This presentation slide is used for the "Planning and Budgeting in Vietnam: Top challenges and solutions" seminar on August 9, 2012. This seminar is organized by TRG International and PwC Vietnam. The slide is shared through TRG International Blog. If you are really interested in this topic, I recommend you download the full slide at http://blog.trginternational.com/seminar-slides-download-planning-budgeting-in-vietnam/.

1. Planning and budgeting
in Vietnam
Top Challenges and Solutions

2. Agenda
• What
Setting the • Why
scene • Challenges
• Overall concepts
Best • Best practices
practices • Approaches
Examples of how technology helps
Your • Question‟s you asked
Q&A‟s • … and some answers
Question forms
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3. Setting the scene
Bart Ziemerink
Associate Director Consulting, PwC Vietnam
Bart leads the Enterprise Performance
Management (EPM) team in Vietnam. He was
involved in the development of the global PwC
EPM framework and approach. Prior to
joining PwC in Vietnam in 2011, Bart worked
for PwC in the Netherlands and Malaysia. He
has advised clients in various industries,
published articles and spoken at different
events on performance management topics.
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4. What is Planning, Budgeting and Forecasting?
• Top down development of 3 to 5 year plans to deliver long term value
creation
Planning • Considers a balanced set of financial and non financial measures
• Provides the basis for targets cascaded to the BU and OU level
• Enabled through modelling technology to evaluate consolidated business as
usual and project scenarios
• Annual budgets are the financial representation of the organisations
activity based business and project plans expressed as a profit & loss,
Budgeting balance sheet and cash flow statement
• Focused on the activities required to deliver against strategic targets
• Forecasting focuses on actions to bridge performance gaps
• It is largely driven out of the typical month end management reporting
Forecasting process
• In addition, it should encompass new knowledge regarding the external
environment and additional factors that may impact performance
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5. Attributes of Planning, Budgeting and Forecasting
Strategic
Business
Activities
Financial
Operational
Fixed Horizon
Planning, Budgeting
Cycles
and Forecasting
Rolling Horizon
Top-down
Bottom-up
Blended
Process Flexible
Zero-based
Beyond Budgeting
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6. Why do we all Plan, Budget and Forecast?
Planning & Budgeting for most organisations is the single most expensive of all Finance
processes, with a lot of hidden costs, too much detail and poor system support.
However it doesn't need to be so expensive.
To spend money?
Number of man days spend on creating the budget
To keep everybody busy? An median company with $1 bio. 25,000
To set targets for bonuses? Best in class company 700
(Numbers from Hackett group)
To adjust direction?
To influence behaviour?
On the other hand Planning & Budgeting should lead to the To drive action?
value creation that is expected by the organisations owners.
It is the most important of all Finance processes.
To beat the competition?
In most cases > 50% of Enterprise
Value is „Future Value‟ To create value more
(= value that can not be explained based on future cash
flows from current activities)
effectively and efficiently?
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7. What are the Top challenges you shared with us?
Weak or no alignment
between strategy, planning
and budgeting. They are all
done in isolation
Lagging behind: a call for
more rolling techniques
Limited technology: the
search for an effective
planning & budgeting
system
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8. It starts with your Strategy
Planning & Budgeting
Mission
Target setting,
Vision Translate value Forecasting
planning & budgeting
drivers into driver
based plans &
Strategic related budgets to
objectives Strategy
focus your
Map business planning
Value drivers on strategy Analyse &
evaluate results Adjust planning
versus planning & forecasting
and forecast
Translate mission, vision &
strategy & values into
strategy maps showing what
to focus on to manage your Translate value
business performance drivers into KPI‟s Dashboard (e.g.
KPI‟s
at several levels in Balanced Scorecard)
your organization
to focus your
business reporting Periodic Management and Operational
on strategy Reports
Organisation Processes People Data Technology
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9. Key Value Drivers enable you to focus the entire
organisation on executing the strategy by consistently
asking one single question...
Use as table of Use as guide for
content for prioritising
Strategy Map Use as an investment proposals
business plan
agenda for
(yearly)
planning Check projects on
their value add to
What did you do to the strategy
improve performance
on one or more of the
Communicate
drivers delivering strategy to all
your strategy?
Use for appraisal Use as guide for
and rewarding of determining
employees information need
Use as starting
point for reporting
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10. By translating value drivers to KPI’s, setting targets on those KPI’s
and defining actions and related budgets to reach those targets,
your budget will be entirely focused on strategy execution
Strategy Map
• A good strategy map “tells the story” of your strategy by showing the
cause-and-effect relationships between your value drivers and your
strategic objectives. It is the cornerstone of your Performance
Leadership potential.
• Joint development of your strategy map will enable your management to
immediately use the created insight in what drives your strategy to
manage the organisation.
Value drivers KPI’s Targets Initiatives Budget
Measurable factors Measurement Level of desired Main initiatives to Financial mandate
that impact strategy of success in realising success or indication realize objectives needed/given to
execution and create the strategy improvement execute these
value potential initiatives
1 2 3 4
What do we really How do we know if How good do we What initiatives What do we need /
have to excel at to we are actually need / want to be at are needed to reach want to invest to
reach our strategic excelling at this? this? our target? reach our target?
objectives?
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11. Mapping plans against value drivers enables you to check
on balance and strategy focus
Match the planned
actions / projects with
the value drivers to
find out:
Value driver A Value driver B Value driver C Value driver D Etc.
1. (strategic) relevance
2. completeness
Gap 2) There are no Gap 3) There are (too) many
3. balance / ROI
actions / projects that actions / projects that relate
Plan / project 1 relate to value driver „B‟ X
to value driver „C‟
Plan / project 2 X (no balance in investments)
Plan / project 3 X X
Plan / project 4 X X
Plan / project 5 X
Plan / project 6 X
Plan / project 7 X X
Plan / project 8
Plan / project 9 X X
Plan / project 10 Gap 1) Plan / project 8 is X X
Plan / project 11 not strategically relevant X X
as it does not relate to any
Etc. X
of the value drivers
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12. Planning, budgeting …
and (rolling) forecasting → theory
Business Financial Analyses &
activities consequences Reporting
Planning Budgeting
Capturing
In theory superior yet efficiently
history
gained insight stems from
combining…
&
Forecasting
… information on actual
performance …
… with budget related forecasts …
&
… as well as forecasts rolling into Rolling
the (near) future Forecasting
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13. Why automate the process?
Automate
• Data collection
labour-
• Consolidation
intensive
• Version tracking / control
tasks
• Multiple ledgers / systems
Integrate
• Spreadsheets
data from
• Multiple people / locations
• Submit / retrieve data from anywhere at any time
Bells & • Support rolling planning / budgets / forecasts & reporting
whistles • Real time monitoring / visbility of submissions & approvals
• Real time “what-if” scenarios
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14. Best practices
Rick Yvanovich FCMA, CGMA, FCPA (Aust.)
Founder & CEO, TRG International
Rick is a Chartered Management Accountant with 30 years
of diverse experiences including Oil & Gas, Hospitality,
Retail, Telecommunications, Financial Services, Property
development, Defence Manufacturing, Manufacturing,
Breweries, FMCG, High Technology, and the Accounting
profession. He has been living in Vietnam since May
1990. A consultant and serial entrepreneur he has been
directly involved in hundreds of client engagements in 39
countries and founded several companies including TRG
International. Rick is a Board Member of the South East
Asia Regional Board for CIMA and is also Chairman of the
AMCHAM HCMC ICT group
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15. Leading practice organizations integrate all aspects of
planning
Leading practice capabilities:
 Move from yearly planning process to Integrated
continuous/rolling forecasting Planning
 Top down/bottom up target setting and budgeting
Link planning and execution at all levels
 Flexibility modelling of scenarios based on differing
business assumptions
 Align incentives and rewards to strategic objectives Continuous
Planning /
 Decentralisation of planning activities and rolling
ownership to enable continuous planning and drive forecasting
accountability
 Integrated planning technology based on a common
data model, hierarchies and chart of accounts
accessible to BI, analytics and ERP
Top down /
 Shift focus to value drivers and strategic objectives bottom up
utilising balanced scorecards target
setting and
planning
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16. Planning Cycles
Fixed Time Horizion Rolling Time Horizion
Q1/1 Q2/1 Q3/1 Q4/1 Q1/2 Q2/2 Q3/2 Q4/2 Q1/1 Q2/1 Q3/1 Q4/1 Q1/2 Q2/2 Q3/2 Q4/2 Q1/3
Planned Values FY 1
Planned Values FY 2
 Changes in environment and premisses can be  Less planning effort during the financial year
integrated into planning contemporarily.
 No revision of exisitng plan
Budgets are modified to the respective level of
information (More flexible responses  High need and effort for estimates
possible).
 High effort for deviation analyses
 Planning as a permanent process
 Target/performance deviations more likely
 Low need and effort for estimates
 Small likelihood of target/performanace
deviations
 Planning period not focused on reporting
period, indirect deduction of FY planning
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17. The Two Basic Concepts of Forecasting (1/2)
Year-end Forecast Rolling Forecast
 Fixed reference point: end of FY  Fixed reporting period (4-6 quarters),
comprehensive (across FYs)
 Management estimate concerning the
achievement of planned objectives of the FY  Management estimate concerning the
implementation of the strategic alignment
 Active controlling within the operative
business scope via measures  Active controlling via measures
 Tie between „Actual“ and Plan  Tie between „Actual“ and Strategy
Forecast Forecast
Financial Year 1 Financial Year 2 Financial Year 1 Financial Year 2
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18. The Two Basic Concepts of Forecasting (2/2)
Year-end Forecast Rolling Forecast
 Lower preparation effort, since budget "only" Prompter integration of changes in the
has to be revised environment into planning
 Taking into account the meaning of the end Improved strategy orientation and
of the FY implementation
Continuous look into the future, not just once a
year
Early recognition of future opportunities and
threats
The rolling forecast can replace the tasks or the statements of the Year-end Forecast,
but the Year-end Forecast cannot provide a comprehensive (across FYs), strategic orientation !
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19. A typical budget cycle … not just in Vietnam
• Management • Finance
reviews the creates the
budget and… forms
“Repeat this cycle until either the
management team is happy with the Gartner
budget or budget managers lose their
will to live”
• Finance • Managers
aggregates input their
the budget data by
accounting
period
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20. The Typical Budgeting Process
Strategically disconnected
60% of large companies report either “no link” or a “weak
link” between the strategy and budget processes … whereas
more than half of the respondents (52 percent) reported
that creating closer links between strategy and operations
was one of their top two priorities.
Slow
Completing an annual budget takes an average of 110 days.
Expensive
Finance departments alone spend $63,000 per 100M in
corporate revenue on budget creation each year … yet only
44 percent of the budget and forecasting process is spent
on analysis, strategy development and target setting.
Unreliable
Management and investors are routinely surprised by the
variances between communicated expectations and results
… no wonder if you know that 70 percent of respondents
reported dependency on spreadsheets.
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21. If you like this topic, please download the full
presentation slide HERE
Thank you!
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