OIS Phase II is the “bridge” phase between Phase I’s business case and Phase III’s implementation when the traditional budget is discontinued.

 OIS Phase II: (a) Unlike Phase I, the Stage II incentive is for  all clients early adopter or otherwise. The incentive is that OIS will improve the firm’s  profit importantly beyond what traditional budget had planned for in the current year.

At the beginning of Year 1, OIS Phase I model is updated, appropriately, with changes from Year 1’s budget including:

• the budget’s annual forecast and an annual future forecast for the S of SG&A
• changes envisioned in the budget for next year’s COGS + G&A
• and optimize

The new OIS will have a forecast and income statement that provide the most profit possible. Then, Year 1’s most profitable budget is created by simply adding Year 1’s strictly fixed costs to OIS. Then sum the activity costs of each department to create the departmental budgets for Year 1

OIS Phase II: (b) Unfortunately, OIS and the traditional budget are the same for only a very few weeks as unpredicted economic dynamics unfold as they always do:

1. 1. making the budget’s forecast increasingly “out of step”
   2. making, in turn, the demands placed on the departments’ budgets’ just as “out of step” with the unpredicted new demands that will be placed on them
   3. also, firm’s profit is only updated-able during Year 1 at the highest levels of aggregation: Revenue – costs = profit.

Fortunately, OIS Phase II provides the CFO/CEO with a forecast and income statement during Year 1 that is updated whenever the current OIS’s forecast assumptions change importantly. For example:

• • important new product delivery  slips
  • more aggressive competitive pricing announced
  • strike
  • economic outlook improves or deteriorates
  • et al.

Another update occurs at the end of each of the current year’s quarters:

• • a comparison is made of the demand OIS had forecasted for that quarter with that quarter’s actual demand.
  • for those differences deemed significant, the associated response functions are updated.
  • OIS then computes a new income statement including a new most profitable forecast

Thus any new profit opportunities are identify as they occur!  So, if the new profit warrants pursuing during OIS Phase II, the CFO/CEO have all the information at the income statement line item detail they need to make the necessary budget changes to achieve the new profit.

OIS Phase II (c): This final section of Phase II implements a new form of the rolling forecast: the “rolling OIS.” It is a new best practice that is, in fact, the OIS that will be implemented in OIS Phase III. One that eliminates A) the traditional rolling forecast’s first 12 moths and all its problems.

The best practice includes:

• a rolling 12 months of OIS that is continually updated at the line item detail of the firm’s income statement. See (b) above
  • not at the detail of 3 to 7 key variables in the rolling forecast; see (A) above
• with a prescriptive forecast that is the most profitable one possible, a new best practice
  • not a driver-based deterministic solution: if X happens, Y is result See (A) above

Continuing with the rolling OIS process, description, at the end of the first quarter of the Year 1, a quarterly OIS will be developed for the first quarter of Year 2 extending OIS back to a 4 quarter model.. It will include a forecast incorporating anticipated events as opposed to the actual events described in OIS Phase II (b). Also, the appropriate future cast. This process continues for the next three quarters

Then, at the end of Year 1, if the Admin Support, below ,hasn’t been completed, the 4 quarters of the rolling OIS are replaced by the budget for Year 2  and the processes described in OIS Phase II (b) and OIS Phase II (c) repeat themselves.

OIS Phase II Admin Support

• Forecasting department should work for the CFO. If not, the forecasting department will provide the CFO with a forecast upon his request.
• Enough time will be provided before implementing Phase III for CFO/CEO to familiarize themselves with OIS’s Phase III’s “rolling OIS” functionality.
• The CFO/CEO team will also be working out all the additional details involved in eliminating the traditional budget in Phase III. For example, bonuses which are frequently associated with the departments’ achieving their budgeted expenditures.
• They will also assess whether:
  • other applications like S&OP could also be discontinued.
  • Given budgets generically have a variety of objectives, developing an OIS-based plan in Phase II to address them is an essential part of preparing for Phase III’s implementation. As a perspective, AccountingTools cites seven. Here is a generic mapping of OIS’s functionality to address the seven.  Importantly, it enhances them all.
  • Finally, are there other financial opportunities of possible interest to the CFO/CEO during Phase II and Phase III:  Additional OIS advantages for client’s CFO/CE.  See drop down menu
  • Should the firm want an OIS rolling forecast of greater than 12 months, it’s possible. Specifically, if the firm can develop a forecast to support the additional months, it’s likely the necessary supporting data can also be provided.