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PPM Insights: Surviving-to-Thriving, Taking the Mystery out of Financial Planning – Part 5 (Forecast/Budget)

By dobka03 posted Apr 21, 2017 08:21 AM

  

Hi PPM practitioners! Welcome to my 5th blog in the series. I hope these are helpful to CA PPM Financial Planning newbies.

Which Investment Types Support Detailed Forecasting?

The good news—all of them (Ideas included 14.3+). The better news—once you know how to create CA PPM cost and budget plans, you can do it for any type of investment. The level of planning detail usually varies based on the type of investment (ideas, projects, applications, etc.), but the steps are the same.

 

Project Financial Forecast

Let’s use project forecasting as our example, since most PPM practitioners have produced a project forecast or budget in Excel. The goal is generally to provide a projection of project cost broken down by expense categories over time.

Excel Forecast ExampleCA PPM cost plans are used to prepare a high-level estimate of investment cost during the intake/initiation phase (leveraging ideas or projects) or a more detailed projection during the planning phase (preparation of business case). They are then used for obtaining funding approval. Once the investment has entered the execution phase, cost plans provide an ongoing forecast of spend and track actuals and variances to approved spend.

 

Cost Plan Structure

The cost plan structure consists of a definition of general properties, along with line item details grouped by investment cost categories, with estimates for each planning period.

Cost Plan Properties

Cost plan properties define the planning period and attributes used to group costs into specific expense categories.

Cost Plan Properties

To ensure reporting and tracking consistency, establish a standard for grouping attributes used to plan investments. Planners can create other cost plans for the investment, grouped by different levels of detail for analysis, but the plan of record for each investment should be standardized as defined by the organization’s business process.

Cost Plan Details

Cost plan details contain line item detail by planning period. In the example below, the forecast is defined by cost type (for breaking out capital vs. operating costs) and transaction class (categories of expense).

Cost Plan Details

 

Populating the Cost Plan

This is one of my favorite features; it demonstrates the power of CA PPM component integration.

Labor Forecast

During initiation or project planning, the project manager identifies staffing requirements by estimating resource roles and level of effort the investment requires. During planning, the PM works with resource manager(s) to target and commit resources.

Two powerful cost plan features are Populate from Investment Team and Populate from Task Assignments. Leveraging the PM’s staffing work, the cost plan can automatically forecast labor cost by using one of the population methods and the cost/rate matrix. The Populate from Investment Team action uses team allocations to forecast cost by category and time period. Populate from Task Assignments uses assignment estimates defined in the project’s work breakdown structure (WBS) to project cost by category and time period. The cost plan can be repopulated to reflect staffing and work revisions. Note: The Populate from Task Assignment action is not available on ideas, applications, assets, products, services and other work investment types, as these do not have a WBS. Populate from Investment Team is available on all investment types.

Other Cost

For other cost (e.g., purchase of equipment or travel), estimates can be manually entered. Repopulating the cost plan doesn’t impact manually entered estimates for non-labor. Care should be taken, however, not to manually update estimates on line items coming directly from the Team or WBS estimates. (One method or the other should be used consistently.)

 

Cost Plan of Record

Since CA PPM supports multiple cost plans, only one may be designated as the plan of record (POR) for communicating planned cost in all CA PPM reports and dashboards.

 

Using Cost Plans for Approved Spending (Budget Plan)

The cost plan is also used to request budget approval in CA PPM, reflecting approved spending for the investment. The PM flags the cost plan POR and uses the submit for approval feature to automatically generate a budget plan. A copy of the submitted cost plan is created as a budget plan and reviewed/updated by the budget approval team. If approved, the budget plan is automatically flagged as the budget plan of record (POR) and becomes view-only. Revisions may be managed by repeating the process. CA PPM retains budget history.

Budget Plan

 

Ongoing Forecast

Forecasted spend may vary during the life of the investment. CA PPM supports reforecasting spend by period without touching the approved budget plan. Revisions may be made directly to the cost plan POR, or the Copy Cost Plan feature may be used to generate a new forecast, retaining the original. Revisions exceeding current approved budget or major reductions may also leverage the Budget Plan submission noted above.

 

Coming Soon

In my last blog for the series, I’ll cover entry of actual cost.

In Case You Missed It

Taking the Mystery out of Financial Planning – Part 1 (The Basics)

Taking the Mystery out of Financial Planning – Part 2 (Financial Framework)

Taking the Mystery out of Financial Planning – Part 3 (Classifications)

Taking the Mystery out of Financial Planning – Part 4 (Managing Rates)

 

Readers interested in more detail around CA PPM Financial Planning can check out DocOps. I encourage you to participate in the best-in-class CA Communities site, where you have access to your peers, events and support. You can also reach out to CA Services for information about CA PPM and individualized business outcome references and analysis. Feel free to post in the comments section of this blog or contact me directly via email and Twitter @kdobsonppm.

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