the accurate forecast horizonRECOMMENDATIONS
No need to go the extra mile
• Lead time Align your forecasting horizon with lead times associated with the business
12
Implement a driver base modelRECOMMENDATIONS
Leading vs Lagging
Alternative scenarios
Improve with time
Allows ressources allocation
13
Retain prior-period forecasts for back testingRECOMMENDATIONS
Prior period forecasts vs actual
14
Ensure cultural shiftRECOMMENDATIONS
Participation
Behavior Change
Positioning
15
Profitability and cost management
Financial Close
Reporting and analytics
Budgeting and forecasting
Strategic planning
TECHNOLOGYEnsure complete technology support
Collaboration
Workflow
Storage
16TRAPS TO AVOID
Beware of Rolling Budget
17
THANK YOU
18
Annex
19TRANSITION
20TRANSITION
21CALENDAR
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