Бюджетування та стратегічне планування діяльності ІТ компаній

1. Strategic Planning &
Budgeting
in IT
Kostyantyn Yerokhin

2. Business Strategy Pyramid

3. General Financial System
All financial data (exact, full, on time) should be kept in one
place
No operations out of the system
One operation – one record
Ex-post control over the records
Simple interface for all users
Clear and strict policy of recording
The system has to reflect the real business processes

4. Financial Subsystems
Operational Accounting
Account Receivables
Cash Flow Management
Payroll System
KPIs & Analysis
Controlling & Budgeting
Tax Reporting
Shareholders Reporting
Investment Decision
Internal Control
Risk Assessment
Auditing

5. Top Management
Sales Competence Finance Legal HR Administrative
IT Outsourcing Organization Model
Project 1
Project 2
Project n

6. Top Management
Sales Competence Finance Legal HR Administrative
IT Product Organization Model
Product 1
Product 2
Product n

7. Financial Responsibility Sharing
Responsibility centers are identifiable segments within a company for which
individual managers have accepted authority and accountability.
1. Profit centers
Profit centers are businesses whose managers enjoy control over their own
revenues and expenses.
2. Cost centers
Cost centers usually produce goods or provide services to other parts of the
company. They have no control over sales prices and therefore can be evaluated
based only on their total costs.
3. Investment centers
Managers of investment centers have authority over — and are held responsible
for — revenues, expenses, and investments made in their centers. Return on
investment (ROI) is often used to evaluate their performance.

8. Financial Responsibility Sharing
All operations belong to responsibility centers (one to one)
Every center has an owner (and only one)
Every owner has control over the center`s finance
It needs to provide the plans and the factual data to all
centers
Center`s owners have to influence on center`s plan during
the budgeting process
Center`s results affects on team`s compensation
(motivation)

9. Top Management Cost Centers
Sales Cost
Centers
Competence Cost
Centers
Finance Cost
Centers
Legal
Center
HR Cost
Centers
Admin Cost Centers
IT Outsourcing Finance Structure Model
Profit Center 1
Profit Center 2
Profit Center n
IT Investment
Centers
Infrastructure
Investment Centers
RnD Investment CentersSales & Marketing
Investment Centers

10. Budgeting and Planning
• Functional and Process Structures of the Company
• Hi-level Targets, Strategy, KPI
• Market and Environment Assumptions
• Risk Management
• Resources, Assets and Funds
• Budget Owners, Supervisors and Committee
• Review of Accounting System, Charts of Accounts and
Methodology

11. What are the purposes of Budgeting?
• Provide structure. A budget is especially good for giving a company
guidance regarding the direction in which it is supposed to be going
• Predict cash flows. A budget is vitally useful in companies that are
growing rapidly, that have seasonal sales, or which have irregular sales
patterns and want to predict the situation
• Allocate resources. Some companies use the budgeting process as a tool
for deciding where to allocate funds to various activities, such as fixed
asset purchases
• Model scenarios. If a company is faced with a number of possible paths
down which it can travel, you can create a set of budgets, each based on
different scenarios, to estimate the financial results of each strategic
direction
• Measure performance. A common objective in creating a budget is to use
it as the basis for judging employee performance, through the use of
variances from the budget

12. What we have to do before Budgeting?
• Functional and Process Structures of the Company
• Hi-level Targets, Strategy, KPI
• Market and Environment Assumptions
• Risk Management
• Resources, Assets and Funds
• Budget Owners, Supervisors and Committee
• Review of Accounting System, Charts of Accounts and Methodology

13. Budgets Classification

14. Steps of Budgeting Process
Strategy, Targets, KPIs
Departments Revenue/Expenses Expectations
Top Management Board of Members
EmployeesBudget Owners
FinDep
Recourses
Funds
Assets
CONFIRMED
COMPANY
BUDGET

15. KPI & Analysis
Financial Perspective: KPIs for
productivity, revenue, growth, usage,
and overall shareholder value.
Customer Perspective: KPIs for
customer acquisition, customer
satisfaction rates, market share, and
overall brand strength.
Internal Process Perspective: KPIs for
resource usage, inventory turnover
rates, order fulfillment, and quality
control.
Learning / Growth Perspective: KPIs
for employee retention, employee
satisfaction, and employee education,
training, and development.

16. Relevant Financial KPI for IT
• DPM (Delivery Profit Margin) = Delivery profit/Revenue
• GPM (Gross Profit Margin) = Gross profit/Revenue
• EBIT (Earnings Before Interest and Taxes) = Revenue – Expenses (including
depreciation, amortization)/Revenue
• EAT (Earnings after Taxes) = Net Profit = Revenue - Expenses (including
taxes)/Revenue
• ROI (Return on investment) = Net Profit/Total Investment
• ROE (Return On Equity) = Net Income/Shareholder's Equity
• DSO (Days Sales Outstanding) = (Accounts Receivable/Revenue) × Number
of days in the period

17. Efficient Financial Management System
General Financial System Financial Responsibility Sharing
IT Business
Structuring
Budgeting and Planning
Financial KPI & Analysis