What is Financial Planning?
Financial Planning in Kiplot encompasses a comprehensive approach to managing an organization's financial activities to achieve its business objectives. It involves forecasting, planning, budgeting, and tracking actual expenditures to ensure effective financial management.
Forecasting allows users to predict financial spend per month, adjusting as more information becomes available or as situations evolve, ensuring agility in financial management.
Planning captures a snapshot of forecasts at a specific time, serving as a baseline for approval and comparison. Users can create multiple plans for better financial oversight, reflecting a strategic approach to financial management.
Actual Expenditures track the real spend per cost item per month, offering transparency and enabling adjustments to stay on budget.
Budgeting defines the approved limit of spending or effort for an initiative. This is typically compared against actual and forecast values.
Kiplot’s financial features include detailed configurations for General Settings and Optional Fields, allowing your organization to customize financial data according to your custom needs. This includes setting financial year start dates, currency symbols, and default allocations for CapEx, among others.
Kiplot also allows for the management and configuration of cost and benefit items, enabling users to tailor financial tracking to their unique project and organizational requirements. This level of detail extends to initiatives, where users can add financial information, including budgets and cost/benefit line items, highlighting the importance of precision in financial planning.
Cost/Benefit Types
Forecast – The forecasted spend per financial month. This value can be changed by the user as more information becomes available or situations change.
Plan – The plan is a snapshot of forecasts at a point in time. The user can copy a forecast to a plan. Previous plans cannot be changed. Plans can be used as approval points and forecasts/actuals are compared against the plan. The user can create and view multiple plans.
Actuals – Actual spend per cost item per financial month.
Budget – The approved limit of spending or effort for an initiative. This is typically compared against actual and forecast values.
Expenditure
Kiplot has functionality to distinguish between Operational and Capital Expenditure.
Operational Expenditure (OpEx) also referred to as Revenue Expenditure (RevEx) – refers to day-to-day expenses incurred in the regular operation of a business, such as salaries and utilities.
Capital Expenditure (CapEx) – investments in long-term assets like buildings, equipment and investments in software systems, providing benefits over multiple accounting periods. CapEx is usually depreciated over several years to spread the cost over the useful life of the asset.
The user can define this on the initiative and/or cost item level by stating what percentage of the cost is considered CapEx.
Depreciation
Depreciation is an accounting method that spreads the cost of a tangible asset over its useful life, reflecting its decreasing value due to wear, obsolescence, or usage in a business. In Kiplot the Useful Economic Life and date the Asset available for use can be specified. In combination with the cost items specified as CapEx depreciation calculations can be made.
For more information on how to manage financial configurations, please look at our guide on Configuration, Financials.
Administrator Access Required
Only users with the Administrator role can view and edit financial configuration settings. Ensure you have the correct permissions to manage these settings.
Manage costs and benefits on initiatives
Check Financial Permissions
To view financial details, you need the Financials Access role. To edit financial values, you must also have Edit permissions on the initiative. Ensure you have the correct access to perform your tasks effectively.
Add basic financials information
On the Financials tab on the initiative the user can add information for Budget and the optional fields External reference, Default CapEx allocation, Asset useful economic life, Asset available for use. Optional fields are only shown when they are enabled in the configuration. Optional fields can only be enabled by users with the Administrator role.
Add cost/benefit information information
On the Financials on the initiative the user can add line items for Costs and Benefits. The available options for costs/benefits are managed by a user with the Administrator role in configuration.
When a cost/benefit item line is added the user can add Forecast or Actual values for a month.
In the table the forecast or actual rows can be hidden from view and the navigation is used to go forward/back through financial years.
Adding cost and benefit items with forecast and actual values on the initiative detail page.
Financial Plan values
The user can create a Plan by copying all forecast values to a Plan. In the action menu (3-dots) in the top right select “copy forecast to plan”. Add a name for the plan and click “copy”. This creates a Plan.
Plan values cannot be changed. Plans are used to compare current forecast and/or actual values against. Users can create new plans from an existing forecast at any time.
When plans are available the user can select which plan to use to compare values against.
Highlight overspend
There is an option to “highlight overspend”. Which compares Forecast and Actual values against the Plan. When no plan is selected the “highlight overspend” option compares the Actual values against the Forecast.
Financial profile on initiative showing plan values and highlighting forecasted overspend against the plan.
Move all forecast values
The user can add or subtract a specified amount of months to all forecast values. This will change the assigned months for all forecasted values. This can be useful to assist with re-planning activities. Please note that Plan and Actual values are not changed.
Lean Budgeting, APM and LPM
Within agile portfolio management, the relationship between budgeting, forecasting, actuals, estimates, lean business cases and time tracking requires evolution of a number of business processes.
For more information on the relationship between financials, lean portfolio management and agile portfolio management, have a look at the resource below.