Planning and budgetingin VietnamTop Challenges and Solutions
Agenda                            • What   Setting the              • Why     scene                  • Challenges         ...
Setting the scene                            Bart Ziemerink                            Associate Director Consulting, PwC ...
What is Planning, Budgeting and Forecasting?                            • Top down development of 3 to 5 year plans to del...
Attributes of Planning, Budgeting and Forecasting                                                    Strategic            ...
Why do we all Plan, Budget and Forecast?                                               Planning & Budgeting for most organ...
What are the Top challenges you shared with us?        Weak or no alignment    between strategy, planning    and budgeting...
It starts with your Strategy                                                                                   Planning & ...
Key Value Drivers enable you to focus the entireorganisation on executing the strategy by consistentlyasking one single qu...
By translating value drivers to KPI’s, setting targets on those KPI’s  and defining actions and related budgets to reach t...
Mapping plans against value drivers enables you to checkon balance and strategy focus Match the planned actions / projects...
Planning, budgeting …and (rolling) forecasting → theory          Business              Financial        Analyses &        ...
Why automate the process?    Automate                            • Data collection     labour-                            ...
Best practices                            Rick Yvanovich FCMA, CGMA, FCPA (Aust.)                            Founder & CEO...
Leading practice organizations integrate all aspects ofplanningLeading practice capabilities: Move from yearly planning p...
Planning CyclesFixed Time Horizion                                         Rolling Time Horizion    Q1/1   Q2/1   Q3/1   Q...
The Two Basic Concepts of Forecasting (1/2) Year-end Forecast                                 Rolling Forecast    Fixed r...
The Two Basic Concepts of Forecasting (2/2)   Year-end Forecast                                 Rolling Forecast    Lower...
A typical budget cycle … not just in Vietnam          • Management                       • Finance            reviews the ...
The Typical Budgeting ProcessStrategically disconnected60% of large companies report either “no link” or a “weaklink” betw...
If you like this topic, please download the full                 presentation slide HERE                            Thank ...
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Planning and Budgeting in Vietnam: Top challenges and solutions

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This presentation slide is used for the "Planning and Budgeting in Vietnam: Top challenges and solutions" seminar on August 9, 2012.

This seminar is organized by TRG International and PwC Vietnam.

The slide is shared through TRG International Blog. If you are really interested in this topic, I recommend you download the full slide at http://blog.trginternational.com/seminar-slides-download-planning-budgeting-in-vietnam/.

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  • PBF can be considered across three dimensions differentiated by the level of granularity, audience and content - strategic planning, annual budgeting and forecasting.We also consider the split between business as usual and portfolio planning - the former considers the future performance of the ongoing business operations based on assumptions regarding organic growth/decline whereas the latter considers a portfolio of activities that look at add value to the organisation over and above business as usual.
  • Why? – Streamline, improve and manage the strategy, planning, budgeting & forecasting process
  • PwC consider leading practice planning, budgeting and forecasting to be an integrated set of planning process enabled through appropriate technology and organisation design.Introducing many of the capabilities in the box below will address the imbalance between the three critical objectives of a typical finance organisation and in turn deliver efficiency and effectiveness benefits and foster greater confidence in the overall planning capability.
  • Planning and Budgeting in Vietnam: Top challenges and solutions

    1. 1. Planning and budgetingin VietnamTop Challenges and Solutions
    2. 2. Agenda • What Setting the • Why scene • Challenges • Overall concepts Best • Best practices practices • Approaches Examples of how technology helps Your • Question‟s you asked Q&A‟s • … and some answers Question formsPwC and TRG International 2
    3. 3. Setting the scene Bart Ziemerink Associate Director Consulting, PwC Vietnam Bart leads the Enterprise Performance Management (EPM) team in Vietnam. He was involved in the development of the global PwC EPM framework and approach. Prior to joining PwC in Vietnam in 2011, Bart worked for PwC in the Netherlands and Malaysia. He has advised clients in various industries, published articles and spoken at different events on performance management topics.PwC and TRG International 3
    4. 4. What is Planning, Budgeting and Forecasting? • Top down development of 3 to 5 year plans to deliver long term value creation Planning • Considers a balanced set of financial and non financial measures • Provides the basis for targets cascaded to the BU and OU level • Enabled through modelling technology to evaluate consolidated business as usual and project scenarios • Annual budgets are the financial representation of the organisations activity based business and project plans expressed as a profit & loss, Budgeting balance sheet and cash flow statement • Focused on the activities required to deliver against strategic targets • Forecasting focuses on actions to bridge performance gaps • It is largely driven out of the typical month end management reporting Forecasting process • In addition, it should encompass new knowledge regarding the external environment and additional factors that may impact performancePwC and TRG International 4
    5. 5. Attributes of Planning, Budgeting and Forecasting Strategic Business Activities Financial Operational Fixed Horizon Planning, Budgeting Cycles and Forecasting Rolling Horizon Top-down Bottom-up Blended Process Flexible Zero-based Beyond BudgetingPwC and TRG International 5
    6. 6. Why do we all Plan, Budget and Forecast? Planning & Budgeting for most organisations is the single most expensive of all Finance processes, with a lot of hidden costs, too much detail and poor system support. However it doesnt need to be so expensive. To spend money? Number of man days spend on creating the budget To keep everybody busy? An median company with $1 bio. 25,000 To set targets for bonuses? Best in class company 700 (Numbers from Hackett group) To adjust direction? To influence behaviour?On the other hand Planning & Budgeting should lead to the To drive action?value creation that is expected by the organisations owners. It is the most important of all Finance processes. To beat the competition? In most cases > 50% of Enterprise Value is „Future Value‟ To create value more (= value that can not be explained based on future cash flows from current activities) effectively and efficiently? PwC and TRG International 6
    7. 7. What are the Top challenges you shared with us? Weak or no alignment between strategy, planning and budgeting. They are all done in isolation Lagging behind: a call for more rolling techniques Limited technology: the search for an effective planning & budgeting systemPwC and TRG International 7
    8. 8. It starts with your Strategy Planning & Budgeting Mission Target setting, Vision Translate value Forecasting planning & budgeting drivers into driver based plans & Strategic related budgets to objectives Strategy focus your Map business planning Value drivers on strategy Analyse & evaluate results Adjust planning versus planning & forecasting and forecast Translate mission, vision & strategy & values into strategy maps showing what to focus on to manage your Translate value business performance drivers into KPI‟s Dashboard (e.g. KPI‟s at several levels in Balanced Scorecard) your organization to focus your business reporting Periodic Management and Operational on strategy Reports Organisation Processes People Data TechnologyPwC and TRG International 8
    9. 9. Key Value Drivers enable you to focus the entireorganisation on executing the strategy by consistentlyasking one single question... Use as table of Use as guide for content for prioritising Strategy Map Use as an investment proposals business plan agenda for (yearly) planning Check projects on their value add to What did you do to the strategy improve performance on one or more of the Communicate drivers delivering strategy to all your strategy? Use for appraisal Use as guide for and rewarding of determining employees information need Use as starting point for reportingPwC and TRG International 9
    10. 10. By translating value drivers to KPI’s, setting targets on those KPI’s and defining actions and related budgets to reach those targets, your budget will be entirely focused on strategy executionStrategy Map • A good strategy map “tells the story” of your strategy by showing the cause-and-effect relationships between your value drivers and your strategic objectives. It is the cornerstone of your Performance Leadership potential. • Joint development of your strategy map will enable your management to immediately use the created insight in what drives your strategy to manage the organisation. Value drivers KPI’s Targets Initiatives Budget Measurable factors Measurement Level of desired Main initiatives to Financial mandatethat impact strategy of success in realising success or indication realize objectives needed/given toexecution and create the strategy improvement execute these value potential initiatives 1 2 3 4What do we really How do we know if How good do we What initiatives What do we need / have to excel at to we are actually need / want to be at are needed to reach want to invest toreach our strategic excelling at this? this? our target? reach our target? objectives? PwC and TRG International 10
    11. 11. Mapping plans against value drivers enables you to checkon balance and strategy focus Match the planned actions / projects with the value drivers to find out: Value driver A Value driver B Value driver C Value driver D Etc. 1. (strategic) relevance 2. completeness Gap 2) There are no Gap 3) There are (too) many 3. balance / ROI actions / projects that actions / projects that relate Plan / project 1 relate to value driver „B‟ X to value driver „C‟ Plan / project 2 X (no balance in investments) Plan / project 3 X X Plan / project 4 X X Plan / project 5 X Plan / project 6 X Plan / project 7 X X Plan / project 8 Plan / project 9 X X Plan / project 10 Gap 1) Plan / project 8 is X X Plan / project 11 not strategically relevant X X as it does not relate to any Etc. X of the value driversPwC and TRG International 11
    12. 12. Planning, budgeting …and (rolling) forecasting → theory Business Financial Analyses & activities consequences Reporting Planning Budgeting Capturing In theory superior yet efficiently history gained insight stems from combining… & Forecasting … information on actual performance … … with budget related forecasts … & … as well as forecasts rolling into Rolling the (near) future ForecastingPwC and TRG International 12
    13. 13. Why automate the process? Automate • Data collection labour- • Consolidation intensive • Version tracking / control tasks • Multiple ledgers / systems Integrate • Spreadsheets data from • Multiple people / locations • Submit / retrieve data from anywhere at any time Bells & • Support rolling planning / budgets / forecasts & reporting whistles • Real time monitoring / visbility of submissions & approvals • Real time “what-if” scenariosPwC and TRG International 13
    14. 14. Best practices Rick Yvanovich FCMA, CGMA, FCPA (Aust.) Founder & CEO, TRG International Rick is a Chartered Management Accountant with 30 years of diverse experiences including Oil & Gas, Hospitality, Retail, Telecommunications, Financial Services, Property development, Defence Manufacturing, Manufacturing, Breweries, FMCG, High Technology, and the Accounting profession. He has been living in Vietnam since May 1990. A consultant and serial entrepreneur he has been directly involved in hundreds of client engagements in 39 countries and founded several companies including TRG International. Rick is a Board Member of the South East Asia Regional Board for CIMA and is also Chairman of the AMCHAM HCMC ICT groupPwC and TRG International 14
    15. 15. Leading practice organizations integrate all aspects ofplanningLeading practice capabilities: Move from yearly planning process to Integrated continuous/rolling forecasting Planning Top down/bottom up target setting and budgeting Link planning and execution at all levels Flexibility modelling of scenarios based on differing business assumptions Align incentives and rewards to strategic objectives Continuous Planning / Decentralisation of planning activities and rolling ownership to enable continuous planning and drive forecasting accountability Integrated planning technology based on a common data model, hierarchies and chart of accounts accessible to BI, analytics and ERP Top down / Shift focus to value drivers and strategic objectives bottom up utilising balanced scorecards target setting and planningPwC and TRG International 15
    16. 16. Planning CyclesFixed Time Horizion Rolling Time Horizion Q1/1 Q2/1 Q3/1 Q4/1 Q1/2 Q2/2 Q3/2 Q4/2 Q1/1 Q2/1 Q3/1 Q4/1 Q1/2 Q2/2 Q3/2 Q4/2 Q1/3 Planned Values FY 1 Planned Values FY 2  Changes in environment and premisses can be  Less planning effort during the financial year integrated into planning contemporarily.  No revision of exisitng plan Budgets are modified to the respective level of information (More flexible responses  High need and effort for estimates possible).  High effort for deviation analyses Planning as a permanent process  Target/performance deviations more likely Low need and effort for estimates Small likelihood of target/performanace deviations Planning period not focused on reporting period, indirect deduction of FY planningPwC and TRG International 16
    17. 17. The Two Basic Concepts of Forecasting (1/2) Year-end Forecast Rolling Forecast  Fixed reference point: end of FY  Fixed reporting period (4-6 quarters), comprehensive (across FYs)  Management estimate concerning the achievement of planned objectives of the FY  Management estimate concerning the implementation of the strategic alignment  Active controlling within the operative business scope via measures  Active controlling via measures  Tie between „Actual“ and Plan  Tie between „Actual“ and Strategy Forecast Forecast Financial Year 1 Financial Year 2 Financial Year 1 Financial Year 2PwC and TRG International 17
    18. 18. The Two Basic Concepts of Forecasting (2/2) Year-end Forecast Rolling Forecast  Lower preparation effort, since budget "only" Prompter integration of changes in the has to be revised environment into planning  Taking into account the meaning of the end Improved strategy orientation and of the FY implementation Continuous look into the future, not just once a year Early recognition of future opportunities and threats The rolling forecast can replace the tasks or the statements of the Year-end Forecast,but the Year-end Forecast cannot provide a comprehensive (across FYs), strategic orientation ! PwC and TRG International 18
    19. 19. A typical budget cycle … not just in Vietnam • Management • Finance reviews the creates the budget and… forms “Repeat this cycle until either the management team is happy with the Gartner budget or budget managers lose their will to live” • Finance • Managers aggregates input their the budget data by accounting periodPwC and TRG International 19
    20. 20. The Typical Budgeting ProcessStrategically disconnected60% of large companies report either “no link” or a “weaklink” between the strategy and budget processes … whereasmore than half of the respondents (52 percent) reportedthat creating closer links between strategy and operationswas one of their top two priorities.SlowCompleting an annual budget takes an average of 110 days.ExpensiveFinance departments alone spend $63,000 per 100M incorporate revenue on budget creation each year … yet only44 percent of the budget and forecasting process is spenton analysis, strategy development and target setting.UnreliableManagement and investors are routinely surprised by thevariances between communicated expectations and results… no wonder if you know that 70 percent of respondentsreported dependency on spreadsheets.PwC and TRG International 20
    21. 21. If you like this topic, please download the full presentation slide HERE Thank you!PwC and TRG International 21

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