Budgeting by Custom Period solution has to be installed only using guided services. Please contact us to enable this solution on your account.
After the solution is installed and configured, it can be extended by the following solutions:
- Lean budgeting: Proposed Budget based on Work Allocations
The solution enables the funding of Portfolios and the allocation of resources to Work, People, or Products based on a Custom Period. This Period is typically determined by planning increments but can be adjusted to align with any custom financial reporting period. Additionally, the solution allows for the tracking of Proposed Budgets and Actuals. There are the following phases of a budgeting process, which are covered by Budgeting by Custom Period solution in Apptio Targetprocess:
- Budget Target - describes the company's initial idea of distributing funds across Portfolios and defining guardrails (Run vs Grow, CapEx vs OpEx).
- Budget Proposal - describes budgets proposed by Value Stream Owners based on the funds needed to complete work planned for a Value Stream.
- Budget Approval - comparing the numbers in a Budget Target and Budget Proposal reflects the final decision on the investment into each Portfolio.
- Actuals - shares information about labor and non-labor expenses related to a Portfolio and Value Streams.
The solution enables the structure of Period Budgets, which allows funding Work, People or Products and see Proposed Budgets and Actuals for any of them.
Step 1: Set Budget Targets
Budget Target describes the company's initial idea of distributing funds across Portfolios and further between lower level items, such as Portfolio Epics, Value Streams, Solution Trains, Agile Release Trains or Products. It's done based on the company vision and strategy for the following year's top-down. It answers the following questions:
- How much do we plan to invest in each Portfolio?
- How will this be distributed further?
Portfolio Owners usually perform budget targeting. Their main goal is to split the Target Budget across different Portfolios, define guardrails, and set what percentage of capitalization should be headed to, as well as the grow and run targets.
Portfolio Owners will handle planning on the Budget Targets dashboard, where you enter a Target Budget for a Portfolio for each Period (PI in this case) and then for each Portfolio Epic, Value Stream, Solution Train, Agile Release Train or Product (Value Streams, Solution Trains and Agile release Trains as an example in this article).
Target CapEx and Opex (Percentage) define desired capitalizable and non-capitalizable expenses. Target Grow and Run (Percentage) – desired Run vs Grow expenses percentage on a Portfolio and each Value Stream, Solution Train, Agile Release Train or Product or Portfolio Epic.
Target Budget In Scope for Portfolio is a sum of Portfolio Epic , Value Stream, Solution Train, Agile Release Train or Product Target Budgets. It's used to see if we distributed the total Portfolio Budgets properly and didn't over or under-plan it. It will be highlighted in red if the sum of Portfolio Epic (Value Stream, Solution Train, Agile Release Train or Product) Target Budgets will be more than a Portfolio Target Budget, meaning we have planned to distribute more funds than available.
Value Stream leaders will see and can update the information about Target Budget of a specific Value Stream on a Value Stream Period Budget view.
Step 2: Budget Proposal
Budget Proposal is provided by Portfolio Epic Owners, who define how much funds are needed by Value Stream, Solution Train, Agile Release Train to implement the planned in Scope Portfolio Epics in the upcoming Period.
It answers the following questions:
- What Agile Release Trains are needed to implement Portfolio Epics?
- What are the forecasted funds for Labor Costs and necessary Non-Labor Expenses?
The Proposed Budget consists of a Proposed Labor Budget and a Proposed Non-Labor Budget (defines expected non-labor expenses, such as Software, Hardware, etc.).
Budget Proposal - Labor
The Proposed Labor Budget usually reflects how much money is needed for labor expenses. You can use the following solution to do that:
- Lean Budgeting: Proposed Budget based on Work Allocations
Portfolio Epic Owners would create ARTs Work Allocations, providing estimate by ART in points and Percentage (Negotiated Capacity) of ART to work on this Portfolio Epic. Using ART Cost per Point the system will calculate how long it will take and how much it will cost.
Calculated Costs will be distributed across Agile Release Train Period Budgets and roll up to Period Budgets. Thus, we'll see the Proposed Labor Budget on an Agile Release Train Period Budget.
Further, by selecting which Portfolio Epics are taken in scope, we'll form Value Stream Proposed Labor Budget.
Budget Proposal - Non-Labor
The Proposed Non Labor Budget will be formed based on the Expenses Proposed amount. First, you'll create the estimated Non-Labor Expenses for ARTs, defining the needed amount. The Expenses will be connected to the respective Period and be shown as a total Period Proposed Non-Labor Budget.
Step 3: Budget Approval
Comparing Target Budget and Proposed Budget for each Portfolio on a Budget Approval dashboard, Portfolio Owners decide if they will go with the initial Target Budget or increase/decrease and distribute it differently across Portfolios.
Further, the budget is distributed across Value Streams. In the Approved Labor Delta and Approved Non-Labor Delta fields, you can see the difference between a budget approved for the Portfolio and the total budget approved for Value Streams in the Portfolio so that you know you approved the correct total budget across Value Streams.
There can be a situation where a Value Stream Proposed Budget is much higher than a Portfolio Target Budget. Portfolio Owner needs to decide whether we will go with the suggested scope and increase a Portfolio Budget or decrease the scope by removing some Portfolio Epics.
Step 4: Actuals
Costs represent Labor Costs and Expenses represent Non-Labor Expenses. They will be aggregated from ART Costs.
The total Actuals will be aggregated for each Value Stream and a Portfolio by Period and can be viewed on the Actuals dashboard. Here you can focus on a specific Period, Portfolio or select a Value Stream to focus on the details.