INTRODUCTION

Every medium to large organization produces budgets for every financial year usually at the end of the preceding financial year. Budgets are a financial plan of the organization which help to crystallize the organization’s strategic plan into realistic estimates of income and expenditure usually for a period of a year even though plans can be done for several years into the future. Budgets are usually produced by departments or smaller units of an organization (sections) usually using Microsoft Excel and are then later consolidated at various levels of the organization until there is a consolidated organization’s budget or national budget in the case of a country. The following are the challenges that organizations usually face during budget preparation processes.

CHALLENGES FACED BY ORGANIZATIONS IN PREPARING AND USING BUDGETS

The challenge of time – Since budgets have to be prepared starting with the smallest unit in the organization such as a section, cost center or profit center, the process usually takes time as each unit produces their budgets and there is consolidation at various levels as well as back and forth transmission of budgets as they are reviewed and send back for adjustments.

The challenge of skills – Usually budgets are prepared using Microsoft Excel and most users of Excel have basic knowledge of Excel which cause them to make many arithmetic and formula errors in producing and consolidating the budgets.

The challenge of wrongly produced budgets – Accurate budgets are zero-based. This means that figures on the budget must be calculated by multiplying the estimated number of units by the estimated price regardless of how much was received or incurred the previous year. In most cases, people involved in budgeting take the simpler route of simply inflating past performance but this does not produce correct budgets as most times each budgeting period has its own unique economic, market, climatic conditions which require fresh forecasting.

The challenge of budget notes – A good budget must be easy to review by enabling every figure in the budget to be understood in terms of how it was calculated. Most times calculations are done on a piece of paper then the resultant figures are captured onto a spreadsheet and this causes problems in reviewing the budget.

The challenge of what-if analysis – When a budget is produced using a well- designed budgeting model or system, it becomes easy for management to carry out what-if analysis and be able to make key decisions by monitoring the behavior of the results as they play around with the system. This is not usually the case as most budgets produced using Microsoft Excel while the users are not well skilled to produce robust models.

The challenge of budget monitoring and tracking – Monitoring the budget maybe difficult because in most cases unutilised budgets are not ascertainable in real time. Accountants only do some variance analysis reports later after expenditure has already been committed. With a good budgeting system, variances will be available in real time and the system must also allow for both price variances and efficiency variances.

INTRODUCING PLANIX BUDGETING SYSTEM

After looking at the above challenges, we decided to come up with a robust budgeting system or model that can be customized to suit any type of organization.This saw the birth of PLANIX budgeting system in 2015 which has now seen various upgrades and improvements over the years to the current version called PLANIX ULTIMATE. PLANIX was initially designed for Local Authorities of Zimbabwe, a project that was supported by the Ministry of Local Government of Zimbabwe, Ministry of Finance of Zimbabwe, the UNDP and UNICEF. We have now standardized the software to enable its customization for use by any other organization that is not necessarily a local authority. In Zimbabwe currently, PLANIX is now being used by almost all of the 92 Local authorities of Zimbabwe including rural and urban councils.

PLANIX ARCHITECTURE

SYSTEM MODULES

PLANIX is a modular system that is so flexible in its implementation. Some of the modules are:

• The Income Budgeting Module – For budgeting the organization’s income. This module differs from one organization to another and forms part of our customization during implementation.
• The General Expenditure Module – For budgeting for general expenditure, repairs, maintenance and other operating costs such as Finance costs.
• The Capital Expenditure Module – For budgeting for the organization’s capital expenditure items, projects and the respective funding of the same assets.
• The Human Capital Expenditure Module – For budgeting for the organization’s Human Capital costs. This module is able to calculate expected benefits per every person in the organization.
• The Admin Charges Module – For transferring funds from one Section or Department to another as a way of internal funding for various sections and programmes.
• The Forecast to Year End Module – For forecasting the actual performance of the preceding year for comparison with the new budget.
• The Take on Module – For the take on of existing budgets done in Microsoft Excel at the point of initial setup of the system.
• The Departmental module – For the preparation of the departmental and sectional budgets.
• The Consolidation Module – For Consolidating all Budgets.
• The Management Accounts Module – This is an optional module that integrates with the organization’s ERP system to pull out actual performance and compare it with budgets for variance analysis purposes.
• The Reporting Module – This module enables Managers and Executives to view budgets that are being prepared by their departments and sections in real time as the budget preparation process is going on. It is a view only module whereby users are not able to edit the budgets but view only.

KEY FEATURES AND BENEFITS OF PLANIX

Enables Distributed Budgeting – PLANIX comes with a choice of any of two installation modes: 1. As a standalone budgeting model that can be installed on one computer of the Budget Officer who then receives budget data from various departments/Sections on Excel Spreadsheets, inputs the data and budgets are automatically produced by the system. 2. It also comes as a distributed budgeting system whereby users in sections or departments collaborate in budget preparation by getting a budgeting module which they use to input their budgets and simply “Push” the budgets for automatic Consolidation.

Automatic Consolidation – No time is spent consolidating budgets as sections simply “Push” budgets to the consolidation module which only requires a “Fetch & Consolidate” button click to automatically consolidate all budgets.

Option for Cloud Budgeting – Section or Departmental modules can either communicate with each other via the organization’s Local Area Network (“LAN”) using the organization’s server or via the internet to access a Cloud server. The cloud option enables every manager who has been granted access to be able to access the budget and actual performance from anywhere in the world as long as they have internet access.

Supports Programme Based Budgeting (“PBB”) – The system comes with an option to use it for programme-based budgeting which gives more insight into the budgets by analysing the budget into various programmes as opposed to traditional line budgets which are limited in terms of insight regarding the impact of the budget to the expected outcomes.

Top-down and bottom-up budgeting approach – PLANIX enables the organization to send budget assumptions and other parameters from the top via the system while those at the bottom of the organization are able to send back budgets for consolidation all via the system.

Control – The system comes with user password controls, user rights controls and audit trail that enables management to know who has done what in the system. Users with no rights to access budgets will be shut out of the system while those with access can be limited to certain budgets only.

Supplementary Budgeting – PLANIX enables the organization to do as many supplementary budgets as they want in a single year. This is critical especially in an inflationary period.

Departmental Distribution Vs Functional Distribution – The system allows the organization to distribute the budget preparation process by department or section or by function or budget type such as “General Expenditure”, “Human Capital Expenditure” etc.

Simple & efficient to produce budgets – Users will not need to write any formula, link anything or consolidate. This is done automatically by the system. Furthermore, the system comes with what we call “Budget Duplication” which helps users to duplicate prior year budgets and simply edit them making it more fast to produce the budgets.

Multi-currency Translation – The system enables budgets to be translated and presented in as many currency of choice as the organization may want. At the point of starting to use the budget, a base currency is set and then exchange rates entered at any time translation is needed.

Accuracy & Transparency – All budget figures can be traced back to calculations by way of a feature we call Dependency Inspector and the system also produces Budget workings reports. Furthermore, all formulas and calculations have been tried and tested over the years in such a way that there won’t be arithmetic errors in the budget.

Integrity – The system has inbuilt data validation mechanisms which produce dynamic alerts and red flags when invalid data is entered.

Integration with the Management Accounts Module – The system can be optionally integrated with our Management Accounts Module which allows the organization to fetch actual data from the system together with budgets from the budgeting system and present variance and graphical analyses.

Various Levels of Report Presentation – PLANIX presents two dimensional reports as well as drag-and-drop multi-dimensional formats together with different summary levels such as detailed reports, summarized reports, yearly reports, quarterly reports and monthly reports.

Detailed Analysis for Various Stakeholders – The system presents results in form of tabular reports, graphs and Executive Dashboards.

Budget Approval & Budget Locking – The system comes with a budget approval module that allows the budget to be approved by a click of a button. Once the budget is approved it becomes locked and can no longer be changed except only by doing a supplementary budget which also requires to be approved.

What-if Analysis – The system enables Executive management to make decisions by playing around with what-if analysis tools in-built in the system. The system therefore can be used as a strategy formulation tool.

Zero-based Budgeting & Inflation Adjustments and Growth Rate Budgeting – The system allows users to do both zero-based budgeting, to inflate figures by an inflation factor and to apply growth rates based on past performance.