“Support and challenge the business through planning, decision making, information and monitoring tools and processes.”
Almost all companies have some form of budget or plan, and when asked “What is your budget for?”, the answers often range from “To make sure we are moving towards our strategic objectives!”, via “How much do we have to sell to get our bonus?” to “We don’t really care because we always have to manufacture a totally different quantity/mix anyway…”, and most respondents are unanimous in agreeing the planning and budgeting process is often frustrating and inefficient. A budget process needs to address all these various needs, or be clear what it is not trying to achieve, and also reflect the management culture of the organisation: top down, bottom up, meet in the middle.
Once the budget is set there is management reporting and financial reporting. Management reporting needs to be a magnifying glass on what has driven performance, how successfully the elements of performance that can be controlled are being controlled, and what needs to be done differently.
Finally the business must communicate financial performance to external stakeholders in the formal format prescribed by IFRS, US GAAP or whatever standards are used. In private companies some stakeholders also get elements of the management accounts, generally focussing on what has driven performance.
Example projects in this area have been:
- Provided a framework and model for and participated closely in the bottom up strategic review of each division and region, and then re-engineered the three year plan, budget and estimating processes to ensure plans, actions and their financial consequences were consistent with achieving the new strategy
- Re-designed the budget process and roles and responsibilities to ensure stakeholder input at appropriate stages and to eliminate duplicate or conflicting review levels, delivering a budget in 2 versions rather than the previous 5+
- Overhauled monthly reporting to focus on KPI’s, and operational performance in particular cashflow, implemented SAP BO to support new data management requirements.
- Implemented IFRS group consolidation system and delivered first ever audited consolidation within three months to satisfy lender covenants.
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