Financial Planning and Budgeting System
The system is designed to automate financial planning and budgeting (FPB), income and expense accounting, and cost calculation for our customer.
Budgeting at Alfa-Bank was based on an informal procedure using MS Excel spreadsheets. Budget formation and approval, as well as allocation of incomes and expenditures had no distinct algorithm, which caused problems in budget consolidation. The reference information that should define the budgeting process was also missing.
IBM Cognos Planning 8 was selected as the most feasible software platform. The implementation began in June 2009 and in May 2010 the system was submitted for beta testing.
The joint IBA–customer team performed the following:
- Developed methodology for the budgeting process.
- Defined basic dimensions (reference data) for the financial budget.
- Identified fundamental accounting indices based on both planned and actual data. For example:
- Capital profitability
- Asset profitability
- Financial lever
- Net interest margin
- Net commission margin.
The following models were developed:
1. Planning of operations with legal entities
- Letters of credit
- Deposits of legal entities
- Loans to legal entities
- Leasing to legal entities
- Post–financing and project financing
- Funds on correspondent accounts
- Subordinated loans
- Current accounts of clients
- Factoring for legal entities
2. Planning of operations with individuals
- Auto crediting of individuals
- Real estate loans to individuals
- Consumer loans to individuals
- Current accounts, overdrafts, and credit cards for individuals.
3. Other lines of banking and economic activities
- Rental and leasing payments (incomes and expenses)
- Commission and other incomes from operations with legal entities
- Bank card commission
- Overhead expenses
- Tenancy tax
- Operating incomes
- Capital and circulating assets
- HR expenses
- Computer software expenses.
4. Budget consolidation
- Balance offset
- Income and expenditure balance
- Other assets and liabilities
- Allocation keys.
The newly implemented system streamlined the planning and reporting processes of our customer using advanced IBM Cognos. The required security, reliability, access control, and web interface with automatic online data consolidation were provided.
Andrey Franev, Director of Financial Department at Alfa Bank, said: “Thanks to the solution based on IBM Cognos, the processes of business analysis and financial planning were significantly improved, enabling us to understand better the factors that impact the financial results of our bank”.