Download - * Dimension Data 2 Absa Vehicle
April 12, 2023Dimension Data2
Absa Vehicle & Asset Financea Division of Absa Bank Ltd
A presentation to the
Corporate Performance Management
User Conference
Presented by: Roy D Martine
General Manager Finance - ABSA
The use of Extensity Planning in streamlining and improving the
AVAF Financial planning process
April 12, 2023Dimension Data3
The use of Extensity Planning in streamlining and improving the AVAF Financial planning process
“The path to our destination is not always a straight one. We go down the wrong road, we get lost, we turn back. Maybe it
doesn’t matter which road we embark on. Maybe what matters is that we embark.”
-- Barbara Hall, Northern Exposure, Rosebud, 1993
April 12, 2023Dimension Data4
Background & Objective
ABSA Vehicle and Assets Finance (AVAF) has undergone significant structural and organizational changes in recent years. To meet the changing
needs of business, the Finance department embarked on a project to improve their current planning process.
This presentation covers the financial planning process within the organization, the challenges being experienced and the opportunities presented to address some of their requirements using the Extensity
Planning tool.
April 12, 2023Dimension Data5
Presentation Content
SA Banking industry and ABSA Vehicle and Asset Finance
Approach and methodology currently used in the AVAF financial planning process
Stakeholder expectations and challenges
Finance department structure to support the reporting and planning process
Requirements of a Financial Planning process
Conceptual solution
Impact of Extensity Planning to support and manage the financial planning process
Concluding statements
April 12, 2023Dimension Data6
The South African Assets Finance Industry
FNB34%
FNB34%
Nedcor18%
Nedcor18%
StandardBank20%
StandardBank20%
ABSA25%
ABSA25%
OtherInstitutions
3%
OtherInstitutions
3%
April 12, 2023Dimension Data7
Core Activities
ABSA Group Ltd
ABSA Bank Ltd
Retail Banking
Commercial Banking
WholesaleBanking
Other
ABSA Vehicle and Assets finance is a product SBU providing assets based finance products to ABSA Customers. It is a division within Commercial Banking but provides assets
finance products to all customer segments within the bank
April 12, 2023Dimension Data8
•Aprox 75,000 Applications Monthly business (R 2.8bn)
General Ledger•800 Ledger Accounts•3960 Units
•Aprox 600,000 Customer Accounts (R 60bn)
22 Alliances Suppliers & Motor GroupsRequiring Ring fenced accounting & reporting
3 Joint Finance CompaniesRequiring separate accounting & reporting with different financial years
Core Activities
April 12, 2023Dimension Data9
JointFinance
Companies
OfficeAutomation
ProcessingCentres
TradeCentres
RecoveryServices
Floorplans
Dealer Academy
VAPS
Internal Sales
Head Office
Small Business
MediumBusiness
LargeBusiness
Suppliers & Manufac
turers
Commercial Sales
Dealers
PersonalSales
Credit
LeasingServices
SPV’s
GroupSupport
Functions
The AVAF Business Operating Model
April 12, 2023Dimension Data10
Idiosyncrasies in Banking that impact upon financial planning and reporting
Both month-end balances and average balances on balance sheet
Direct relationship between average balances on balance sheet and revenue on income statement
Modelling of advances growth & related revenue
Linking revenue forecast to interest rate forecasting
Linking bad debt forecasting to credit behaviour
Internal matched funds transfer pricing for funding the process
Central Bank regulatory requirements
Norms driven management (Ratios)
High proportion centralised costs that has to be re-allocated
April 12, 2023Dimension Data11
Presentation Content
SA Banking industry and ABSA Vehicle and Asset Finance
Approach and methodology currently used in the AVAF financial planning process
Stakeholder expectations and challenges
Finance department structure to support the reporting and planning process
Requirements of a Financial Planning process
Conceptual solution
Impact of Extensity Planning to support and manage the financial planning process
Concluding statements
April 12, 2023Dimension Data12
Overview of planning process
Develop high level financial targets (aspirational)
Fine-tune using more accurate economic parameters
Mechanistically forecast on a Business-as-Usual basis (BAU)
Identify and quantify projects and initiatives
Adjust BAU for projects and initiatives (projected)
Gap analysis between aspirational and projected
Re-visit projects and initiatives
Finalise plan
First year of plan becomes the budget target
April 12, 2023Dimension Data13
Details of the current Planning Process
AVAF
Steerco
Budget Timeline
Group Finance
Funding
Process
MPC MPC Planning MPC Planning
Prepare Alignment Approve Approved Prepare Approve/
with Group Forecast Budget 5 yr model Reject
AVAF Finance Planning Process
Repeated
Cost Centre
Managers
Alliances 6 FC 6 Act
MPC
ERM &
Group Finance
Submit for
approval
Submit to
ERM &
Group Finance
5 Year Plan
Contracting
Gap
Analysis
seeding
Budget &
Process
Funding
Forecast Budget
Load MPC
Provided
Sales & Volume focussed
Funding
Process
Model High
Bottom up
Forecast
(Full year)
Format
Receive
Level Plan per GM
ERM &
Group Finance
Review
Forecast
Submit for
approval
Submit to
Receive
Communicate
Timetable
Submit for
approval
Submit to
April 12, 2023Dimension Data14
MTP Process Timeline (Example)
May J une J uly August September October November December*19/5 *17/6 *11/7-15/7 *3/8 *19/9 3/10-10/10 *8/11 *8/12
Stage 1 Stage 1 J uly Stage 2 Stage 2 October ExCo BoardThemes and Submissions QEDs Guidelines Submissions QEDs agrees MTP agrees MTPGuidelines to Group to Group & STP & STP
1 1
2 2 Evaluation of financial plan:* Vs In-year performance
3 * Key execution challenges* Productivity Improvements
4 3
5
Outputs:
1 J uly QEDs 1 Oct QEDs
2 Agreed targets and execution priorities 2 Agreed 3 year financial plans
3 High level guidance for financial plan 3 Specific guidance for next year "budget" (STP)
Review of strategic investments required
Actions from J uly QEDs are baked into financial and business plans
Evaluation of execution capabilities and initiatives
High-level financial commitments
Evaluation of plan and targets
Assessment of plan against the market context
Evaluation against CEO priorities(Things That Need To Go Right" Initiatives)
Stage 1Strategy Assessment
Stage 2Detailed Plan Assessment
April 12, 2023Dimension Data15
Characteristics of the Process
Follows Group planning timetable
Moving from high level plans to detailed budget
Check-points for approval during the process
Establishing authority levels and mandates
Adjust for new information
Final plan is a performance contract
April 12, 2023Dimension Data16
Financial planning / management design philosophy
Decompose the balance sheet and income statements of existing branches into :-
• Specialized cost centers per activity for cost management
• Restructure balance sheet and revenue items into manageable components – related to
business drivers
April 12, 2023Dimension Data17
Tools/ Systems used in the current Planning Process
High Level Strategic Financial Plan
Forecast
Middle down allocation to
Business Units
Bottom Up Input & Contracting
Middle Up submission to Group
Board Presentation
Annual Budget
Excel environment
Prism
MPC
Prism
April 12, 2023Dimension Data18
Challenges
No automatic link between processes (strategy, high level 5Yr plan, budget, forecasting)
Unable to effectively spread high level targets
Organization structure too complex
One size does not fit all (large number of specific rules in models)
Difficult to apply constant change to different applications (time consuming)
Large volumes of data to manage and control
Usual risks associated with spreadsheets
Changes in line management roles & responsibilities
April 12, 2023Dimension Data19
Challenges (Continued)
Number of entities growing
Meeting group deadlines whilst simultaneously setting detail budgets
Need to shorten & Streamlining the planning cycle
Need to improve efficiency and manage costs
Existing “dated” planning tool (Prism)
April 12, 2023Dimension Data20
Presentation Content
SA Banking industry and ABSA Vehicle and Asset Finance
Approach and methodology currently used in the AVAF financial planning process
Stakeholder expectations and challenges
Finance department structure to support the reporting and planning process
Requirements of a Financial Planning process
Conceptual solution
Impact of Extensity Planning to support and manage the financial planning process
Concluding statements
April 12, 2023Dimension Data21
Stakeholder expectations and requirements place pressure on the system
SBUFinance
Department
SBUFinance
Department
GroupFinance
Planning Office
GroupFinance
Planning Office
BusinessUnit
BusinessUnit
UltimateHolding
Company
UltimateHolding
Company
April 12, 2023Dimension Data22
Expectations from our stakeholders
Ultimate Holding company
•Realistic medium & short term goals
•Support the overall process
•Supply relevant required information
•Ability to predict business as usual and impact of initiatives on results
April 12, 2023Dimension Data23
Group Finance Planning Office
Deliver results within the timeline
To cope with multiple parameter changes
Multiple iterations of interdivisional recoveries
Late Adjustments following executive review and approval
Expectations from our stakeholders
April 12, 2023Dimension Data24
Expectations from our stakeholders
Business Unit
Direction and guidelines
Relate strategic objectives of business to strategic financial plans
Prepare financial plans for evaluation
Convert strategic financial plans into detail budgets for business unit
Intellectual involvement rather than process administration
Determine impact of changes in macro-economic environment
April 12, 2023Dimension Data25
Presentation Content
SA Banking industry and ABSA Vehicle and Asset Finance
Approach and methodology currently used in the AVAF financial planning process
Stakeholder expectations and challenges
Finance department structure to support the reporting and planning process
Requirements of a Financial Planning process
Conceptual solution
Impact of Extensity Planning to support and manage the financial planning process
Concluding statements
April 12, 2023Dimension Data26
AVAF Finance Structure
AVAF Finance
Department
Statutory Reporting
Management Planning &
Control
Joint Ventures &
Alliance Reporting
Investment &
Subsidiaries
Pricing &
Sales Support
April 12, 2023Dimension Data27
AVAF Finance Planning & Control Structure
Management Planning &
Control
Financial ConsultantRetail Sales
Financialconsultant Corporate
Sales
Activity Based
Costing
MPC administration
Financialconsultant
CommercialSales
April 12, 2023Dimension Data28
Enable a small team of staff to manage large volumes of data with a high degree of complexity
Simulate the complexity of the lower level detail in a summarised environment i.e. results are more realistic
Planning models that meet unique need of different parts of the business
Centralised version control of planning components
Alignment of the various planning components
Shorten the planning process by generating first cut for review, eliminating initial data capture at cost centre level
To meet expectations, our main requirements
are ….
April 12, 2023Dimension Data29
Presentation Content
SA Banking industry and ABSA Vehicle and Asset Finance
Approach and methodology currently used in the AVAF financial planning process
Stakeholder expectations and challenges
Finance department structure to support the reporting and planning process
Requirements of a Financial Planning process
Conceptual solution
Impact of Extensity Planning to support and manage the financial planning process
Concluding statements
April 12, 2023Dimension Data30
Generally, the financial planning process should :
Link top down strategies and targets with bottom up operational plan
Convert high level strategic financial statement projections into quantifiable units to measure and manage performance.
Present a realistic view of the future to support decision making
Provide a bench-mark for measuring performance
Provide aspirational targets for continued improvement
Requirements of the financial planning
process
April 12, 2023Dimension Data31
Strategy Formulation:Enterprise Goals and Strategies
Execution:Operational Targets & Budgets
Transaction Systems:Process Transactions
Communication
CorrectionImprovementFeedback
PerformanceMeasurement
Components of effective CPM
April 12, 2023Dimension Data32
To position ourselves in order to fulfil all the stakeholders needs
• Support the operating model
• Streamline the planning process
• Easily control & manage data (multiple version control)
• Fully integrated planning application
• Multiple models to support the complexity of different business units
• Improve and shorten the planning process
April 12, 2023Dimension Data33
High Level StrategicPlanning
MPCData-base
Actual/Budget/Forecast
Seeding Chartof Accounts
Seeding Branches
Sales AnalysisDatabase
Cost CenterBudgetReview
Gap
An
alys
is
Target SettingMarketers
AVAF Components of effective CPM
April 12, 2023Dimension Data34
HighLevel
MechanisticPlan
Strategy&
Initiatives
TrendAnalysis/ Action
Plans
RollingForecast
BottomUp Inputs
DetailedBudget
Monitoring& Control
Actual/Budget
OfficialForecast
Seeding
Gap
SeedingBottom
Up Input
OperationalPlan
Bi Monthly
Process flow of planning components
April 12, 2023Dimension Data35
Presentation Content
SA Banking industry and ABSA Vehicle and Asset Finance
Approach and methodology currently used in the AVAF financial planning process
Stakeholder expectations and challenges
Finance department structure to support the reporting and planning process
Requirements of a Financial Planning process
Conceptual solution
Impact of Extensity Planning to support and manage the financial planning process
Concluding statements
April 12, 2023Dimension Data36
GeneralLedger
Prism
GroupReports
MPC Planning
ExcelServices
FundingModule
DataWarehouse
Existing Data Flow
between different systems
Existing Data Flow
between different systems
From this…..
April 12, 2023Dimension Data37
GroupReports
GeneralLedger
MPC Planning
DataWarehouse
To this !
April 12, 2023Dimension Data38
Of all the features of planning, the main ones
we identified were…
• Integrate with MPC’s and strategy Management’s Structure and data with two-way transfer
• Combine MPC functionality and power with Excel functionality and ease• Use a dimension in multiple places and only update it in one using Model
Manager • Combine data from multiple sources without recapture • Respond quickly to updates from higher levels in the company • Quickly build models based on other models • Real time multidimensional database with Excel front end • Goal seek as well as lock and spread functionality• Ability to seed the detailed budget from the high level financial plan
April 12, 2023Dimension Data39
High Level StrategicPlanning
MPCData-base
Actual/Budget/Forecast
Seeding Chartof Accounts
Seeding Branches
Sales AnalysisDatabase
Cost CenterBudgetReview
Gap
An
alys
is
Target SettingMarketers
April 12, 2023Dimension Data40
New Data Management
Multiple Versions
MPC Data Base
Planning
MultipleUsers
MultipleUsers
DetailedSales
Targets per Marketer
Web based Inputs
April 12, 2023Dimension Data41
Presentation Content
SA Banking industry and ABSA Vehicle and Asset Finance
Approach and methodology currently used in the AVAF financial planning process
Stakeholder expectations and challenges
Finance department structure to support the reporting and planning process
Requirements of a Financial Planning process
Conceptual solution
Impact of Extensity Planning to support and manage the financial planning process
Concluding statements
April 12, 2023Dimension Data42
Support the operating Model
Re-organise the duties & responsibilities of Finance staff
•Investigate variances of monthly results
•Predict future trends (Rolling Forecast)
•Engage in action plans/corrective measures
•Gather bottom up inputs to adjust anomalies of rolling forecast
•Prepare and discuss high level financial plans with business partner
•Spread financial plans as detailed budgets and manage gap discrepancies
April 12, 2023Dimension Data43
Streamline the planning process
Focus
Sales staff focus on market potential, sales targets and cost of sales
Back office/Operations focus on productivity and cost efficiency
Set targets by spreading forecast & budget data
Determine operations capacity requirements from sales activities
Focus on controllable items
Reduce the level of detail input
Focus on drivers to calculate budgets
April 12, 2023Dimension Data44
Streamline the planning process
Performance monitoring
Variance
Analysis
Rolling Forecast
“What If”
Final
Forecast
Publish
Strategy
Set Strategic
Goals
Evaluate
options
Scenario
Modelling
Operational Management
Strategic
Planning
Target Setting
April 12, 2023Dimension Data45
Ease of Control & management of Data
•Snapshot versions on MPC
•Write back access controlled centrally
•Control over submissions & approvals
April 12, 2023Dimension Data46
Fully integrated planning application
• Business drivers and rate views managed centrally on MPC
• Centrally managed schedule & unit rules on MPC
• Planning models linked to MPC with version & periodic control
• Reports based on central data base
• Group “Excel” submissions dynamically linked to MPC data base (CBR)
• Funding process done simultaneous while modelling data• Single version of the truth• Monitor individual progress of budget submissions• Ensure completeness of budget components
April 12, 2023Dimension Data47
Multiple Models to support the complexity of
different business units
• Organisational structure grouped to support generic and non generic business entities
• General rules applied to models for generic business units
• Unique rule used in specific models for non generic business rules
• Different funding models for different business rules
April 12, 2023Dimension Data48
Improve & Shorten the Planning Process
Link strategic planning / feasibility studies with budgets and forecasts
Development rolling forecast and dynamic planning methodology
To manage & Control middle-up/middle-down budgets & forecasts (multiple versions)
Gap analysis between different versions
Allow data input from spreadsheets
Centralised monitoring of the process.
Centralised budget drivers to accommodate economic and rate view changes
Easy Top/Down adjustments if necessary
April 12, 2023Dimension Data49
Presentation Content
SA Banking industry and ABSA Vehicle and Asset Finance
Approach and methodology currently used in the AVAF financial planning process
Stakeholder expectations and challenges
Finance department structure to support the reporting and planning process
Requirements of a Financial Planning process
Conceptual solution
Impact of Extensity Planning to support and manage the financial planning process
Concluding statements
April 12, 2023Dimension Data50
Obstacles and Considerations
• Where do we start
• Defining perfect solution vs getting started
• Consider company technology policies
• Technical support requirements
• Hardware and software capability
• Computer Literacy
• Specialised Training
• Resistance to change
April 12, 2023Dimension Data51
Benefits – our highlights
Data stored in a controlled server environment
• Improved data integrity
Setting of budget targets at various levels
• Change in budget approach - setting of targets
Web-based delivery of reports
• immediate availability of actual results after month-end closure to all users
Ease of data integration to Excel for fine tuning
Simultaneous existence of alternate reporting structures
Ease of comparison of units in the same business unit
Eliminate manual re-capture and balancing between sheets
Ease of top down adjustments when necessary
Focus on analysis and planning rather than admin functions
April 12, 2023Dimension Data52
Our Future Intentions
Executive Dash Board
Drill through facility to identify detailed transaction per account balance
Automated executive management financial reports
Automated executive management presentations
Enhance automated alerting ability
Expand web based analysis capability
IFRS Requirements
April 12, 2023Dimension Data53
Conclusion
Planning together with MPC provides us with the ability to integrate Strategy, Budgets and Forecasts, whilst simultaneously combining financial and non-financial reporting into the same data-base.
This project is not an event, but rather as a journey to improve the financial reporting and planning process until such time as the Business Unit is able to operate dynamically re-plan on a continuous basis.
Past Performance + Strategic Objectives + Initiatives + Market Conditions ===> Business Plans
April 12, 2023Dimension Data54
Thank You
Questions ?
Don’t be afraid to take a big step if one is indicated. You can’t cross a chasm in two small jumps.
-- David Lloyd George