INTRODUCTION TO PLANNING, BUDGETING AND FORECASTING MODELS · introduction to planning, budgeting and forecasting models rome –la sapienza 2017, may 11th

INTRODUCTION TO PLANNING, BUDGETING AND FORECASTING MODELS

ROME –LA SAPIENZA 2017, MAY 11TH

Copyright © 2017 Accenture All rights reserved.

AGENDA

2

ENTERPRISE PERFORMANCE MANAGEMENT – RECAP

INDUSTRIAL PLANNING AND CONSOLIDATION MODELS – CASE STUDY


Enterprise Performance Management (EPM) is a strategy and key capabilities required to make decisions and take actions to drive shareholder value.

An effective EPM capability enables to focus and align the organization to the key drivers of its strategy, to plan and forecast based on these drivers, to measure results, and course correctly accordingly.

Total

Returns to

Shareholders

Info

rmati

on

Decis

ion

s

Acti

on

s

Business

Strategy

Operate

MonitorTarget

Setting

ENTERPRISE PERFORMANCE MANAGEMENT - OVERVIEW

3


Strategic Plan & ObjectivesTarget Setting Forecasting & Monitoring

Refine Corporate Vision & Strategy

Objectives

Cascade Targets to Lower Level Metrics/

Organization

Set Targets for Key Measures of Accountability

Planning & Budgeting

Develop Plans to Achieve Targets

Allocate Resources

(capital & people) to Achieve Plans

Review, Challenge &

Finalize Plans & Budgets

Develop Action Plans, Re-allocate Resources and Update Forecast

Monitor Key Measures of Business

Performance

Determine Key Measures of

Success

Close and Consolidate Books and Report

Actuals

Portfolio Value Assessment

Review Performance with Executive Management

Determine Key Value Drivers

Enablers

Data structures & controls

Incentives & Rewards

Standardized processes

Integrated IT Architecture

Leadership & governance

PERFORMANCE MANAGEMENT FRAMEWORK

Source: Accenture

THE EPM FRAMEWORK

4


Assess & Design (conceptually)

1

Design (detailed) & Develop

2

Deploy

3

Manage4

A typical project approach is made by four main Activities, each of which has a one ore more Deliverable.

5

PB&F –PROJECT APPROACH TO IMPROVE EFFICIENCY AND EFFICACY


AGENDA

6

ENTERPRISE PERFORMANCE MANAGEMENT – RECAP

INDUSTRIAL PLANNING AND CONSOLIDATION MODELS – CASE STUDY


>20

# of Countries

> 500

# of Legal Entity

> 900# of Plants

>3.000Employees

A global Group, leader in the Resources Industry, with main business focus on Energy and mainly

based in Italy but with operations in more than 20 Countries in Europe, North America and Latin

America.

INDUSTRIAL PLANNING & CONSOLIDATION MODELS –CASE STUDY

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New Planning and Consolidation Model

and tool

Several existing solutions in the

Group with different tools and

application

Planning Processes not integrated and not efficient (duplication, timeframe too long, …)

Controlling dimensions, rules

and standards different by

Country

Complexity due to high Legal Entities

number (~500) and Plants number

(>900)

Corporate tools “HQ centered” for a world wide Group

Integrate Client P&R model with

Corporate reporting Platform

Planning & Reporting under pressure: Key challenges in the Group processes.


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Year 1 Year 2 Today

Group Planning Tool at Country

Level(Central Staff and

Line functions directly involved)

Group Planning and Consolidation

Tool at Country Level

(Data Collection from Local P&C)

Local Planning Process

Assessment

Group Control Model Review

Group Planning and Consolidation Tool at

Plant Level

(~ 800 Plants)

New Controlling Model in the

Group Planning and

Consolidation Tool

Main Countries Planning models Deep Diving and

Benchmark

Planning Tools implementationsAssessments

Operating Control Process

Assessment

Unique Common Planning Baseline within Group

Unique Planning Process

in > 20 Countries

Group Controlling Model fully recognized by Countries ad available in all Information Systems.

Key Results

Planning & Reporting Processes re-design: main Project Milestones.

Unique Consolidation

Model


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Maximum responsibility

of Countries andLegal Entities

Unique Planning Process supporting Group requirements

Operation and Development Plan fast Simulations on collected Data

• 1 process

• 1 calendar

• 1 data entry

• 1 original data

Significant collaboration / interaction between central and local P&C

departments.Total Integration with Corporate

processes

A relevant change in Planning and Consolidation Processes for more than 500 Legal

Entities in 20 Countries


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Meetings with Countries in order to understand local planning processes and consolidation models.

Local Models general analysis

Local Planning Models Analysis in order to choose best practices and adopt Unique Models for the Group.

Local Models

Benchmark

Sharing with Countries of the Unique Planning and Consolidation Models both for Profit & Loss and Balance Sheet.

Model Closing and Workshop

• Application Test with European Users;

• Application Training with all Country Users.

Test / Training

System Available to Users both for Planning Activities and to feed automatically the Central Planning Consolidation Tool.

Go Live

Project Approach and main activities: deliverables and timing.

m1 m2 m3 m4 m5 m6 m7 m8 m9

Planning and Reporting Tool Implementation

INDUSTRIAL PLANNING MODELS –CASE STUDY

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General Model

• The dimensions of the Planning and Reporting Tool has been set in order to feed the Central Planning and Consolidation Model and satisfy the reporting needs of the Client;

• The model of the Software Tool has been centrally designed keeping in in consideration Countries requirements and standardizing them in a Unique model.

Profit & Loss Model

• P&L “Slim” designed starting from the Central Planning and Consolidation structure and choosing Planning Accounts;

• P&L can be calculated according to the designed Planning Models and can be adjusted using manual input.

Balance Sheet Model

• Balance Sheet hierarchy is created starting from the Central Planning and Consolidation tool;

• BS will be automatically moved and balanced according P&L and Capex for all the Legal Entities;

• Manual input (e.g. Debt) only on main Legal Entities.

CASE STUDY: UNIQUE PLANNING MODEL KEY FACTS

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• Unique common Chart of Account

• Planning at Plant / Legal Entity Level

1

2

• Common calculation models for each Chart of Account section (i.e. Revenues: P*Q + Input)

3

General Model

• Common Data Entry and Reporting set

4

Countries Planning Activities will follow a Unique Planning model suitable for the whole Group

CASE STUDY: UNIQUE PLANNING MODEL KEY FACTS

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Intercompany

Scenario

Entity

Technology

Year

VersionAccount

Country

APE

P&L

BS

KPI

2013

Plant

Flows

Value Chain

Period

2012

…

JanFeb

…Dec

Plan

Mbdg

Fore Act

GN Plant Maint.

GN Plant Dev.

Support…

Hydro

Wind

…

CHI…

Wrk. Ver. 1

Wrk. Ver. 2

App Ver. ITUS

…Thirds

…

Entity

Prices

Quantities

Plan

Value

Execution

BD

Operation

Local

Eur

…

Controlling Model is based on several Dimensions, each of one has a clear link to the

Business.

CASE STUDY: CONTROL MODEL OVERVIEW

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• Production;• Market Sales;• Energy Purch;• # Green Cert.;• Prices.

Accounts Chosen

• 3 Calculated;• Input.

• Energy Purch;• Production;• Energy Sold;• Unit Costs.

P&L “Slim” Highlights:

•Total base account number: ~150

•Each section can be calculated using Planning Model, can be a direct input or can be a p*q + input;

• Input account can be pre-calculated applying CPI to previous Actual or Forecast.

• Input.


• FTE;• FTE Cost;• Maint. Unit

cost;• Production;• Capacity.

• 2 Input/ Calc.• COD; Usef. Life.

• 4 Input/ Calculated.

• Debt;

• Input/ Calc.• Tax Rate.

• Input


CASE STUDY: PROFIT & LOSS KEY FACTSModel Based

on:

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CalculatedInput Economics

Net Electricity Production (MWh)

PPA Sales(MWh)

Market Price(€/MWh)

Market Sales(MWh)

Market Revenues

Feed in Price(€/MWh)

Energy Sold(MWh)

PPA Revenues

Feed In Revenues

Energy Purchased to be sold (MWh)

Group Sales (MWh)

Group Price(€/MWh)

Group Revenues

Energy Revenues

Calculation Model is a

clear Example of

Driver Based

Budgeting

Legenda

PPA Price (€/MWh)

CASE STUDY: ENERGY REVENUES PLANNING MODEL

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Planned Maintenance Unit Cost (€/MWh)

Net Electricity Production (MWh)

Serv. main. rep. Wor. and T part. Fa. Im

Unplanned Maintenance Unit Cost (€/MW)

Net Generation Capacity (MW)

Direct Input on selected Accounts

Planned Maintenance

Unplanned Maintenance

Operating Costs

Calculation Model is

a mix of Driver

Based Budgeting

and Inflation (CPI)

Based Budgeting

Previous Year Value * CPI Effect

or

Previous Year Value * CPI Effect

or

CASE STUDY: OPERATING COST PLANNING MODEL

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CalculatedInput Economics

Legenda


Balance Sheet Highlights:

•Selected only base account used for Actual: ~90

•Each section is calculated at Legal Entity Level and can be adjusted using input accounts.

•Surplus is automatically posted on a Cash account: BS is automatically balanced;

•Manual input (i.e. Debt) can be a direct input only on main Legal Entities.

• Tangible Asset: Total Capex, Impairment,

Amortization;

• Intangible Asset: Impairment, Amortization;

• Net Financial Asset: Impairment.

• Net Trade Receivables:- Increase: Core Costs + Opex (no Pers., Tax) +

Capex;- Decreases: according to Payment Days.

• Trade Payables:- Increase: Core Revenues, Ricavi No Energy e

Altri Ricavi;- Decreases: according to Payment Days, input

for Capex Payables.

• Provisions: “Provision Expenses” and “Deferred Tax Expenses and Income” from P&L.

• Direct Input;• Short Term financial payables - Third

automatically increased/decreased with Balance Sheet SURPLUS;

• Impact on Medium Long / Short – Group / Third Financial Income and Charges according to 4 Interest Rates by Country.

• Direct Input / Calculated from P&L.

• Direct Input.

• BS balanced on Cash Account.

Model Based on:

CASE STUDY: KEY FACTS FOR BALANCE SHEET

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APE - Opening BalanceOpening Balance is automatically calculated starting from previous period closing

INV - Capital Expenditures

Calculated from Total Tangible Capex

IMP - impairment - Calculated from P&L - Impairment of tangible assets

AMM - Depreciation Calculated form P&L: Depreciation of tangible assets

… other flows Other significant flows can be filled as input

CHI - Closing Balance Sum of the Flows

Net Tangible Asset

Automatically Calculated

Direct Input

Legenda

+

+

-

=

Balance Sheet

Model is a clear

Example of Driver

Based Budgeting

CASE STUDY: BALANCE SHEET PLANNING

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INTRODUCTION TO PLANNING, BUDGETING AND FORECASTING MODELS · introduction to planning, budgeting and forecasting models rome –la sapienza 2017, may 11th