Banish Budgets! Managing Your Organization Through Rolling Forecasts. Tamara Koopman MBA, CPA, CGMA. #laslms17. Continuous Improvement environment.

Transcription

1 Banish Budgets! Managing Your Through Rolling s Tamara Koopman MBA, CPA, CGMA Learning Objectives 1. Understand the benefits of rolling forecasting. 2. How to create a repeatable forecast process. 3. Maintaining a Rolling in a Continuous Improvement environment. 2 1

2 Frame of Reference Global manufacturer of LED displays Publicly traded company Revenues $500M+ 5 Business Units Lean years Standard widgets & Custom orders Order size < $5K to $50M+ Sales cycle from 3 days to 2+ years Quarterly Rolling since Your Frame of Reference? How does your organization align? How is your organization different? What can you learn from our experience? Can you identify your organization s challenges? Can you identify how your organization could succeed? 4 2

3 Traditional Budgeting Requires A Major Time Investment Can become irrelevant at any point during the budget period Is susceptible to gaming 5 A Rolling Takes less time than traditional budgeting Adjusts to retain relevancy Highlights areas of gaming 6 3

4 A Rolling Is flexible with economic & operational changes Gives each reporting period multiple evaluations Stretches future visibility past the end of the traditional budget period 7 A Rolling Sample Timeframe Quarter FY 16 FY 17 Completed Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY 15 Q4 $ $ $ $ FY 16 Q1 $ $ $ $ Q2 $ $ $ $ Q3 $ $ $ $ Q4 $ $ $ $ FY 17 Q1 $ $ $ Q2 $ $ Q3 $ 8 4

5 The Rolling 6-7 Months Detail (Every 13 Weeks) with 9 Implementing Rolling ing Detail with 10 5

6 Implementing Rolling ing Who will sell the process to your organization? Acceptance at the executive level Acceptance within the finance team Impact if there are changes in the organization Detail with 11 Implementing Rolling ing Who Owns The? Finance Owns the Sales provides Target level of orders Personnel provides Target level of employees provides Target level of Cap Ex Finance determines Planned levels Detail with 12 6

7 Detail with 10/20/2017 Implementing Rolling ing Can you gain shared understanding? Leaders identify their impact on forecast Give us a 90% The Gap between input & forecast Detail with 13 Implementing Rolling ing Gap Between & Sales Order = Target Order - Mutually Identified Areas of Risk/Opportunity Finance Order = Planned Order * Similar gaps in personnel and capital expenses 14 7

8 Implementing Rolling ing Across Your Detail with 15 Implementing Rolling ing Across Your Identify who will be a part of the process Identify points of engagement Train for shared understanding Detail with 16 8

9 Implementing Rolling ing Identify Who Will Be a Part of the Sales, Service, Engineering, Manufacturing IT, Personnel, Facilities Leadership in Remote Locations Detail with 17 Implementing Rolling ing Identify Points of ment Established Recurring Meetings Existing data sources Additional Resources Required Detail with 18 9

10 Implementing Rolling ing Train for Shared Understanding Continuous Need Changes in Planning and Common Terminology Double Loop Learning Detail with 19 Implementing Rolling ing Training for Shared Understanding - Terminology Quarter FY 16 FY 17 Completed Name Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY 15 Q4 Q1 Fcast $ $ $ $ FY 16 Q1 Q2 Fcast $ $ $ $ Q2 Q3 Fcast $ $ $ $ Q3 Q4 Fcast $ $ $ $ Q4 $ $ $ $ FY 17 Q1 $ $ $ Q2 $ $ Q3 $ 20 10

11 Implementing Rolling ing Selfleadership.com 21 Implementing Rolling ing Double Loop Learning Acknowledges: Rolling forecasting is not budgeting four times a year Requires understanding the need for minimal inputs to get maximum outputs Detail with 22 11

12 Implementing Rolling ing Detail with 23 Implementing Rolling ing ID System/Level of Entry & Reporting Determine Resources Required Determine Timeline Detail with 24 12

13 Implementing Rolling ing Level of Entry & Reporting Orders (Product & Service) Revenue (Contract, Standard, Service) Gross Profit (Contract, Std, Svc, Other) Manufacturing Expenses (Variances) Selling Expense (All Line Items) G & A (Externally detailed) Cap Exp (FY & 5 yr) Detail with 25 Implementing Rolling ing Determine Resources Required Determine who will be involved in the process Time requirements of non-finance involvement Time requirement of finance involvement Detail with 26 13

14 Implementing Rolling ing Determine Timeline Target Completion Prevent Fatigue Identify Challenges Detail with 27 Implementing Rolling ing Current Timeline Sample Schedule Timeline Week 1 - & Adjust Current Week No Activity Week 9 - Kickoff Meeting, Cap Ex Complete Week 10 - Complete Manufacturing Week Complete All Other Dept s Week 13 - with Management Detail with 28 14

15 The Rolling Identify & Detail with 29 Implementing Rolling Identify & Kickoff meeting (finance team) Underlying critical factors Globally loaded information Detail with 30 15

16 Implementing Rolling Evaluate Detail Detail with 31 Implementing Rolling ing Evaluate Detail s Limit Outputs Utilization of information Build in Flexibility Detail with 32 16

17 Implementing Rolling Detail with 33 Implementing Rolling ing Requires engagement of organization Utilize or expand existing sources Adapt to change Detail with 34 17

18 Implementing Rolling ing Detail with 35 Implementing Rolling ing Essential to time savings Key to repeatable process Should facilitate analysis Detail with 36 18

19 Implementing Rolling ing the Detail with 37 Implementing Rolling ing the Risks/Opportunities What s Changing & Why Detail with 38 19

20 Implementing Rolling ing Complete Detail with 39 Implementing Rolling ing Complete Results reflect assumptions/input Analyze comparison to: Prior year actuals Prior rolling forecast Staffing/Capital Expenditures/R & D Detail with 40 20

21 Implementing Rolling ing Complete Report + Template = Replate Last Last Current Actuals Fcast Actuals Fcast Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 R4Q R4Q R4Q Orders Sales COGS GP Expenses Operating Income Implementing Rolling ing With Management Detail with 42 21

22 Implementing Rolling ing With Upper Management Critical to Buy-In Confirm interpretation of data gathered from leadership team Communicate fiscal year & forward Detail with 43 Implementing Rolling ing Detail with 44 22

23 Implementing Rolling ing Total Q1 PY Actuals Actuals Act + Fcast Fcast Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 R4Q R4Q Orders Sales COGS GP GP % 42% 40% 43% 33% 39% 43% 42% 40% 43% 42% 42% Expenses Operating Income 17% 20% 14% 20% 18% 21% 17% 20% 21% 20% 15% 45 Implementing Rolling ing Evaluation Detail with 46 23

24 Implementing Rolling ing Evaluation Accuracy of prior quarter forecast Validation of base assumptions Improvements for next forecast Detail with 47 Implementing Rolling ing Continuous Improvement Cycle 48 24

25 Maintaining The Rolling Detail (Every 13 Weeks) with 49 Implementing Rolling ing For Next Quarter Detail with 50 25

26 Implementing Rolling ing For Next Quarter Carry information from next three quarters forward Carry last quarter forecast forward to next quarter Facilitates next quarter forecast by moving from full data input to input tweaking Detail with 51 Maintaining The Rolling 6-7 Months Detail (Every 13 Weeks) with 52 26

27 Maintaining Rolling ing Identify business changes and their impact on the rolling forecast process nd eliminate waste Evaluate effectiveness of output 53 Maintaining Rolling ing Utilize information already being produced Tie into other processes Sales & Ops Planning further with areas of the business Keep partners trained and informed 54 27

28 Communicating Our Journey In Retrospect Our trials Our triumphs Our truths 55 Rolling ing - Trials Getting the right level of detail Keeping personnel engaged in the process Engaging with remote parts of the business Managing the time investment Staying disciplined to the schedule 56 28

29 Rolling ing - Triumphs Flexibility during the economic downturn One source of data for operations & finance Continuous engagement 57 Rolling ing - Triumphs Week One Tweak Managing the time investment Information is Valued By Management 58 29

30 Rolling ing - Truths The is Always Wrong Know How Wrong You Can Afford To Be Understand How Wrong You Might Be 59 Rolling ing - Truths The Only Thing Constant is Change What changes are within the forecast horizon? Can the current forecast process adapt to those changes? 60 30

31 Rolling ing - Truths Know Where To Invest Your Time Level of Information = Level of Effort Concentrate on the Items That Make a Difference To Your Bottom Line High Level Estimate and of Other Items 61 Rolling ing - Takeaways Rolling ing Impacts the Management of s by: Providing flexibility Retaining relevancy over time Engaging across the organization Creating a shared outlook of expected future results 62 31

32 Rolling ing Our Journey Continues Lean Environment - Supports Continuous Improvement Downtime Evaluation Predictive Analytics 5 Day Close = 5 Day 63 Rolling ing Your Journey Starts Preliminary work sets up future success Flexibility is Critical ation Plan for Continuous Improvement Just Start It! 64 32

33 Rolling ing Questions? Contact Me: 65 33