The BRM Role in Financial Planning
The BRM role is vital to the coordination and collaboration between a business partner and service provider, and is critical to planning annual and ongoing resource needs——but what about the planning that happens at the outset of an organization’s budget cycle?
On an ongoing basis, a BRM engages with the business about plans, direction, and initiatives. On the other hand, a BRM is expected to aid the provider organization in translating business plans into provider resource requirements or needs.
The thing is, resources can take the form of the 4Ps – People, Processes, Partners, and Products – which ultimately impact an organization’s financial coffers. So what is expected of a BRM when it comes to budgeting?
ABCs of Financial Management
Budgeting
Accounting
Charging
Borrowing a page out of the ITIL® playbook, there are three critical Financial Management activities that should be part of every BRM’s skillset, known as the ABCs of Financial Management – Accounting, Budgeting and Charging. Typical Financial Management adheres to a lifecycle. During the lifecycle, the BRM role evolves as the planning cycle moves from inception to implementation and operational management.
Typical BRM activities for each stage in the lifecycle include:
Budgeting
The start of the financial lifecycle is the budgeting process, which is normally associated with the start of an organization’s annual financial planning activity. In this stage, financial budgets are set as expenditure plans.
For organizations with a less mature BRM capability, BRMs can be expected to provide information for service provider budget planning based on possible business activity changes. This information is critical to provider groups that use zero-based budgeting, yielding insight into things like translation changes to be incorporated into the budgets. For these organizations, capital budgets are typically projected for replacement or expanded technology.
As the BRM capability matures, the BRM role plays a larger and more strategic role in the budgeting process. In addition to the budget detail, as a strategic partner, the BRM is expected to be engaged in discussions about the viability of business projects and business planning.
This interaction with the business is a vital planning activity for a service provider, as it expands on the understanding the business capacity needs. It also provides important insight into critical decisions by the service provider to expand, change, or contract elements of the 4Ps during provider operational and capital budgeting.
If an organization chooses to implement charging, nominal rates are set as an outcome of budgeting.
Accounting
After the budgets have been set, the next step in the planning cycle is to track and report planned expenditures against approved budgets.
Management will be called upon to explain any variances and forecast changes to operating budgets. For the BRM, accounting is an important feedback tool to aid in understanding the ramifications of project decisions and ongoing operations.
Less mature BRM roles and organizations will engage in discussions about variances that address unexpected expenditures in particular. For more mature BRMs, accounting and accounting reports provide the opportunity to validate portfolio decisions, especially in terms of linking the costs and benefits of business initiatives.
Charging
As the last stage of the planning cycle, charging is an activity for mature organizations.
Whether an organization decides to formally implement a charge-back mechanism or decides to use a “show-back” process (a forecast of what it would cost the partner if a charge was made), charging is an important BRM tool. Organizations have used charging or show-back as a way to not only account for ongoing costs and resource utilization, but also as a way to make actual or potential costs associated with project decisions more visible.
Ultimately, the Financial Planning lifecycle is a learning process for the BRM. As the organization completes a budget year, the lessons learned during the year (processes, resource utilization, etc.) should be recorded to serve as an important input for the next financial cycle. A wise BRM takes note of key expenditures, decisions, and events that impacted implementation of the last cycle, and then accounts for them in the next cycle.