Introduction: 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 processes. The author’s suggestion is that OIS’s support be provided by a small CHQ department reporting to the CFO. It’s a small department because OIS is a model and it’s straight forward to formulate the changes necessary in a current model or develop a new one to address the issues in which the CFO/CEO are interested.

Another way to think about the department is that it becomes, in effect, an advanced analytics “wheel house” for the firm under CFO/CEO leadership.

In fact, such a function was out-looked in 2014 by the then CEO of Deloitte. In addition, in 2016 Thomas Davenport published another article in Chief Marketing Officer magazine describing Finance as currently behind in advanced analytics. Certainly, something OIS fixes definitely.

Among the variety of advanced analytic advantages OIS provides the CFO/CEO the most important is its forecasting capability. It sets a new best practices forecasting standard by providing a forecast and associated income statement that is the most profitable one possible. 

There are a variety of opportunities for the CFO/CEO to consider looking for profit. They include:

A.  Compute most profitable forecast for next year’s budget

1. Update OIS Phase 0 with appropriate changes from next year’s budget and optimize
2. Create next year’s budget by summing activity costs of each department to create each department’s budget for next year.

B.  Capture profit opportunities that emerge during the next year Unfortunately, OIS and the traditional budget are the same for only a very few weeks as the traditional economic dynamics unfold:

1. making the budget’s forecast increasingly “out of step”
2. and its profit only updated-able during the year at the highest levels of aggregation: Revenue – costs = profit

What follows is the possibility of a significantly improved profit opportunity as a part of improved rolling forecast functionality. It is enabled by either forecasting reporting to the CFO or the CFO persuading whomever it does to update the OIS forecast from the beginning of the year when:

• Any of the beginning forecast’s assumptions importantly:
  • new product delivery  product slips
  • substantially more aggressive competitive product(s) competition
  • et al
• At each quarter’s end

If such forecasts were available, OIS would incorporate them and compute a new most profitable  income statement. As such, the CFO would know exactly which departments would need more resource to achieve the profit. With that information, the CFO could decide whether the traditional budget should be updated to achieve the additional profit.

C. Other financial opportunities of possible interest to the CFO/CEO:  See”Additional advantages for client’s CFO/CEO” tab on OIS home page

D. Plan for supplanting the budget in Phase II: Budgets generically have a variety of objectives. So, developing an OIS-based plan in Phase I to address them is an essential part of preparing for Phase II’s implementation.

As a perspective, AccountingTools cites seven. Here is a generic mapping of OIS’s functionality to address the seven.  Importantly, it enhances all of them.

The OIS implementation team of CFO/CEO/most senior Operations executive would also being working out all the additional details involved in eliminating the traditional budget including bonuses which are frequently associated with the departments’ expenditures..