A. Source of OIS’s Advantages: As context, it is essential to understand how OIS differs from the traditional budget’s income statement. These differences are the essence of what makes OIS’s functionality so compelling starting with it’s forecast which is the most profitable one.

1. Traditional budget’s foundational building blocks: It is the firm’s departments’ budgets while OIS’s is the activities of those departments. This distinction favors OIS enormously:
   1. Traditional budgets can’t be modeled; activities can which makes much more relevant and profitable planning possible, as described below
   2. Those budgets provide no value for the firms’ customers; activities are what the firm does that create value for its customers
   3. Those budget’s are widely understood to be deeply flawed; activities are not.
   4.  Those budgets give the managers no knowledge of how to contribute to the firms’ profit other than to under-spend their budgets, not a particularly likely outcome. Activity-based analyses show the managers how to make their activities more productive, tying their efforts directly to the firm’s profit.
   5. When the firm’s volumes are foretasted to improve or decline, the budget has no reasonable way to adjust the departments budget for volume changes.  All that’s available is the percentages changes in the volume.

Conversely, the departments’ activities have been modeled as a function of volume! So, all that’s required is to multiply the departments’ activity cost by the new volume to update the departments’ budgets. See (1) above.

2.  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

3.   Details 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

B. AccountingTools lists six budgeting objectives:  OIS must either improve on them or provide equivalent functionality before OIS’s Phase II can be implemented. It’s also very likely each firm will tailor its budgeting objectives to meet its particular needs. However, as a template, here’s the author’s view on how OIS will address the six, generically.