Seven were provided by AccountingTools

• Provide structure
  • “…only if management refers to it constantly and judges employee performance on expectations outlined in it.
    • OIS’s forecast contains the best possible profit updated any time an OIS assumption changes. That should certainly warrant constant management references
    • An example of a performance expectation change is changing the managers from cost management to profit improvements. Those are provided by departmental activity-based analyses providing improvements in departments’ activities productivity
• Deal with risk
  • “…scenario planning….allows business to explore different financial outcomes…”
    • OIS scenario planning results provide the most profit possible
• Provide cash flows
  • “…only reasonable if it covers the next few months…”
    • Advanced cash flow analytics provided by Optilogic same company that will implement OIS OIS’s Cash flow
• Allocate Resources
  • “…should be combined with capacity constraint analysis…”
    • Such analyses are based on activities and are thus integral to OIS which is created with activities
• Control costs
  • “…determine whether the department managers are controlling their costs to align with the budget…The intent is to ensure department expenditures are capped.”
    • OIS has no such requirement. Its departments’ budgets are determined by the budget’s forecast times the departments’ activity costs required by those volumes.
• Model scenarios
  • “…create a set of budgets, each based on different scenarios…can result in unlikely results if overly optimistic assumptions are used.”
    • Budget’s scenarios results are predictive; what will the result be if X happens. The results are thus neither the best nor consistently developed.
• Measure performance
  • “A common objective of budget is to use it for judging employee performance through variance from budget. Treacherous objective…managers can modify budget making their objectives easier…known as budgetary slack
    • Impossible with OIS as described in Control costs in PP2. Managers have not involved in developing their budgets.