As an introduction, it is essential to understand how OIS differs from the traditional budget’s income statement. These differences are the essence of what powers OIS’s functionality.

1. Cause and effect: The traditional income statement is an effect; it is a derivative of the budget. OIS is the opposite; it causes the operational budget (OB) = OIS + firm’s strictly fixed costs
2. Budget data: The budget’s data is the departments’ budgets. OIS’s is the  departments’ activities.
3. Detail of forecast-ed profit: The budget’s departments’ budgets can’t be modeled. So, the budget’s detail is only valid on day 1 of each new year. After that, the only way to update profit is predicatively at the grossest level. Profit outlook = revenue minus total costs.

Conversely, OIS’s profit is always current at the line item detail of the firm’s income statement.

4. Analytics: The budget’s is predictive: What is result if X happens. OIS’s is prescriptive: what is the best possible result

Phase I:

Organization: The CEO and CFO will be using OIS to provide insights into improving both the firm’s profit and related aspects of the firm’s financial performance without disrupting the traditional budget’s process and utilization. The author’s suggestion is that OIS support should be provided by a small CHQ department reporting to the CFO.

It’s a small department because OIS is a model so the turn around is quick and the staff requirements are modest. Another way to think about the department is that it becomes, in effect, a prescriptive analytics financial “wheel house” for the CFO/CEO.  In fact, such function was out-looked in 2014 by the then CEO of Deloitte. In addition, in 2016 Thomas Davenport published another article in CMO describing Finance as currently behind in advanced analytics’. Certainly, something OIS addresses authoritatively!

Tasks:

• Profit improvements beyond what’s budgeted: OIS is updated any time a new forecast is generated for what ever reason. See OIS is always current.

If  OIS’s new profit is enough better than what’s budgeted, a simple analysis is performed to determine its source. Simply compare OIS’s departments’ costs with the appropriate departments’ budgeted costs and adjust the budget as appropriate.

• Fr other financial performance analyses of interest to the CFO/CEOs., see

“OIS Additional advantages for clients’ CFOs/CEOs.” see tab on OIS home page

• Plans for eliminating the budget in Phase II: Budgets generically have a variety of objectives. Further, each firm will tailor its budgeting objectives to meet its particular needs. So, there can be no “one size fits all” plan to replace it; each will be specific to the firm. So, developing such a plan is an essential deliverable of Phase I since replacing it eliminates its widely acknowledged problems and cost.

Further, these problems have created a variety”work a rounds.” Budgeting specific examples include zero-based budgeting, flexible budgeting and activity-based budgeting. Other process examples include Sales & Operations Planning (S&OP), Integrated Business Planning and driver-based planning.

All of their costs and HC  commitments will also be eliminated.