Planning, Budgeting and Forecasting
Planning, budgeting and forecasting on the one hand and BI tools on the other form two sides of the same coin called business performance. Planning models create fresh information (plans, budgets, forecasts), whilst BI tools manipulate and report information that is created elsewhere. However, for the sake of simplicity many, including Microsoft, use the term Business Intelligence to encompass all these activities.
The terms planning, budgeting and forecasting have also been used inter-changeably, but there is a subtle distinction in their approach to predicting future business performance.
Planning typically starts as a top-down exercise often engaging a small number of senior managers or business analysts acting on senior managers’ behalf. Conversely, budgeting has a strong bottom-up element and is usually a process of agreeing targets between multiple or indeed numerous contributors for key categories of revenue and expenditure that support corporate objectives. Because budgets normally serve as yardsticks against which performance is measured and rewarded, getting budget predictions as accurate as possible often involves an extended, iterative process of revision and re-submission.
Monitoring whether a company stays on course with their budgets requires the collation – again by numerous contributors - of revised forecasts of business drivers and outcomes.
Good planning, budgeting and forecasting software and their link to ERP systems is crucial to effective management of resources, to comparing actuals against forecast and to devising what-if scenarios to better protect and equip the business against the vagaries of the modern world of business. If management has better control over the variables being predicted and can take quicker corrective action should something go astray, then the company has the ability to devise and implement cohesive and strategically more robust plans.
In days gone by such activities were typically the domain of a financial director and a few accountants. However, budget planning is becoming more of a company-wide effort thanks to the latest software, with a greater number of managers and employees contributing to the process. Many companies are using technology to combine the traditional bottom-up approach to budget preparation, in which department heads submit budget requests that are rolled up into a corporate budget, with a top-down approach in which budgets are prepared in line with strategic objectives outlined by top management. And while annual budgets were once as unchanging as a statue, more companies now view budgets as living documents that are revised on an ongoing basis throughout the year.
We at M4 Systems specialise in providing a number of powerful software systems which we can integrate with ERP systems, in particular Microsoft Dynamics GP to endow our customers with more powerful performance management capabilities.
Software specialisations include:
