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Early Warning Systems to flag Budget Overruns

A key determinant of effective cost management by an organization is budget allocation for the various cost centers. While it is imperative for firms to institute efficient budget allocation mechanisms, it is equally (if not more) important to monitor budget utilization levels throughout the year. Utilizations of annual budgets are rarely uniform across the year, and some degree of front-loading or back-loading is inadvertent in real-world business situations. However, indiscriminate over-utilization in the initial few months of a financial year usually leads to the unfortunately widespread & familiar problem of inordinate cost pressures (even budget freezes) in the latter half of the year.

Organizations with robust monitoring systems that maintain a careful vigil over budget utilization levels across the various cost centers are better able to control & manage their cost base, and by extension their profitability. Firms that are able to foresee probable cost overruns can initiate timely interventions so as to ensure that budget constraints and/or freezes do not disrupt the natural course of business operations and implementation of management strategy.

insAnalytics presents an integrated easy-to-use solution that provides early warning signals of budget overruns at the various cost centers. A RAG flag (RAG: Red-Amber-Green) enables cost-center managers to carefully monitor their expenses, in order to avoid inordinate cost pressures and/or budget freezes towards the latter half of the fiscal year. In addition, analysis of expense patterns in the current year vis-à-vis prior-year expense patterns enables cost-center managements to estimate full-year expenses based on year-to-date expense patterns. The solution integrates seamlessly with the Cost Leakage Analysis solution, enabling drill-down analysis into the drivers of probable cost overruns and thereby facilitating the necessary proactive corrective actions.

Key Features

  • Monitor expenses on a cost-center basis, and variations from prior-year expense levels
  • Examine the "Cumulative Spend Till Date" as a proportion of the total approved budget
  • Project full-year expenses based on year-to-date expense patterns
  • Estimate the probability of a cost overrun for the various cost centers

Business Benefits

  • Visually-appealing decision engine easily usable by a wide range of business end-users
  • Real-time analysis of the expenses incurred by the various cost centres
  • A RAG flag for each cost center (RAG: Red-Amber-Green) that indicates the likelihood of a budget overrun
  • Effective & efficient cost management and monitoring of budget utilization

Analytics Backbone

  • Financial Modelling
  • Mathematical Modelling
  • Statistical Projections
  • Testing of Hypotheses
  • Visual Analytics
  • Exploratory Analysis

Technology Variants

  • Tableau
  • Qlik View
  • SAS Visual Analytics
  • SAP Lumira
  • Oracle
  • R

The solution is technology-agnostic, and available over a range of technology platforms. Choice of the best-suited platform for specific installations is governed by the existing ERP product being used by the client, in order to provide a cost-effective solution and to ensure seamless connectivity & integration. Open-source adaptations of the solution are also available to reduce the total cost of ownership for the client.

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