SAP BPC OVERVIEW BY Magnific Online Training
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Planning & Budgeting with SAP BPC
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Agenda Introduction of SAP BPC(EPM 10 NW) Fundamentals of BPC BPC Architecture & Administration Reporting in BPC Integration of BW to BPC
BPF, Work Status
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How BPC evolved? In 2004, SAP decided to create a next generation planning solution called Integrated Planning (BW-IP), which would be the successor of BPS. It looked like it would be a strong solution. However impressive , the technical advantages of BW 窶的P only solved part of the equation; the reality was that many businesses were growing tired of IT departments having to own and maintain planning and consolidation solutions with IT support, not ownership. In 2007 SAP formed a new organization focused on the business user. So a Enterprise Performance Management team was launched under this area to address the needs being expressed by the CFO suite. So EPM team evaluated potential acquisitions that had the desired ease-of-use and simplicity, and discovered them with Outlook Soft. The user environment was native Excel, which Finance users live and breathe by.
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How BPC evolved? •
Members of Outlook Soft and SAP were summoned to SAP headquarters in Waldron. A business scenario was created and two teams were formed. The first was SAP and included BW experts, ABAP developers, web application development members and finance personnel. In the other corner was the Outlook Soft team made up of a couple finance users with no data warehousing or development skills. The two teams split up and started building their planning applications using the two different solutions, BW-IP and Outlook Soft. After thirty minutes, the Outlook Soft team came back with the completed application; it took SAP team over six hours to build the same application using BW-IP. This sealed the deal within SAP and the acquisition of Outlook Soft gave SAP the best user experience in the industry, planning and Consolidation in one product. The rest is history.
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Concepts of Planning Planning : It involves thinking ahead and formulating a set of activities you will execute in future; in other words, it is the process of modeling or projecting future business activities. It is on high level. Budgeting : It is the process of allocating resources once the planning process is approved a d a epted the o pa ’s a age e t. It is on detail level. www.magnifictraining.com
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Concepts of Planning • Forecasting : It deals with the realization of the plan, and is used as a monitoring mechanism to facilitate the success of planning. Business environments do not remain the same – what was planned yesterday may not be same today. It is done during the course of the current budget year with a key objective to provide visibility on the current state of the business in a timely manner so that corrective action can be taken when there is significant difference between the current state of the future and what was planned for during the planning process. www.magnifictraining.com
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Concepts of Planning People do ot pla to fail, ut they fail to Pla . The planning, budgeting and forecasting concept is critical to the success of the corporation. Common error is the fact that the did ’t pla e ough a d did ’t pla proactively. Its very difficult to plan, budget, or forecast in an accurate, timely and consistent way. www.magnifictraining.com
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Concepts of Planning  Planning is not like consolidations, where someone else (GAAP or IFRS rules and regulations from the government) is telling you how to do it and when to do it, the consolidation process.  Planning process is done on its own and is somewhat unique to the different industries.  Planning process is the lifeblood of the short-term and long-term revenue stream of a corporation and the overall income/expense process within a corporation.
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Concepts of Planning - Planning Horizon The Planning horizon determines the time frame for planning. Planning horizons are divided into Short Term Planning: The planning time frame in short term is usually a year or less. Business use this when it has clear cut goals such as cutting costs, increasing labor productivity by freezing new hires and effectively training the work force. www.magnifictraining.com
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Concepts of Planning - Planning Horizon Medium Term Planning: It covers a period of one to three years. Business uses this when it plans to increase market share in a particular segment of the business. Long Term Planning: When the duration of planning exceeds more than three years. Business uses this when there is a long gestation period between initial investment and final realization of sales and profits especially in Manufacturing industries or Infra Structure industries.
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Concepts of Planning - Planning Types Operative Planning: It is used for short term and is generally o du ted at o pa ’s operatio al le el. It rel on a bottom-up planning approach. Employees at the bottom level of the hierarchy may be a part of the planning process to make it successful.
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Concepts of Planning - Planning Types Tactical Planning: It is associated with planning for the medium ter a d is ge erall o du ted at o pa ’s di isio al le el. Co pa ’s Mid le el a age e t plays a vital role. Strategic Planning: It is associated with the planning for the long term and is generally conducted at the Orga izatio al le el. Co pa ’s Ma age e t usually plays a major role in this type of planning. www.magnifictraining.com
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Concepts of Planning - Planning Types
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Concepts of Planning - Planning Areas Planning is a generic function applicable to all area of business. Finance: Liquidity Planning : focuses on planning for maintaining optimal cash flow to be able to run the business. For AR and AP estimation. Cost Center Planning : is done for operational, non operational, and capital expenditure costs the company will incur at various cost center levels. Asset Planning : is concerned with the planning for the purchase of new assets and the disposal and maintenance of existing assets, ased o the o pa ’s o je ti e. Profitability Planning : determines profitability by identifying sales revenue and costs that will be incurred in the future.
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Concepts of Planning - Planning Areas Production: how much to produce and when and where to produce it in order to meet the market/customer demands. Variables such as seasonal behavior, geographic demand are considered when planning for production. Human Resources: This area of planning is especially important in industries that require large numbers of employees and where specialized skills are required for realizing the objectives of the business. Costs associated with it has direct impact on the financial planning.
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Concepts of Planning – Common Scenarios for Planning in Business Gross Profit Margin Planning Profit & Loss and Balance Sheet Planning Investment Planning Labor Planning/HR Planning Sales Planning
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Concepts of Planning – Common Scenarios for Planning in Business Considerations in Planning: Importance Skills Internal Data Governance Communication Monitoring Planning Method Participation www.magnifictraining.com
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Planning Execution Time Frame
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Integrated Planning
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Concepts of Planning What Problem Are We Trying to Solve? The Gap between Execution and Strategy
Today, companies struggle to bridge the gap between strategy and execution to optimize their business performance.
Strategy disconnected from operations
Decisions made without context
Strategy / Vision
Information locked in storage
Execution
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Misaligned action across organization
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Examples and Typical matters In practice, key issues
of the process could be summarized as follows:
Strategically disconnected: a great number of companies report have no link or weak link between the strategy and the budgeting process
Slow: a large number of organizations have not a single tool supporting the budgeting process and as result completing an annual budget usually takes many days
Expensive: the budgeting process requires the collaboration of all departments and the aggregation of all single data
Unreliable: management is routinely surprised by the variances between communicated expectations and results
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Concepts of Planning Why is there a Gap? E plo ees do ’t understand how the strategy affects them, and how their decisions impact others. It’s u lear as to ho is accountable for ensuring execution of initiatives, projects, and tasks. Ma age e t s ste s do ’t empower employees to make their own decisions. There’s o for al e ha is for ta ti s to i flue e strateg or to share best practices.
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Concepts of Planning There’s o li k et ee the budgeting process and strategy. Very often strategy is managed using inadequate tools that require much manual tracking and updating e.g. spreadsheets, PowerPoint, word documents, email Plus … there eeds to e E e uti e Co it e t a d a ulture of performance management
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Concepts of Planning - Solution Alignment and Communication is key
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Fundamentals of BPC Wel o e to the The udgeti g pro ess with “AP BPC ourse aimed at: Introducing SAP BPC features and benefits for planning and budgeting cycle management Pointing out common matters and issues to take into account and clear out whenever you analyze, assess, and design the planning and budgeting cycle Providing you with consistent guidance as well as hits and tips to roll out an effective budgeting process efficiently empowered by SAP BPC Sharing experience
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Fundamentals of BPC What this course is not about? Not a genie with 3 wishes, black art, crystal ball gazing Not a guide to successful project Management Not the perfect project approach
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Fundamentals of BPC The budgeting combines historical data and economic trends with the Top Management vision, as a result budgeting is key to establish, keep, and maintain a tight linkage between strategy and operations …Nothing more than: spending money knowing what targets need to be met to get a bonus driving action influencing behaviors adjusting direction beating the competition creating value more effectively and efficiently
EPM Methodology – Where we are…
ALIGN Strategy
Plan
CPM
Culture
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Governance
Data Technology Management
Process
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Fundamentals of BPC Implementing a EPM framework enhances management effectiveness and overall performance in a variety of ways: Improves decision making capabilities Improves progress by allowing line of sight into operational performance and compliance Allows management to spot potential problem areas and address them proactively Enables management to focus on areas requiring their attention and decisions
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Fundamentals of BPC Facilitates process improvement and provides a common yardstick to measure goal attainment Potential for business intelligence (BI) capabilities (predictive, forecasting, root cause, etc.) Provides quick analysis of functional areas Aligns employee performance with corporate and business unit goals Enables more collaborative processes Increases employee awareness of corporate strategy Reduces costs involved in Management Information1
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Advantages of SAP BPC tool How SAP BPC can support the budgeting process? SAP Business Planning and Consolidation is a single, unified, Enterprise–wide solution. It represents a web–based, collaborative solution that unifies the business planning and performance management process, and integrates and manages the financial process Provide modeling capability to develop plans and budgets a d li k to KPI’s/“trategi Plans
Created, maintained and run by the business users
Unified planning, reporting and consolidation
Agile planning process driven by end users
Strengths of the tool
Fast end users acceptance means immediate time–to–value
Microsoft Office provides a familiar user interface
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Budget Process Types So e types of udgeti g pro esses…
Top–Down
Flexible
Blended
Zero–based
Bottom–Up
Rolling Forecasts www.magnifictraining.com
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Budget process types Approaches to Budgeting: Top–Down budgeting Works well for organizations with highly inter–related divisions, those in crisis situations, and for budgeting over longer time horizon Pro: Fewer iterations required, often a better fit with flexible budgeting
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Budget process types Cons: Line managers may feel removed from the process; innovation may be stifled Most annual budget processes encourage and reward ga i g “tret h u ers used for target setti g are usuall unsuitable for resource planning purposes Overly tight control from the centre may stifle innovation and reduce agility at a local level
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Budget process types Approaches to Budgeting: Bottom–Up budgeting A good fit for diverse organizations that require creative management at the unit level Pro: Increased department–level responsibility and sense of ownership Cons: Can lack control and consistency, may overlook certain corporate objectives and can be time–consuming Too infrequent to provide actionable information Annual performance contracts hard wired to budget targets, make it difficult to respond to unforeseen opportunities or threats Most annual budget processes encourage and reward ga i g
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Budget process types Approaches to Budgeting: Blended budgeting In practice, most organizations use some manner of le ded or ou ter– urre t udgeti g pro ess. All too often, these blended processes combine the time– consuming and costly nature of bottom–up budgeting with the minimal sense of unit–level ownership and lack of innovation that can result from the use of top–down budgeting While often the right answer, organizations need to be parti ularl igila t to a oid falli g i to a orst of oth orlds s e ario www.magnifictraining.com
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Budget process types Approaches to Budgeting: Flexible budgeting Flexible budgeting predicts results over a range of possible operational outcomes Segregates controllable from non–controllable expenses at a high–level
Uses key drivers and activity bases for predicting performance More effort is involved upfront, but rework is reduced and budgets stay more relevant throughout their useful life
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Budget process types Approaches to Budgeting: Zero–based budgeting With the traditional budgeting techniques, every department ust justif o l the i reases o er the pre ious ear’s udget level. With the zero–based budget, every function is reviewed and all expenditures must be approved rather than only the increases. Pros: More efficient allocation of resources as it is based on the a tual o pa ’s eeds Identifies and eliminates wasteful and obsolete operations Cons: In a large organization, the volume of forms may be so large that no one person could read it all Time Consuming
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Budget Process Types Approaches to Budgeting: Rolling forecast The most forward–thinking organizations are replacing the annual budget with a rolling forecast. Making this move makes sense for organizations that are: Empowered at the unit level; line managers have access to actual performance information in near–real time, and have the tools and know–how to translate recent performance information and experience into accurate near to mid–range forecasts Disciplined at the unit level; keeping the forecast accurate and up to date is an imperative Managed by a corporate management team comfortable with reduced detail (but presumably higher accuracy) in near and mid– range performance estimates
Actual Data
+
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Budget Data
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Project approach The main steps of our operative methodology for managing a BPC project are:
Analysis • Understanding the
Prototype • Realization, based on
Realization • Testing of the
organization the identified business application in order to business model requirements, of a identify potential • Understanding the prototype which takes misalignment As–Is of the into consideration all • Data loading through planning and control necessary data, reports, automatic systems process and processes • Reconciliation of • Design of the new • Plan and execute historical data scenario (To–Be) workshop aimed to through control show defined solution reports www.magnifictraining.com
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The tools used for managing SAP BPC Planning Project
Fundamentals of BPC - Project approach Analysis
Prototype
• Business Blueprint • Project Plan
• Typical BPF • Reporting package
• Test documentation • Technical documentation Step del BPF
Modello SAP BPC
Budgeting & Reporting process with SAP BPC
Dimensioni – AccdetailB (2 di 3)
Business process flow
Soluzione: la dimensione AccdetailB viene utilizzata secondo lo schema seguente:
BPF Budgeting / Pre-closing:
Conto Economico Gen
Feb
1a Mar
Apr
Mar
Giu
Lug
Ago
Set
Ott
Nov
Measure “Periodic”
Per i dati di Conto Economico, viene caricato/elaborato mensilmente il saldo del periodo di riferimento
Estimation details
Balance Sheet
Inizializzazione
Stato Patrimoniale Gen
Feb
Mar
Apr
Mar
Giu
Lug
Ago
Set
Ott
Nov
3
Dic
Check
F_APE F_MOV …
Per i dati di Stato Patrimoniale, é acquisito a gennaio il saldo di apertura (F_APE) e sono acquisiti mensilmente i movimenti del periodo (F_MOV), secondo i flussi necessari all’elaborazione del Rendiconto Finanziario. Il saldo del periodo è dato dalla somma (F_TOT)
F_TOT
4 Logic LEGEND
La Measure consente poi di sommare i movimenti del periodo (PERIODIC), sia di CE sia di SP, per determinare in automatico i valori progressivi alla data (YTD)
Quick Reminder: F_CLO: saldo del periodo di riferimento F_APE: saldo di apertura F_MOV: movimenti del periodo (incrementi / decrementi) F_TOT: somma del saldo del periodo
PricewaterhouseCoopers Advisory
Pagina 38
BPF Reporting flow
Input schedule
BPF Budgeting/Pre-closing flow
Report
BPF Consolidation flow
Task
5
7 Submit/Approval
PricewaterhouseCoopers Advisory
Page 30
6 Versioning
Report
Measure “YTD”
Example of deliverables
Intercompany
Profit & Loss 1b
F_CLO
2
Opening
Dic
Application maintenance
Realization
STEP 1 - SET-UP Apertura Actual da preclosing Apertura Actual da consuntivo Apertura Budget Inizializzazione Preclosing STEP 2 - PARAMETRI Imposte Aliquote ammortamento Assumption di budget Curve di mensilizzazione CE Curve di mensilizzazione SP Giorni incasso bollette Giorni incasso fatture STEP 3 - ACTUAL Import da SAP R3 Import da SAP R3 con stime Inserimento dati di CE Inserimento dati di SP Inserimento dati di RF Controllo dati Elaborazione dati Report di CE Report di SP STEP 4 - PRECLOSING Inserimento dati di CE Inserimento dati di SP Inserimento dati di RF Controllo dati Elaborazione dati Report di CE Report di SP STEP 5 - BUDGET Inserimento dati di CE Inserimento dati di CE HQ Inserimento dati di SP Inserimento dati di SP HQ Inserimento dati di RF Controllo dati Elaborazione dati Report di CE Report di CE HQ Report di SP Report di SP HQ STEP 6 - OFFICIAL Controllo totale Dashboard Budget Versioning Approvazione dati Report ufficiali
% completamento
Test
To do
• Typical Proposal
Note
100% 100% 100% 100% 100% Creare scheda per imputazione aliquote ammortamento 100% 100% 100% Creare scheda per imputazione giorni di incasso Creare scheda per imputazione giorni di incasso 100% 100% 100% 100% 90% 100%
Verificare correttezza scheda input RF Creare logica
100% 100% 100% 100% 90% 80%
Verificare correttezza scheda input RF Creare report Creare logica
100% 100% 100% 100% 100% 100% 90% 80% 100% 100% 100% 100% 100% 100% 100% 100% 80% 100%
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Verificare correttezza scheda input RF Creare report
Definire work status
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Different component of a budget process Both in the analysis / Design phase and after in the implementation phase, we will use Invenio reference model to realize the improvement to the actual budget process in terms of: a more Efficient and Simple process; accuracy e accountability (data collection through secure processes managed centrally and delegated to local user/function); Speed up the process through automatism and closed calendar Flexibility: realization scenario simulation (market, currency, etc.) budget/actual coherence for obtaining a compliant variance analysis Provide the users with an independent vision and real time/quick information
Reference Framework Sales Plannig Quantity, Pricing, Payment Condition, etc.
Purchase cost Budget
Unit cost, quantity, VAT, payment condition, etc
P&L
Headcount, FTE, etc
Personnel Budget
CAPEX Budget Nondirect cost Budget
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Different component of a budget process At the same time, to obtain a financial planning, we will realize: ď ąThe Budget completeness with the Balance Sheet area
ď ąProvisional and Actual Cash Flow with the relevant analysis dimensions
Reference Framework
Sales Plannig Purchase cost Budget
Quantity, Pricing, Payment Condition, etc.
VAT, etc.
Unit cost, quantity, VAT, payment condition, etc
Debts, Credits and Net Financial Position
Billings and Encashment Analytic Plan
Balance Sheet
P&L
Headcount, FTE, etc Personnel Budget
Cash Flow
Tangible and Intangible Assets CAPEX Budget
Budget dei Noncosti cost direct indiretti Budget
TFR, debiti, PFN
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Billings and Encashment Analytic Plan
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Fundamentals BPC - Link between economic/financial planning planning and Link betweenofeconomic/financial planning and operative operative planning • Technical cubes for simulations Check dashboard
Consolidation Level
• Mid–Term Consolidation • Key figure • Simulation at Group level
C
• Common target item for Market Unit
Consolview for business
Inter–business view MU Consolview
BU/MU level
Consol View for Entity and for Market
Main Dimensions
Group target check
Profit and Loss
Balance Sheet
KPI’s
Cash Flow
Sales Margin
Assets
Liabilities
Fi a ial KPI’s
OPEX
Depreciation
Free Cash Flow
Non Financial KPI’s
…
…
…
…
Business Unit Consolidation
C
Production (e.g. Power generation, …)
C
Production specific OPEX (e.g. Production, maintenance, project e e utio , aterial ha dli g, …)
CAPEX (e.g. Project, CAPEX, Fixed Assets, IT Projects)
Harmonization between business Units / Market Units
Group Consolidation
Group level
C
IC&PL Key figures Personnel Margin Interco detail
B MU 2
B MU …
• Harmonize Key Figures • Same main figures for all Market Units • Reconciliation
Sales specific OPEX
Financing cash flow (e.g. Increasing Capital stock, Dividends)
Working capital Financial KPI
(e.g. EBITDA, EBIT, CAPEX, Cost to serve, Cost to acquire)
Planning Items (Harmonized Cost Obj and CoA)
Custom
• Market View • Business View • Consolidated View
MU 1
Main Cubes
A
Specific detail per MU
Sales
B
Specific Cubes
Operating data capture
Market Unit specific dimensions
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Link between economic/financial planning and operative planning
• Top–dow targets, … • Top–down forecast • Automatic report generation from operational planning data
Economic/Financial Budget
Group level • Technical cubes for simulations
Group Consolidation Profit and Loss
Balance Sheet
Cash Flow
KPI’s
Group target check
C
• Common target item for Market Unit
Consolview for business
Assets
Liabilities
Financial KPI’s
OPEX
Depreciation
Free Cash Flow
Non Financial KPI’s
…
…
…
…
Business Unit Consolidation
C Main Cubes
C C B
A
Specific detail per MU
IC&PL Key figures Personnel Margin Interco detail
B MU 2
Production
Production specific OPEX
(e.g. Power generation, … )
(e.g. Production, maintenance, project execution, material handling, …)
Sales
Sales specific OPEX
CAPEX (e.g. Project, CAPEX, Fixed Assets, IT Projects)
Working capital
Financing cash flow
Financial KPI
(e.g. Increasing Capital stock, Dividends)
(e.g. EBITDA, EBIT, CAPEX, Cost to serve, Cost to acquire)
B
Planning Items (Harmonized Cost Obj and CoA) MU … • Harmonize Key Figures • Same main figures for all Market Units • Reconciliation
Operative Budget Operative Budget
Market Unit specific dimensions
Custom
• Market View • Business View • Consolidated View
MU 1
Specific Cubes
Consol View for Entity and for Market
Sales Margin
Inter-business view MU Consolview
BU/MU level
Operating data capture
Main Dimensions
Check dashboard
Harmonization between business Units / Market Units
• Mid-Term Consolidation • Key figure • Simulation at Group level
Consolidation Level
Economic/Financial Budget
• Bottom–up plans, sub–pla s, … • Bottom–up forecast • Integration between MU and BU plans, though keeping each MU and BU peculiarities
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