1. © Baan Development BV Controlling 1 iBaan ERP 5.0c

2. 2 © Baan Development BV iBaan ERP Course Objective I The objective of this course is to The objective of this course is to lear n about the concepts and functionality of lear n about the concepts and functionality of Multi Dimension Budgeting and Cost Multi Dimension Budgeting and Cost Allocations (Single Dimension Budgeting) within iBaan ERP Finance. Allocations (Single Dimension Budgeting) within iBaan ERP Finance.

3. 3 © Baan Development BV iBaan ERP Course Objective PEG/Support The objective of this course is to The objective of this course is to lear n about the concepts and functionality of lear n about the concepts and functionality of (Multi Dimension Budgeting and) Single (Multi Dimension Budgeting and) Single Dimension Budgeting within iBaan ERP Dimension Budgeting within iBaan ERP Finance. Finance.

4. 4 © Baan Development BV nKnow module contents and links to other modules nKnow multi dimension budget procedures –Distributions –Budget data –Relations between ledger accounts –Copying budgets –Budget data based on actual data nKnow cost allocation procedures –Iteration –Retrograde calculation nUse course material as a reference –Workbook. Finance iBaan ERP iBaan ERP Course Objective II

5. 5 © Baan Development BV Budget Actual Allocation iBaan ERP - Course Content nOverview FBS/CAT nMulti Dimension Budgeting –Set up –Using multi dimension budgets nCost Allocation –Set up –Perform cost allocation –Rates and surcharges nDisplay and Reporting

6. 6 © Baan Development BV Central Invoicing Projects Service Quality Management Manufacturing Warehousing General Ledger Order Management Accounts Receivable Budgets Cost Accounting Financial Statements Fixed Assets Cash Management iBaan ERP Finance Purpose: To control and plan the business activities in a financial way. Budgets Iteration Operation Rates and Surcharges Deviations Accounts Payable

7. 7 © Baan Development BV FBS/CAT in relation to iBaan ERP Finance ACR FAM Service TS Project TS Basic Data IBD EMM COM MCS Central Invoicing Logistics IBD TD IBD I TS TP GLD TI SLI FST ACP CAT FBS WH CMG

8. 8 © Baan Development BV Cost accounting Background n1970s: Kilger and Plaut developed highly structured and detailed approach to cost control: –through standard costs and flexible budgets –basic principles: cost centers are focal point for cost planning, cost control, and production costing clear distinction between fixed and variable costs nU.S. cost systems similar to these cost systems n1980s: –use of computers makes it possible to create more frequent reports displaying direct/indirect costs –activity based costing

9. 9 © Baan Development BV Cost accounting What is it? nProcess of determining cost of producing goods and services: –manufactured goods: allocate direct labor and materials to cost of product allocate overhead based on actual usage of overhead expenses

10. 10 © Baan Development BV nAnalyze performance of cost centers nSet direct and accurate CP rates nImprove allocation of indirect costs nAnalyze profitability and product mix nProduce Management Income Statements nBreak Costs into Fixed and Variable Components nTranslate Business Plans into Flexible Budgets Cost Accounting Why?

11. 11 © Baan Development BV The business process nCreate annual plans and budgets nPeriodically compare budget (what I expect to do) vs allowed costs (what would it cost at standard) vs actual (what actually happened and what it actually cost) nAfter results possible to readjust our standard to more appropriate amounts

12. 12 © Baan Development BV Manufacturing Plan Manufacturing Plan Capacity check Capacity check Production Plan Production Plan Sales Plan Sales by: Customer group Sales region Product group Disaggregation through Product Fam. to Products Hours Man Machine Material Concept - planning cycle

13. 13 © Baan Development BV Budget Production Plan Production Plan Operation rate/ surcharges Operation rate/ surcharges Cost price per item Cost price per item Fixed transfer price Fixed transfer price Stock valuation Stock valuation Actual Routing BOM Profit margins Profit margins Evaluation Fixed and Variable Concept - planning cycle

14. 14 © Baan Development BV Budget Production Plan Production Plan Operation rate/ surcharges Operation rate/ surcharges Cost price per item Cost price per item Fixed transfer price Fixed transfer price Stock valuation Stock valuation Actual Routing BOM Profit margins Profit margins Evaluation Fixed and Variable Concept - planning cycle Manufacturing Finance

15. 15 © Baan Development BV Budget types nMulti dimension budget –Budget amounts can be based on several cost types (one ledger account and/or one or more dimensions) together –Not performance driven –Baan IV functionality nSingle dimension budget –Performance driven budgets that are only based on ONE dimension at the time –Usage of CAT module for allocation and iteration –Integrating surcharges/rates

16. 16 © Baan Development BV Ledger Account Dimension Dimension Types (1)(2)(3)(4)(5) Dimension A. B. E. D. C. Ledger Account Dimension Ledger Account Dimension Examples: Multi dimension budget nDefined in a horizontal way:

17. 17 © Baan Development BV Dimension Ledger Account Reference Unit (cost driver) Ledger Account Reference Unit (cost driver) Single dimension budget nDefined in a vertical way:

18. 18 © Baan Development BV FBS/CAT functionalities nCost Center Budgeting –Multi Dimension –Cost Allocation (Single Dimension) nProduct Costing nActivity-based Costing Energy Accounting Dep. Production Dep. Warehouse Dep. Energy Production Dep. Warehouse Dep. Product A Product B Energy Production Dep. Warehouse Dep. Cutting Assembling Issuing Receiving Product A Product B

19. 19 © Baan Development BV Multi Dimension Budgeting Depreciation expenses Travel expenses Telephone expenses Ledger AccountsBudget 1500 1000 500 Actual 1400 1350 495 Dimension WRH dept. PUR dept. SLS dept. PUR dept. SLS dept. PUR dept. SLS dept. FIN dept. 100 250 150 80 260 155 300 1050 250 750 1100 100 200 1000 100 200

20. 20 © Baan Development BV Multi Dimension Budgeting Depreciation expenses Travel expenses Ledger AccountsBudget 1500 1000 Actual 1400 1350 145 500 150 600 300 800 100 Dimension Location Amsterdam Rotterdam Amsterdam Munchen New York Rotterdam 75 0 150 0 1000 100 75 50 100 75 Amsterdam New York Munchen Rotterdam 0 250 200 505 Dimension Department WRH PUR SLS FIN PUR SLS 1100 100 150 850 1000 100 225 75 145 1205

21. 21 © Baan Development BV Set up master data Multi Dimension Budgeting nDistribution codes –Used for distributing the year amounts among the periods –Factors or percentages based –Multiplier for copying budgets nBudget code –Budget method –Parent budget –Budget currency nBudget Amounts

22. 22 © Baan Development BV Distribution codes nUsed for distributing the year amounts among the periods nFactor or percentage nMultiplier is used for copying budgets Quaterly distribution Quarter 1151,00 Quarter 2251,05 Quarter 3401,10 Quarter 4200,95 Multiplier % Quaterly distribution Quarter 111,00 Quarter 231,05 Quarter 341,10 Quarter 420,95 Multiplier Factor

23. 23 © Baan Development BV Budget methods nBottom-up –Budgets can only be defined on sublevel 0 ledger account and/or dimension –Higher sublevels are build up automatically nTop-down –Budgets can be defined on sublevel 0 or on higher sublevels –No check on consistency between sublevels nBudget method applies for ledger accounts as well as dimensions

24. 24 © Baan Development BV 3 2 1 0 2 111 000000 Bottom-up Budget method

25. 25 © Baan Development BV 3 2 1 0 Top-down Budget method

26. 26 © Baan Development BV ¥ Company level Branch level Department level Sales Europe Sales America Sales Asia $ $ £ $ Parent budgets €

27. 27 © Baan Development BV nBudget Distribution nBudget Codes nBudget data Question 1-3 Exercises 1-5 Skill Objectives

28. 28 © Baan Development BV Budget Actual Pat Year New Budget Year Current year Budget Actual Estimate Latest Estimate Budget Simulation

29. 29 © Baan Development BV nBudget comparison Exercises 6-9 Skill Objectives

30. 30 © Baan Development BV Cost Allocation Single Dimension Budgeting Dimension: Cost Centers Accounting Department Production Department Sales Department Warehouse Department Purchase Department Main Cost Centers 100 m 1.100 m 100 m 650 m 50 m 2.000 m Energy Primary Cost Center Expenses January: $ 10.000 $ 500 $ 5.500 $ 500 $ 3.250 $ 250

31. 31 © Baan Development BV Cost Allocation Dimension: Cost Centers Accounting Department Production Department Sales Department Warehouse Department Purchase Department Main Cost Centers 100 m 1.100 m 100 m 650 m 50 m 2.000 m Energy Primary Cost Center Expenses January: $ 10.000 $ 500 $ 5.500 $ 500 $ 3.250 $ 250 Performance Quantity Total Budget Amount Budget Rate / Surcharge 5

32. 32 © Baan Development BV FBS versus CAT Cost Allocation CAT Allocation Relations Import Actual Retrograde Calculation Price Iteration FBS Allocation Results Budget Distribution Budget Code Reference Units Hierarchies Report Structures LA Relations Budget Defaults Performance Budget Single Dim. Budget Integrate Results GLD

33. 33 © Baan Development BV Set up master data Cost Allocation nDistribution codes nBudget code nReference Units nPerformance Budget nSingle Dimension Budget n Secondary ledger accounts n Allocation Relations n Hierarchies n Report Structure

34. 34 © Baan Development BV Reference unit nReference Unit = Cost Driver or Surcharge Base Cost driver Machine Hours Machine Hours for an assembly department Man Hours Man Hours for a maintenance department Kilowatt Hours Kilowatt Hours for an energy cost center Square Meters Square Meters for a facility cost center Cost driver Machine Hours Machine Hours for an assembly department Man Hours Man Hours for a maintenance department Kilowatt Hours Kilowatt Hours for an energy cost center Square Meters Square Meters for a facility cost center Surcharge base Direct material costs Direct material costs for a warehouse department Surcharge base Direct material costs Direct material costs for a warehouse department

35. 35 © Baan Development BV Reference unit Progressive planning nTotal performance of source allocation relation is checked against budgeted performance quantity while defining allocation relations nDirect maintenance of performance quantity not possible nLimited capacity nForward planning CC1 CC4 CC3 CC2 Performance Quantity = 100 Allocation q 30 Allocation q 45 Allocation q 25 Target Cost Centers Source Cost Center

36. 36 © Baan Development BV Reference unit Retrograde planning nPerformances defined in allocation relations used to determine performance of reference unit as source for allocation relation nUnlimited capacity nBackward planning CC1 CC4 CC3 CC2 Target Cost Centers Allocation q 25 Allocation q 15 Allocation q 5 Performance Quantity = 45 Source Cost Center

37. 37 © Baan Development BV Reference unit Retrograde planning Raw material A Raw material B Weld material AScrap 10% Cut material B Waste 5% Assembling Loss20% Steel (0,9m) Fabric (0,95m) Chair € 25,00 € 20,00 € 45,00 € 56,25 € 22,50 € 19,00 Cost of 1 item 1m steel plate = € 25 1m fabric = € 20 1m steel plate = € 25 1m fabric = € 20 How much steel and fabric is needed for 100 approved chairs? 100q/80*100=125q assembled (125q*0,95m)/95*100= 125m fabric (125q*0,9m)/90*100= 125m steel

38. 38 © Baan Development BV Performance Budget nWhat is the available total quantity of the Reference Unit? Machine1.500 machine hours Maintenance2.000 man hours Housing15.000 square meters Machine1.500 machine hours Maintenance2.000 man hours Housing15.000 square meters

39. 39 © Baan Development BV Single Dimension Budget nWhat is the budget amount and rate/surcharge for the dimension/reference unit? Maintenance Cost Center LA Wages LA Temporary labor LA Interest € 200.000 € 100.000 € 10.000 Budget AmountRate €10 € 5 € 0,50

40. 40 © Baan Development BV Effective rates and surcharges nPolitical rates, based on experienced external/internal (market) policies nBased on the budgeted rates/surcharges nCan be updated manually Maintenance Cost Center LA Wages LA Temporary labor LA Interest € 200.000 € 100.000 € 10.000 Budget AmountRate €10 € 5 € 0,50 Eff. Rate €8 € 6 € 0,50

41. 41 © Baan Development BV Secondary ledger account Primary ledger accounts Maintenance Cost Center LA Wages LA Temporary labor LA Interest € 200.000 € 110.000 € 10.000 LA Allocate To (credit) € 0 € 320.000 Assembly Cost Center LA Allocate From (debit)€ 240.000 Warehouse LA Allocate From (debit)€ 80.000 Secondary ledger accounts

42. 42 © Baan Development BV Allocation Relations Maintenance Source Cost Center Assembly Target Cost Center Warehouse 2.000 mh 1.500 mh 500 mh

43. 43 © Baan Development BV Retrograde calculation nUsed to recalculate performance quantities of retrograde reference units nAfter recalculation: final capacity nNow possible to calculate operation rate

44. 44 © Baan Development BV Price iteration 1 nIterative calculation of reference unit rate gives very good approximation of rate in case of reciprocal allocation relations nDeviation of rates; e.g. 1.00 –If the differences of allocation rates are decreased to <1.00 price iteration ends nNumber of cycles; e.g. 8 –After 8 iteration cycles the iteration process ends

45. 45 © Baan Development BV 1 2 3 4 5 6 7 8 Iteration Cycles Max. 99 cycles Price iteration 2

46. 46 © Baan Development BV nReference Units nPerformance Budget nSingle Dimension Budget nAllocation Relations Exercises 10-19 Skill Objectives

47. 47 © Baan Development BV Hierarchy of general ledger accounts and dimensions according to GL master data New New Hierarchy of general ledger accounts and dimensions according to FBS master data Hierarchies

48. 48 © Baan Development BV Report Structure nTo enable the user to define his own report structure nColumns and names are fixed nRows based on ledger accounts nPossibility to vary with multiple hierarchies nSummation lines can be inserted

49. 49 © Baan Development BV nHierarchies nReport Structure nIntegrated allocation results with GLD Exercises 20-26 Optional 27-34 Skill Objectives

50. 50 © Baan Development BV Exercise H3.1 Dimension: Cost Centers Prod. Preparation dept. Prod. Assembly dept. Warehouse department Sales department Purchase department Main Cost Centers Energy Administrative Cost Center Kilowatt Hours