Driver Based Planning and Budgeting

Developing
Driver-Based Budgeting
and Planning
February 2007
Steve PlayerProgram DirectorBeyond Budgeting Round Table - North America
289 Turnpike Road, Westborough, MA 01581Tel: 508-870-0300, Fax: 508-366-2278Introduction
The Beyond Budgeting Roundtable (BBRT) is a member-based peer-to-peer network of organizations working to improve the way they plan, forecast and control their organiza-tions; ultimately seeking to improve overall performance through implementation of best practices. The BBRT can provide you with front line implementation experience necessary to develop your road map for change. For additional information including how your orga-nization can join, please contact Kisty Fairchild at 214-239-0155 or kisty@theplayergroup.com.
This paper is part of a series written by Steve Player and the Beyond Budgeting Round Table in conjunction with Applix. Readers may also wish to review, "Managing Through Change: The Power of Rolling Forecasts", which provides an overview of the objec-tives of traditional budgeting and the problems commonly faced. It identi?es pitfalls to avoid, improvement levers and a summary of the do's and don'ts of rolling forecasts. You may request a copy by contacting Kellee McGolpin of Applix at 508-475-2495 or kmcgolpin@applix.com.
©2007 BBRT and Applix, Inc. All rights reserved.Information contained in this document is derived from copyrighted BBRT research.No part of this document may be reproduced in any form, by Photostat, micro?lm, xerography, or any other means or incorporated into any information retrieval system, electronic or mechanical, without the written permission of the copyright owner. Inquiries regarding permission for use of material contained in this document should be addressed to:Applix, Inc. Beyond Budgeting Round Table North America289 Turnpike Road 5310 Harvest Hill Road, Suite 211Westborough, MA 01581, USA Dallas, TX 752301-800-8APPLIX 1-214-239-0155 E-mail:info@applix.com E-mail: bbrtna@theplayergroup.com Fax: 1-972-692-8395
Applix and TM1 are registered trademarks of Applix, Inc. All other trademarks and company names mentioned are the property of their respective owners.Developing Driver-Based Budgeting and Planning By Steve PlayerThis white paper seeks to help readers understand how to begin the transition to driver-based budgeting and planning. Many ?nd that this is their ?rst step toward implementing true rolling forecasts (as opposed to quarterly or monthly forecasts "to the wall" or period end). Many organizations are taking this step as an evolutionary approach to implement-ing continuous planning and adaptive controls and are being aided by the research and support materials provided by the Beyond Budgeting Round Table. Our goal is to help you understand how you can truly transform your planning and control activities into the proactive management function that adds greater value through faster decision making.
Making the Case for ChangeIf you are the CFO, or you are somewhere in the CFO's chain of command, you realize the Recent surveys show that role ?nance plays in planning and controlling organizational activities. While the work is the majority of companies often done by others in operations or marketing, the ?nance function is typically charged
still use spreadsheets to with monitoring and measuring performance. Finance also drives the planning and budgeting function, which is historically prepared on an annual basis. There are numerous budget and plan operations. problems with this traditional budgeting process which include (1) it is costly to perform, (2) it is time consuming, (3) it can detract from value, (4) it slows response times and limits innovation, (5) it leads to gaming and a lack of transparency, and (6) it sub-optimizes 1organizational results by limiting reach.
Even with faster computing power, many ?nd that annual budgets cannot keep up with the rapid change of business today. Recent surveys show that the majority of companies still use spreadsheets to budget and plan operations. These off-line spreadsheets introduce a host of problems because they allow operational managers to create their own assumptions which often do not adhere to corporate guidance. This results in attempts to coordinate parts that are operating in different spheres. In addition, departmental tactics are not aligned wi... [download for more]