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Increase Efficiencies in Your CAPEX Budgeting & OPEX Planning
Increase Efficiencies in Your CAPEX Budgeting & OPEX Planning
Planning
Budgeting
Scorecards and dashboards used by executive management may not be able to explain
what is happening today or provide insight into tomorrow
Applying cost cutting programs do not effectively reduce costs across their value chain or
attain targeted sustainable cost reduction targets
Companies that apply overheads through apportionments or allocations are effectively
spreading indirect costs like peanut butter which may not accurately match actual cost
behaviors
Companies continue to have difficulty in modeling realistic assumptions or can explain the
relationships and behaviors of their complex cost structures
Spreadsheet modeling may lead to multiple versions of the truth or may be difficult to
reconcile against layered assumptions
Transactional systems are effective analysis tools for evaluating historical data, however,
may lack accurate predictive capabilities or manage assumption based planning
Management and Cost Accounting Today
Companies need to operate with agility responding to Management and Cost Accounting
changing KPIs • Enables explanation of events that lead to actual
• Scorecards and Dashboards report key performance results
measures • Data modeling supports predictive cost
• Reviewing performance against historical results, management
budgets enable management to target results • Contribution margin analysis enables predictive
• Indicators alert management to what is happening implementation of pricing strategies to attain
profitability goals
• Historical weaknesses in the budgeting & planning process • Successful financial planning transformations require a
persist, limiting the perceived value of the financial close partnership between the corporate office, functional
planning process within the organization areas and business units
• The process continues to be time consuming, iterative and • Simplifying processes, iterations and level of detail require
inaccurate a strong leader/change agent to drive the desired
• The call to fundamentally improve the financial planning outcomes
process is taking priority over other competing finance and
business initiatives
• The optimal level of detail for financial budgeting & • Rolling forecasts are no longer an emerging trend, but
forecasting has surfaced as a passionate topic of debate for rather they are becoming an established leading practice
many organizations • But there does not appear to be a trend toward completely
• Extensive detail in account planning often extends cycle eliminating the annual budget process once rolling
times, making info dated by time outputs are finalized forecasts are adopted, due to their use for overall
management control and linkage to incentive
compensation
Let’s take a few minutes to ask some interactive questions.
The budgeting processes costs on average over $12 million annually for
organizations with $10 billion or more in revenue
Let’s look at what sets apart the leaders
Let’s take a few minutes to ask some interactive questions.
Technology Challenges - Today’s organizations have highly complex information environments, & often BI,
EPM and Analytics initiatives overlap which leads to further confusion
Hundreds of source systems
Different functions use separate DWs to support planning
Multiple financial reporting environments
Bolt-on patchwork of point solutions
Multiple ‘Enterprise’ initiatives for EPM, BI, and data management
Some integration but lots of spreadsheets and manual data transfers
Data expanding by terabytes
Much data yet little confidence in finding the ‘one source of truth’
Target Architecture for Finance Reporting
SAP has multiple budgeting tools like internal order, project system & funds management
Budgets are approved planned values for a given period and for a particular organizational unit.
Approved budget values should be released/distributed, only the released budget can be utilized.
System will give notifications to user at various levels when the budget is being consumed and can
stop further postings after reaching the level.
SAP allows to provide additional/supplementary budget to cost objects in addition to original
budget.
Release of budgeting can be carried out periodically or annually.
Unutilized budgeted values can be carried forward to the next period or fiscal year
Internal orders can only be budgeted individually.
Budget can be carried out at the top level or at the individual level.
A Typical Budgeting Cycle
Key Budgeting concepts in SAP
Investment Management
• It is a budgeting module in SAP
• The investment program is linked to the investment measures (orders or
projects) by their integrated planning and budgeting functions.
• Assigned funds resulting from purchase orders, invoices, in-house activity,
and so forth are collected on the investment measures. Reports can be run
on these values from the investment program.
• Actual values from these assigned funds are settled periodically to
receivers in management accounting. Or, if the actuals require
capitalization, they are settled to assets under construction. When the
asset under construction is complete, it is settled to final fixed assets.
Investment Program
• The structure of the investment program usually reflects the structure of
the enterprise. It therefore corresponds to a hierarchy of areas of
responsibility, represented by cost centers or profit centers.
• The investment program is a hierarchy of program positions, which can be
graphically maintained, within a framework defined by the program
definition. Investment measures can be assigned to the lowest-level
program positions in the hierarchy.
• The following are maintained in the program definition: the person
responsible, the fiscal year variant and the investment program currency.
You can also specify that you want budget categories or budget
distribution, also for annual values.
Currencies in Budgeting
• Each budget line item is saved in the currency in which you entered it (budgeting currency). The system also saves the amount in the controlling area and object currencies if
they differ from the budgeting currency.
• Controlling Area Currency - This is the currency used in the controlling area. If you are using the controlling area currency for budgeting, you can use this currency only for
entering budgeting items.
• Object Currency - This is the currency used for the object (such as, WBS element), and is specified in the master data for the object (such as, WBS element). If you specify the
object currency for budgeting, you can only enter the budget items using their respective object currencies.
• (Freely Definable) Transaction Currency - On the initial screen of each budgeting function, you can specify the currency in which budgeting items are to be entered. You can use
as many currencies as required for budgeting. If you do not specify a currency on the initial screen, the system uses either the object currency or controlling area currency as
default, depending on whether or not you set the Object Currency as Default indicator in the budget profile.
SAP Approach to Budgeting
Key Benefits