Strategic modelling out-of-the-box

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Strategic modelling out-of-the-box

Strategic modelling and long-term planning with Oracle’s Enterprise Planning & Budgeting Cloud Service (EPBCS) – part II

Financials need powerful and flexible tools to analyse the consequences of rapidly changing business circumstances and insecurities that are inherent to financial prognoses for the long term. Many finance departments rely on spreadsheets to create financial modelling and impact analyses for these forecasts. Such tailor-made spreadsheet solutions are hard to manage, lack data transparency and integrity, are not integrated into operational plans, and are not efficient in handling treasury and financial modelling activities.

In addition to helping you get rid of unreliable forecasting models and methods, Oracle EPBCS can handle all aspects of financial modelling with the Strategic Modelling module, replacing multiple spreadsheet environments.

In a previous blog, we already took a closer look at the What-If modelling capacities of this Agile planning module, Strategic Modelling by Oracle EPBCS. In this second part, we take a look at the other out-of-the-box functionalities for long-term planning, corporate finance and Treasury initiatives in this module.

Strategic Modelling – the basis

Within EPBCS, the user interface, navigation, data integration and reporting options are exactly the same for each module, including strategic modelling. Integration with the other modules therefore also provides the option of easily moving data from budgets and operational plans to the strategic plans. In addition, Strategic Modelling shows how strategic decisions could have affect the bottom line, balance sheet, cash flow and shareholder value of your organisation.

These functions are all embedded, so you no longer have to worry about writing out the financial logics. These built-in options for financial modelling are easy to use, ensuring financial professionals can easily add complex modelling to their planning process. In addition, Oracle offers users a web-based interface and a spreadsheet interface, which gives you the look and feel of a tool that is easy to learn.

A few of the options

Forecasting cash flows and balance sheet fluctuations are crucial elements in every planning environment. Strategic Modelling provides financial intelligence that links every aspect of financial performance – from profit potential and management of working capital to capital expenditure, taxes and the capital structure – to support the organisation. With Strategic Modelling, users can tackle the complex and iterative nature of financing, the impact of strategies on credit ratings, and optimisation of capital structures. It provides such functions as treasury planning, which can be used to create value and reduce an organisation’s capital costs. Here’s an explanation for some of the out-of-the-box functionalities that support this:

The Consolidation View consolidates models by using standard calculation rules, consolidates account groups over specific time periods and excludes account groups for eliminations. Consolidations across different scenarios are supported, ensuring that scenarios based on different models can be combined in order to identify the most probable scenario in the consolidated model. You can exclude models that are not relevant for a scenario, look at model consolidation methods, such as equity, and add models to a consolidation by dragging and selecting, and by selecting the scenario for consolidation for each business case. In addition, you can check the status of consolidations from the Job Console and you have the option to modify the navigation flows.

You can use Account Forecast to decide how a value is determined by looking at forecasting formulas and adjusting them as needed. Both standard and custom forecast methods are supported. Using the custom forecast method, you can define adjusted formulas by using the Formula Builder, which displays the accounts and offers a wide range of functionalities that you can use to enter conditional instructions, retrieve other account values and include specific time formats. To record more details, you can add new accounts and aggregate them into the hierarchy of the list of accounts.

Audit Trail provides the transparency you need to fully understand the account logics, assumptions and relationships in a model. You can use Audit Trail to determine how values are calculated, but also to adjust your assumptions.

A built-in hierarchical list of accounts with similarly structured financial logics will help you get started quickly, together with the option to add sub-accounts for planning on a more detailed level. By default, accounts contain balance sheet accounts, income statements, funding flows and cash flows, including related accounts and account types.

A set of integrated financial reports contain e.g. a standard income statement, balance sheet and cash flow. Using Excel, you can also define supplementary reports. Finally, Administrators or Form Designers can create calculation rules that generate a long-term plan based on the bottom-up plan by synchronising the plans. The long-term plan is updated for the next year and the assumptions for future planning can be modified. To ensure that the strategic and operational plans are aligned, the updated objectives can be fed into the operational projections.

Using this mixture of standard functionality and customisation options, Strategic Modelling contains a perfect agile toolset (robust, flexible and versatile) for strategic modelling and long-term planning, including integration with your operational plans.

Would you like more information about Oracle’s financial planning solutions? Or are you curious to see what a successful implementation could mean for your organisation? We would be happy to answer any questions or contribute ideas based on your own planning process! Feel free to contact us. We would be happy to help you along in your process.