Essential Budget Planning for the 21st Century Corporation Today's corporations are more competitive, dynamic, and, consequently, more powerful and successful than ever before. As a result, the days when corporate budgeting was merely an obligatory, routine process of estimating the coming year's revenues and expenses have long ended. Successful corporations are constantly improving their ability to predict their future operations and their related resource requirements, enabling them to adjust their plans as needed and stay ahead of the competition. Not only does this heighten the importance of the budgeting and planning process, but it also changes the traditional roles of spreadsheets, legacy budget systems, and software created in-house. Budgeting shows corporations how to achieve and maintain their edge through modern budgeting systems and the use of good budgeting software. This book provides comprehensive guidance through the range of considerations that are crucial to streamlining the budget planning process: * What corporations should be looking for when buying or building a new budgeting solution * How to select the right budgeting solution from the field of vendors * How to successfully implement a new budgeting solution * How to fully utilize the Web . . . plus helpful lists and questionnaires, and interviews with managers from leading companies who have effectively created internal processes and implemented software solutions. Equip your corporation to excel in the twenty-first century with the tools and information offered in this invaluable resource.

NILS H. RASMUSSEN, MIM, has more than ten years of experience with development, implementation, and sales of budgeting and financial reporting software. He is a frequent speaker at budgeting conferences, has conducted field research, and has held numerous workshops in the area of Web-based budgeting and reporting, and streamlining of corporate reporting processes. Mr. Rasmussen currently lives in Los Angeles, California, and can be reached at nhr@solverusa.com.

Preface

ix

Part One: Budgeting and Forecasting Overview

1

(62)

Budgeting Today: Overview and Trends

3

(14)

Re-engineering the Budgeting and Forecasting Process

4

(2)

Tighter Integration of Corporate Strategy with Budgeting

6

(1)

Added Detail in Strategically Important Areas

7

(2)

More Complex Models

9

(1)

Improved Accuracy of Budgets and Forecasts

10

(1)

Integration of Available Resources and Tools

10

(2)

More Frequent Revisions

12

(1)

Increased Employee Participation and Departmental Involvement

13

(1)

Streamlined Budget Reviews and Approvals

14

(3)

Budgeting Processes and Approaches

17

(12)

Basics of the Budgeting Process

17

(1)

Forecasting: How to Derive the Budget Figures

18

(1)

Budgeting Processes

19

(8)

Selecting a Budgeting Approach

27

(2)

Budgeting Methods

29

(12)

Prior Year (Incremental) Approach

29

(1)

Zero-Based Budgeting

30

(1)

Percentage of Sales

31

(1)

Rolling Forecasts

32

(1)

Balanced Scorecard

33

(4)

Benchmarking

37

(1)

Activity-Based Budgeting

38

(3)

Popular Budgeting Reports and Ratios

41

(22)

Popular Budget Reports

41

(2)

Popular Ratios (Performance Measurement)

43

(20)

Part Two: Budgeting Software: Technology Trends and Functionality

63

(60)

Technology Trends

65

(14)

Windows Platforms, SQL, and OLAP Databases

65

(3)

Benefits of Open Database Connectivity Support

68

(1)

Decreased Reliance on Spreadsheets

69

(3)

Increased Use of Budgeting Specific Software

72

(1)

Less Dependency on IS Staff to Build and Maintain Budget Model

72

(1)

More Automation of Typical IS Department Tasks

72

(2)

Tighter General Ledger Integration

74

(1)

Better Integration with Analytical Tools

74

(1)

Linking to Payroll, Sales Order Entry, and Other Software

74

(1)

Web-Enabled Applications Simplify Corporate-Wide Rollout

75

(2)

The Future: More Features, Better Integration, More Specialization

77

(2)

Functionality Offered by Modern Budgeting Software

79

(14)

Supporting Your Planning Process with a Modern Budgeting System: A Step-by-Step Example

79

(4)

Integration to Get Financial and Statistical Data into the System

83

(1)

Integration to Get Transactional Data Out of the System and into Other Software Packages

83

(2)

Multiple, Customizable Dimensions

85

(1)

Integration to Maintain Master Tables

85

(1)

Customizable Input Screens

86

(1)

Data Entry Automation

86

(1)

Linking the Data Entry Activity to Corporate Strategic Targets

86

(1)

Data Entry Guidance (Help, Warnings)

87

(1)

Online Connection for Remote Sites

87

(1)

Line Item Detail

88

(1)

User-Defined Calculations

89

(1)

Workflow Automation

89

(2)

Powerful and User-Friendly Report Writer

91

(1)

Full Security

91

(1)

Data Recovery

91

(1)

Drill-Down

92

(1)

What Will Future Budgeting Software Offer?

93

(10)

Budgeting Software Buyer's Guide

103

(6)

What Core Budgeting Functionality Do Companies Want?

106

(3)

Using Excel as a Budgeting Tool

109

(14)

When to Use Excel and When to Use a Best-of-Breed Budgeting Tool

109

(4)

Building an Excel Budgeting Model

113

(5)

Analyzing the Numbers

118

(1)

Integrating to the General Ledger

119

(1)

Using Excel as a Front-End to a Database

119

(1)

Budgeting with Excel on the Web

120

(3)

Part Three: Software Evaluation and Selection

123

(26)

Selecting a System

125

(8)

Steps in the Selection Process

125

(6)

Using a Software Selection Company

131

(2)

Software Evaluation: Factors to Consider

133

(10)

Expected Use Now and in the Future

133

(1)

Getting the Rest of the Company to Buy into the Process

134

(1)

Cost/Benefit Analysis

135

(1)

Features and Flexibility

136

(1)

Compatibility with Existing Software

137

(1)

Ease of Use

138

(1)

Software Stability

139

(1)

Vendor-Related Items

139

(1)

Working with an Implementation Partner

140

(1)

How to Select: A Summary

140

(3)

The New Alternative: Outsourcing

143

(6)

Outsourcing

143

(1)

How It Works

144

(1)

When You Should Consider an ASP

145

(1)

Selection Criteria for an ASP

146

(2)

Ensuring Continuous Success

148

(1)

Part Four: Software Implementation

149

(26)

Systems Implementation: Project Planning

151

(8)

Implementation Phases

151

(8)

Detailed Implementation

159

(16)

General Project Checklists

159

(2)

Project Plans

161

(2)

Large Projects Versus Small Projects

163

(1)

People to Involve in Your Project

164

(2)

Model Maintenance and Support (Who and How)

166

(1)

Tips to Ensure Faster and Better Implementation

166

(5)

A Note on Integration Issues

171

(4)

Part Five: Interviews

175

(98)

Interviews

177

(96)

American Furniture Company

178

(3)

American Pharmaceutical Association

181

(3)

Blue Cross of Northeastern Pennsylvania

184

(4)

Bonneville Power Administration (BPA)

188

(4)

Car Wash Partners, Inc.

192

(6)

E! Entertainment Television Networks

198

(5)

Infiltrator Systems, Inc.

203

(2)

Morningstar, Inc.

205

(4)

SalesLogix Corporation

209

(6)

Appendices

Appendix A Sample Confidentiality and Non-Disclosure Agreement (Sales/Demo Process)

215

(4)

Appendix B Sample RFP

219

(22)

Appendix C Software Candidate Evaluation and Rating Sheet

241

(2)

Appendix D Sample License Agreement

243

(6)

Appendix E Sample Support Plan/Agreement

249

(4)

Appendix F Sample Consulting Agreement

253

(6)

Appendix G Sample Implementation Project Plan

259

(8)

Appendix H Software and Vendor List with Web Addresses

267

(6)

Glossary

273

(12)

Index

285

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