BUSINESS VALUE GUIDE

VOLUME 6

COGNOS PLAN-TO-PERFORM BLUEPRINTS

CAPITAL EXPENDITURE PLANNING

CAPITAL PROJECT PLANNING
DISCRETIONARY EXPENDITURE PLANNING

Capital Expenditure Planning

helps companies manage crossenterprise capital expenditures
to gain visibility into the global
implications of delaying or
accelerating capital spending.

THE COGNOS SOLUTION MAP

MARKETING

FINANCE

SALES

PRODUCTION &
DISTRIBUTION

EXECUTIVE
MANAGEMENT

PURCHASING

CUSTOMER
SERVICE

TECHNOLOGY
IT/R&D

HUMAN
RESOURCES

Capital expenditures are essential to corporate

growth, whether major capital projects such as
new retail stores and employee facilities, or as
discretionary capital outlay for such things as
furniture and personal computers.
Because capital expenditures have a major impact
on cash flow and can encumber corporate funds for
years, they require close scrutiny at all levels within
a corporation. Capital projects must be justified
according to such ROI and risk evaluation measures
as payback period, internal rate of return, and net
present value. Executive committees may periodically
review corporation-wide capital projects to ensure the
right ones are approved.
Discretionary capital spending, such as the purchase
of furniture or computer equipment, is controlled by
restricting spending authority to appropriate levels of
responsibility. Management understands that savings
can be realized by aggregating capital spending across
departments and divisions.
Corporations are therefore seeking tools and
disciplines to manage capital projects and
expenditures so that divisional decisions are aligned
with corporate objectives.

Business drivers link Capital

Expenditure Planning to
corporate process areas.
Discretionary capital expenditures are dependent on
a number of business drivers. For instance, headcount
may drive the purchase of computer equipment or
furniture. In turn, discretionary capital expenditures are
required for overall corporate income statement, balance
sheet, and cash flow projections.
Major capital projects are also dependent on a number
of business drivers. For instance, a three-year strategic
plan might identify the need to expand employee facilities
to support the headcount increases required to drive
revenue growth. In turn, capital project expenditures are
necessary inputs into corporate expense plans, balance
sheet, and cash flow projections.

SUPPORTING PROCESSES

Strategic Planning
Capacity Planning
IT Portfolio Planning
Headcount Planning

CAPITAL EXPENDITURE
PLANNING

OUTPUT

The outputs of the Capital Expenditure Planning

process are an approved capital expenditure plan and
depreciation expenses.

ON
CIATI
E
R
P
DE
NSES
EXPE

APP
ROV
EXP CAPIT ED
END AL
ITU
RES

SUPPORTED PROCESSES
Capital Expenditure Planning
Expense Planning
Integrated Financials

Discretionary Capital
Expenditure planning enables
cost-center managers to capture
capital asset needs, forecast
capital spending, and comply with
corporate procurement policies.
Cost-center managers begin by assessing capital asset
needs based on key business drivers. For instance,
headcount may be directly linked to the need for
additional furniture or computer equipment.
Cost-center managers then determine the asset category
and priority of various asset requirements. The anticipated
purchase price, acquisition date, and in-service date
are estimated. Managers spending authority must be
validated against the desired capital requisition.
Cost-center managers then submit capital spending
forecasts to management and divisional finance for review.
This is an opportunity to aggregate capital spending
in order to achieve better terms and conditions from
suppliers. For instance, cost-center managers might plan
to purchase three different types of personal computers
from three different vendors. By aggregating such
purchases into a single type of personal computer from
one supplier, lower costs and better payment terms can
be secured, which directly impacts corporate income
statement and cash flow.

DETERMINE
DISCRETIONARY
CAPITAL
REQUIREMENTS

Cost center manager

assesses discretionary
capital asset needs
based on business
drivers such as
headcount or
infrastructure plans

FORECAST
DISCRETIONARY
CAPITAL SPENDING

Determines asset
category and priority
Forecasts estimated
purchase price
Forecasts expected
purchase date and
in-service date

COMPLY WITH
PROCUREMENT
POLICIES

Resolves corporate
procurement compliance
issues
Compares purchase
amount with approved
spending limits

REVISE CORPORATE
EXPENSE PLAN

Finance rolls up all

discretionary capital
expenditures up into
revised corporate expense
and cash ow forecast

A typical workflow supporting

Discretionary Capital
Expenditure planning.
Many corporations update their capital spending
forecasts as part of monthly financial and operational
forecasting. Particularly in low-margin businesses
where cash flow is managed carefully, discretionary
capital expenditures need to be monitored and
controlled diligently.
Cost-center managers determine discretionary capital
requirements based on key business drivers. They
select asset class and priority, then forecast estimated
purchase price, purchase date, and in-service date.
During this process, they adhere to corporate spending
limits. The revised forecast is then submitted to
management and corporate finance for review and
consolidation into revised corporate P/L, balance
sheet, and cash flow projections.

Corporate
Finance

CONSOLIDATE

Line-of-Business
(LOB) Managers

REVIEW

Line-of-Business (LOB) managers identify

opportunities to aggregate capital spending and
eliminate redundant spending across departments.
By managing capital spending diligently, corporations
can positively impact cash flow.

Departmental
Managers

DETERMINE
DISCRETIONARY
CAPITAL NEEDS

FORECAST
DISCRETIONARY
CAPITAL
SPENDING

COMPY WITH
PROCUREMENT
POLICIES

REVISED
CORPORATE P/L,
BALANCE SHEET,
AND CASH FLOW
FORECAST

Most companies manage

Capital Expenditure Planning
using asset management systems
and spreadsheets which leads
to error, delay, and difficulty
controlling discretionary
capital spending.
Asset management systems can effectively track capital
assets history, while supplementary spreadsheets are
typically used to help make capital spending projections.
But manual spreadsheet-based planning can lead to
error in asset capture and inconsistency in corporate
classifications, where different divisions might classify
the same asset in different manners.
Management has little visibility into spend aggregation
opportunities, and cannot readily determine whether
two departments are planning to purchase the same
furniture if each department classifies the asset
differently. It is difficult to aggregate the spend with
a single supplier and solicit better prices, terms, and
conditions. Consequently, P/L and cash-flow projections
are adversely affected.

Takes two months to synchronize

total discretionary capital
expenditures forecasts with overall
P/L, balance sheet, and cash ow.

Corporate
Finance

CONSOLIDATE

Manual process leads to errors

in expense calculations.

Manual, spreadsheet-based models,

disconnected across hierarchical
organizations, lead to errors and difculty
in coordinating and synchronizing nancial
and operational plans.

Little visibility into spend

aggregation opportunities.

LOB Leaders

REVIEW

Manual policy compliance leads to

errors and delays in requisitioning

Errors can also occur in validating appropriate spending

levels during the requisitioning process.
Errors often occur in the financial calculations that feed
the P/L, balance sheet, and cash flow projections, which
can have a major impact on businesses that need to
manage cash flow tightly.

Departmental
Managers

DETERMINE
DISCRETIONARY
CAPITAL NEEDS

FORECAST
DISCRETIONARY
CAPITAL
SPENDING

COMPY WITH
PROCUREMENT
POLICIES

Finally, synchronizing discretionary capital spending

with corporate financials can take two months or more.
Manual process leads to errors in
asset capture and classication.

REVISED
CORPORATE
P/L, B/S, CF
FORECAST

High-performance companies
replace the manual spreadsheet
process with robust multidimensional modeling and
integrated workflow that help
reduce errors, improve control,
and increase accountability.

Takes two weeks to synchronize

total discretionary capital spend
forecasts with overall P/L, balance
sheet, and cash ow.

Corporate
Finance

Robust multi-dimensional modeling

capabilities replace spreadsheet process
with integrated workows to reduce
errors, improve control, boost
accountability, and help synchronize
nancial and operational plans.

Procurement aggregates spend

based on accurate forward view of
spending forecasts.

LOB Leaders

REVIEW

Management can quickly view consolidated

discretionary capital spending forecasts and identify
spend aggregation opportunities.
Financial calculations are under central control and
are much less likely to contain errors, while cash flow
projections are more accurate and reliable.
Enterprise-wide discretionary capital spending forecasts
are synchronized with corporate financial P/L, balance
sheet, and cash flow projections in a matter of weeks.

Automatic alerts ensure

compliance is maintained.

Departmental
Managers

DETERMINE
DISCRETIONARY
CAPITAL NEEDS

FORECAST
DISCRETIONARY
CAPITAL
SPENDING

COMPY WITH
PROCUREMENT
POLICIES

Improve capital spending forecast

by eliminating errors.

REVISED
CORPORATE
P/L, B/S, CF
FORECAST

Depreciation expense
automatically calculated.

An enterprise planning system can help automate and

integrate the discretionary capital spending process.
Cost-center managers can quickly select the capital
asset types that are consistently classified, and can
easily project purchase price, purchase date, and
in-service dates.
A planning system automatically creates an alert if a
spending limit has been exceeded, so that cost-center
managers can make necessary adjustments. When the
discretionary capital spending forecast is submitted
to management and corporate finance for review,
automated workflows monitor the process and alert
reviewers of action deadlines.

CONSOLIDATE

In the hands of Cognos Implementation Services consultants,

Cognos certified implementation partners or experienced
customers, the Blueprints enable streamlined project
implementation schedules and improved project success rates.

OPERATIONS, MARKETING, ETC.

Capital
Expenditure

cost-center managers capture and forecast spending in

a way that reduces errors, increases accountability, and
heightens control. Management can review consolidated
spending forecasts and identify opportunities for spend
aggregation and savings.
Capital Project Planning enables project owners to justify

HUMAN RESOURCES

STRATEGIC
FINANCIAL PLANNING
AND FORECASTING

Operating Expenses

Discretionary Capital Expenditure Planning lets

Finance can synchronize capital spending forecasts with

corporate financials to see the impact on cash flow projections
quickly and easily.

SALES PLANNING
AND FORECASTING

CAPITAL
EXPENDITURE
PLANNING

Cognos Capital Expenditure Planning Blueprints:

major capital projects and forecast project expenditures.

Management can ensure that ROI measures are consistent
across the corporation. And finance can rapidly perform
what-if analysis of proposed shifts in the cost and timing
of capital projects.

Market Demand

Reports
Income Statements
Balance Sheet
Cash Flow
Financial Ratios

Depreciation Expense

SALES

Revenue Plan

Plan-to-Perform Blueprints are pre-configured solution building

blocks that allow companies to jump start implementations.
Blueprints are pre-defined data, process, and policy models that
encapsulate collective best-practice knowledge from the Cognos
Innovation Center for Performance Management and leading
customers in specific business process areas.

FINANCE

EXPENSE
PLANNING
AND CONTROL

HEADCOUNT AND
COMPENSATION
PLANNING

Headcount Expenses

The Cognos Capital Expenditure

Planning Blueprints enable
an integrated capital spending
planning process that aligns
divisional decisions with
corporate financial objectives.

Pre-configured solution
building blocks that:
Pool collective
best-practice knowledge
Accelerate time-to-value
Increase project success rate

Capital Project Planning

involves project justification,
capital project spending
projection, divisional and
corporate approval, and
coordination with
corporate financials.
A capital project owner determines a project need based
on key business drivers such as long term sales forecasts
or long-term capacity plans that may have been
approved by executive management during the strategic
planning process. The project owner justifies the project
based on a set of corporate ROI measures.
Companies use a variety of justification methodologies
such as payback period, internal rate of return, and net
present value. During the process, the project owner
creates a capital project spending projection based
on asset types, estimated costs, purchase dates, and
in-service dates. The completed project requisition is
reviewed by divisional management and finance. Finance
adjusts the timing and amount of capital outlays to
align with division financial objectives.
Corporate finance consolidates the capital project
proposals from all divisions, then executive management
reviews and grants final approval to the prioritized
project list.
Finally, corporate finance revises income statement,
balance sheet, and cash flow projections.

CREATE CAPITAL
PROJECT JUSTIFICATION
AND REQUISITION

Cost-center manager
determines capital
project needs based
on key business
drivers like sales
forecast or long-term
capacity plans.
Justies project
based on consistent
corporate ROI
measures.
Creates capital
project spending
forecast.

SECURE DIVISIONAL
APPROVAL

Cost-center manager
submits capital project
requisition.
Divisional nance
adjusts spending
amounts and timing.
Approval granted at
divisional level.

DEVELOP
CONSOLIDATED
CORPORATE
CAPITAL PLAN

Corporate nance
creates consolidated
corporate capital
project plan.

SECURE CORPORATE
APPROVAL

Capital project review

committee grants final
approval.
Corporate finance
revises the corporate
P/L, balance sheet, and
cash flow forecasts.

Typical workflow supporting

Capital Project Planning.
Executive management periodically approves capital
project spending plans. Divisional proposals are
evaluated for strategic or tactical impact and weighed
against a range of alternative ROI measures. Final
decisions can have long-term consequences on corporate
cash flow. For example, the risks associated with a
multi-million dollar production or distribution facility
expansion must be carefully measured against potential
returns and benefits.
The project owner must diligently justify the proposed
project against a consistent set of ROI measures. The
owner then creates a detailed capital project projection
based on asset types, estimated procurement prices,
and in-service dates. Divisional management and
finance review the proposal and finance adjusts timing
and capital spend amounts to fit the overall divisional
financial picture.
At the corporate level, finance gathers all capital project
proposals from across all divisions. After final approval
by executive management, corporate finance updates
corporate P/L, balance sheet, and cash flow projections.

CONSOLIDATE
CORPORATE
CAPITAL
PROJECT
FORECASTS

Corporate
Finance

APPROVE
DIVISIONAL
CAPITAL
PROJECT
FORECASTS

Divisional
Finance

Departmental
Managers

10

APPROVE
CORPORATE
CAPITAL
PROJECT PLAN

Executive
Management

JUSTIFY
CAPITAL
PROJECT
NEEDS

FORECAST
CAPITAL
PROJECT
SPENDING

REVISE
CORPORATE
P/L, BALANCE
SHEET, AND
CASH FLOW

Most companies use a manual,

spreadsheet-based process.
The typical result: error, delay,
and difficulty in aligning
divisional capital project
decisions with overall
corporate financial objectives.
One impact of the manual, spreadsheet-based planning
process is difficulty in ensuring a consistent set of ROI
measures across all divisions of a corporation. By the
time an inconsistency is identified at the corporate level,
the entire project proposal has already been created
and reviewed at the division level. Time is wasted, and
the opportunity cost of starting the project on time is
magnified.
Divisional finance has difficulty assessing how shifts in
the timing and amount of capital outlays impact the
overall financial picture.
Corporate finance has difficulty rolling up capital project
plans company wide. The spreadsheet-based process is
cumbersome, time-consuming, and error-prone.

APPROVE
CORPORATE
CAPITAL
PROJECT PLAN

Executive
Management

Takes two months to synchronize

with corporate P/L, balance sheet,
and cash ow.

CONSOLIDATE
CORPORATE
CAPITAL
PROJECT
FORECASTS

Corporate
Finance

Divisional
Finance

Manual, spreadsheet based models,

disconnected across hierarchical
organizations, lead to errors and
difculty in coordinating and
synchronizing nancial and
operational plans.

After executive management approval, finance struggles

to incorporate capital expenditures into corporate income
statement, balance sheet, and cash flow projections. Even
the smallest error can have a significant negative impact
on cash flow.

APPROVE
DIVISIONAL
CAPITAL
PROJECT
FORECASTS

Difculty assessing how shifts in

capital spending timing and amounts
impacts total capital spending.

Departmental
Managers

JUSTIFY
CAPITAL
PROJECT
NEEDS

FORECAST
CAPITAL
PROJECT
SPENDING

Manual process leads to

inconsistent ROI justication
measures across the corporation.

11

REVISED
CORPORATE P/L,
CF, BS

High-performance companies
replace the spreadsheet process
with robust multi-dimensional
modeling and integrated
workflow to reduce error,
improve control, and enhance
accountability.
Using enterprise planning, companies can ensure a
consistent set of ROI measures. Project owners justify
capital projects based on the same set of criteria, which
reduces error and time-loss in the downstream process.

Takes two weeks to synchronize

with corporate P/L, balance sheet,
and cash ow.

Corporate finance can readily consolidate all capital

project plans from across all divisions.

CONSOLIDATE
CORPORATE
CAPITAL
PROJECT
FORECASTS

Corporate
Finance

Project owners can easily model capital project elements,

selecting the right asset types and projecting costs over
an appropriate time horizon.
Divisional finance can easily perform what-if analysis
to assess the impact of changes in the timing or amounts
of capital outlays to ensure that cash projections fit the
divisional financial picture.

APPROVE
CORPORATE
CAPITAL
PROJECT PLAN

Executive
Management

Divisional
Finance

Robust, multi-dimensional
modeling capabilities replace
spreadsheet process with integrated
workows that reduce errors,
improve control, boost
accountability, and help synchronize
nancial and operational plans.

After approval by executive management, corporate

finance can easily create revised income statement,
balance sheet, and cash flow projections.

APPROVE
DIVISIONAL
CAPITAL
PROJECT
FORECASTS

Easy to conduct what-if scenario

analysis of impact changes in timing
of individual projects has on total
capital spending.

The whole process now takes only a few weeks and is

much more reliable.

Departmental
Managers

JUSTIFY
CAPITAL
PROJECT
NEEDS

FORECAST
CAPITAL
PROJECT
SPENDING

Automated process ensures consistent

ROI justication measures throughout
the corporation.

12

REVISED
CORPORATE P/L,
CF, BS

Consider how the Cognos

Plan-to-Perform Blueprint can
help a corporation approve a
new distribution center and
incorporate the investment
impact into its financials.
A retailer anticipates significant same store sales
increases in the Western USA region over the next
three years. The logistics manager recognizes the
need for a new distribution center to support a
sales increase, and justifies the capital project
based on a consistent set of ROI measures across
the entire corporation.

Executive
Management

Corporate finance consolidates total capital project

expenditures from across all divisions and compares
them to the strategic plan.
After executive management approval, corporate finance
can easily revise the corporate P/L, balance sheet, and
cash flow projections for the next twelve months, paying
special attention to the cash flow impact of the newly
approved distribution center.

APPROVE
CORPORATE
CAPITAL
PROJECT PLAN

Executive Management approves

the three-year strategic plan, which
calls for aggressive sales expansion
in Western USA.

Corporate nance easily

consolidates total corporate capital
project expenditures and compares
them to strategic plan.
APPROVE
DIVISIONAL
CAPITAL
PROJECT
FORECASTS

Divisional
Finance
Three-year strategic plan requires adding a new
distribution center in Southwestern USA. Logistics
manager creates justication based on increased
sales forecast in Western USA.

Departmental
Managers

JUSTIFY
CAPITAL
PROJECT
NEEDS

Divisional nance easily conducts

what-if scenario analysis of impact in
changes in timing of individual projects has
on total divisional capital spending.

FORECAST
CAPITAL
PROJECT
SPENDING

Logistics manager easily adjusts shape

and timing of capital project expenditures to
match three-year corporate sales projections.

13

Takes two weeks to synchronize

with corporate P/L, balance sheet
and cash ow.

CONSOLIDATE
CORPORATE
CAPITAL
PROJECT
FORECASTS

Corporate
Finance

The logistics manager rapidly adjusts the shape and

timing of the expenditures to match the three-year
sales projections.
Divisional finance reviews various capital outlay
scenarios in order to align the project expenses with
divisional financial objectives.

APPROVES
THREE-YEAR
STRATEGIC
PLAN

REVISED
CORPORATE P/L,
CF, BS

The Capital Expenditure

Planning Blueprint is based
on proven best practices
from companies like Deluxe
Corporation, who implemented
Cognos Planning to improve its
budgeting and project planning
Deluxe Corporation is the largest supplier of checks in
the United States, providing check printing services for
10,000 financial institutions and selling direct to small
businesses and consumers.
The spread of ATMs, increasing use of credit and debit
cards, on-line banking and payment, and consolidation in
the financial services industry have increased pressure to
reduce prices. Deluxes strategy is to focus on customer
retention and improve customer profitability through
ongoing cost containment.
Deluxe has used Cognos Planning to improve the value
of its planning and budgeting process. Eliminating
spreadsheets has streamlined planning and reporting
cycles, allowed more time for analysis, and enabled
deeper visibility into corporate performance. Expanded
participation in the planning process has increased
accuracy, enhanced sense of ownership and buy-in,
and fostered greater accountability.
Deluxe Corporation has also used Cognos Planning to
promote more effective project management and support
company-wide activity-based costing initiatives.

Leading provider of printed checks and

business forms
More than 9,000 employees

FINANCE

Revenues $1.57 billion

BUSINESS CHALLENGES
Evolving business model spurred by

industry regulation
Internal strategic and organizational shifts to

drive aggressive growth

Need more effective cost control
Spreadsheet-based process slow and inefficient
Finance-driven plan lacked true collaboration

and buy-in

SOLUTION APPROACH
Cognos Planning to improve planning, budgeting

and forecasting process. Integration of revenue

reporting, project management, strategic planning,
and activity-based costing into overall process

BUSINESS VALUE DERIVED

Reduced annual operating plan cycle time by 75 percent
Enabled 15-month rolling forecasts updated quarterly
Improved accountability and forecast accuracy
Improved project management

14

COGNOS SOLUTION MAP

We use planning to manage project

forecastinginitiatives like Deluxe
Select. Now we can have the program
managers involved, working directly with
finance, to input their forecast. We roll
all this up to be sure we have the cash
for capital expenditures. The other thing
iswe make our project managers more
accountable. If you say were going to
save X amount of dollars in your forecast,
were going to hold you to it.
SENIOR FINANCIAL ANALYST
Deluxe

About the Cognos Innovation Center

The Cognos Innovation Center for Performance

Management is dedicated to the understanding,
adoption, and implementation of next-generation
planning and performance management practices. It is
a consortium of industry leaders, practitioners, thought
leaders, forward-looking executives, and technology experts
experienced in, and committed to, the advancement and
successful application of technology-enabled performance
management best practices. The Innovation Center seeks
to assist organizations in optimizing the alignment
of their plans, processes, and resources with corporate
goals and strategies.