4. *
*Original Question “We are a Global
Organization and Our Senior Managers spend 6
months in a year on Planning & Budgeting. Is it
possible to Fix this? If yes then how?”
*The Correct Question - “There are a lot of
issues involved here but if we start from the
First Principles the solution could be very
simple conceptually. The right question is to
question our Assumptions and Articulate our
Purpose. Allow me to show you.”
6. *
* Both budgeting and accounting are fiscal systems or processes that involve planning,
allocating, and disbursing of monetary resources.
* This results in an interrelationship and a need for coordination between these two
fiscal disciplines.
* Generally, budgeting is regarded more in terms of planning and enacting a fiscal plan.
* However, these planning and enactment processes are dependent upon the accounting
of past-year and current-year expenditures, revenues, transfers and prior year
adjustments.
* And Accounting focuses on the recording, classifying, and interpreting of financial
transactions
* Accounting systems provide data for the budget process
* As well as monitoring budgeted resources for the duration of the life of appropriations
* The budget contains a complete plan and itemized statement of all proposed
expenditures... and of all estimated revenues, for the ensuing fiscal year, together
with a comparison, as to each item of revenues and expenditures, with the actual
revenues and expenditures for the last completed fiscal year, the estimated revenues
and expenditures for the existing fiscal year, and the budgeted revenue and
expenditures for the next fiscal year…
7. *
* 1 month before the Quarter or Year gets over “Managers” spend an enormous amount
of time and effort to “Just tweak a few things” to make the numbers look attractive to
Investors
* Auditors spend an “enormous time and effort!!!” making sure another Enron doesn’t
happen ;-)
* 1 month after the Quarter or Year gets over The World gets to see the Numbers and
how we performed and we give projections, Wall Street and Analysts swing into action
…
* Senior Managers take the last year’s numbers make some projections in the air 1 year
down and spend a few months planning and budgeting (shouldn’t we be spending more
time running our business?)
* Our Mid Managers use something called Cost/Managerial Accounting to run the show on
the ground…
* A lot of businesses’ Focus exclusively on the Purpose and Direction and leave it to
Finance to make sure nothing is going drastically wrong on that front… “Yeah lets get
the customers and market share… the profits will come later…”
* Professor Ram Charan says Managers need Business Acumen to run companies
successfully. They need to know how their business makes money, where it is spent
etc. etc. and that such principles are valid across all businesses
8. *
* If everyone’s happy why change things? What happened now?
* Well! We just designed General Ledger Systems that can reliably do 10-
200+million entries per day if not 100x that if needed
* Specialists designed and implemented Double Entry Book Keeping. But now
generalists that work across Software, Finance & Accounting, General
Management, Legal… came along and figured out they could solve a lot of
problems if they fixed this
* And everyone realized that Accounting was the base on which everything
else is built, so to fix anything we have to start with fixing accounting…
* Some people fancy Kaplan Norton’s Scorecards but a lot of other people
realized that the best way to manage an organization was using Individual
and Aggregate Realtime Continuous Trends
* And that Accounting was slow, delayed and still periodic at best.
* And it was becoming difficult to Manage an organization using Trends
without Continuous Accounting, Budgeting, Planning, Allocations…
9. *
* Continuous Accounting would enable
* Continuous Planning & Targets(???)
* Continuous Forecasting & Actual Burn Rate
* Continuous Budgeting & Allocations
* Realtime Management by Trends
* Increased Transparency
* Performance Management & Better Performance
* Easier Auditing – Watch out for Changes and Reversals first in the least, the nonsense of tweaking numbers will
become very difficult with Realtime Trends being Publically Available.
* Being Ethical will become easier and being Unethical will become a little bit harder. If you are not doing this you
have a lot to hide…
* Iterative and Incremental Execution will get reinforced
* Interplay between Management and Leadership will be smoother
* Interplay between By Design Strategies and Emergent Strategies will be smoother
* Continuous Feedback for anyone who cares
* Immense Automation, on demand Report generation, public Report (Not Book Entry Data) API’s & Ratios & Trend
Dashboards
* Reasonably Automated Consolidated Report Generation
* Prof. Ram Charan’s concept of Business Acumen will become more prevalent across Managers which will be nice…
* And Finally Business Agility…