How to Manage Ideas › The Idea Approval Process › Update Idea Properties › Define Budget Information

Define Budget Information

To evaluate ideas for portfolio management, define the planned cost and benefit information for each idea. You can define budget information from the Idea: Properties: Main - Budget page. With budget properties, you can define metrics. For example, the idea planned cost, NPV, ROI, and breakeven information. You can also elect to have the application calculate budget metrics for you automatically using the cost of capital.

Use the fields on the page to set the start and end dates for the budget. With budget properties, money flows constantly and evenly over this period. The values budget properties are applied to only one time period: from the idea start date to the finish date. The dates are applied only to your idea and not to its parent investments.

Follow these steps:

1. Open the idea.

   The list page appears.

2. Click the subject of the idea.

   The properties page appears.

3. Open the Properties menu and then from Properties, click Financial Summary.
4. Complete the following fields in the Financial Planning section:

   Currency

   Defines the currency for the investment.

   Default: System currency

   Budget equals Planned Values

   Specifies if the budget values in the budget properties of an investment match the planned values. If a detailed budget plan exists for the investment, all the field values in the Budget section are display-only. The fields reflect the values in the detailed budget plan. When the check box is cleared, you can edit the budget fields.

   Default: Selected

   Calculate Financial Metrics

   Specifies if financial metrics for the investment are calculated automatically. If unselected, you can define the financial metrics manually.

   Default: Selected

5. Complete the following fields in the Financial Metrics Options section:

   Use System Rate for Total Cost of Capital

   Select the field to calculate the total cost of capital at system rate.

   Use System Reinvestment Rate

   Select the field to calculate the total cost of capital at the system reinvestment rate.

   System Rate

   Displays the system rate for calculating the total cost of capital.

   Investment Rate

   Displays the investment rate for calculating the total cost of capital.

   Initial Investment

   Defines the initial investment on the idea.

6. Complete the following fields in the Planned section:

   Planned Cost

   Defines the idea planned costs. The value is distributed between the Planned Cost Start and the Planned Cost Finish dates.

   Note: When you convert the idea into an investment, the planned cost value supersedes the estimated cost entered in the Estimated Costs and Benefits section of the Idea Properties: General page.

   Planned Cost Start

   Select the date of starting the idea planned cost.

   Planned Cost Finish

   Select the date the idea planned cost expires.

   Planned Benefit

   Defines the total planned benefit you receive from the idea.

   Note: When you convert the idea into an investment, the planned benefit value supersedes the estimated benefit entered in the Estimated Costs and Benefits section of the Idea Properties: General page.

   Planned Benefit Start

   Select the date when the idea planned benefit starts.

   Planned Benefit Finish

   Select the date when the planned benefit of the idea expires.

   Planned NPV

   Displays the planned NPV (Net Present Value) of the investment.

   Planned ROI

   Displays the planned ROI (Return on Investment) of this investment.

   Planned Breakeven

   The date when the idea planned cost equals the planned benefit. The field is read-only.

   Planned IRR

   Displays the planned internal rate of return for the investment.

   Planned MIRR

   Displays the planned modified internal rate of return (MIRR) for the investment.

   Planned Payback Period

   Displays the date of the investment planned payback period.

7. The following fields display in the Budget section.

   Budget Cost

   Displays the budgeted cost amount for the investment.

   Budget Cost Start

   Displays the budgeted cost start date of the investment.

   Budget Cost Finish

   Displays the budgeted cost finish date of the investment.

   Budget Benefit

   Displays the budgeted benefit amount of the investment.

   Budget Benefit Start

   Displays the budgeted benefit start date of the investment.

   Budget Benefit Finish

   Displays the budgeted benefit finish date of the investment.

   Budget NPV

   Displays the budgeted NPV (Net Present Value) of the investment.

   Budget ROI

   Displays the budgeted ROI (Return on Investment) of this investment.

   Budget Breakeven

   Displays the date when the idea budgeted cost equals the planned benefit. The field is read-only.

   Budget IRR

   Displays the budgeted internal rate of return for the investment.

   Budget MIRR

   Displays the budgeted modified internal rate of return (MIRR) for the investment.

   Budget Payback in Months

   Displays the date of the investment budgeted payback period

8. Submit your changes.
9. View an Overview of Estimated Cost and Benefits.

Financial Plans for Ideas

You can create and manage the following types of financial plans for an idea to track its costs:

• cost plans
• benefit plans
• budget plans

Submit cost plans for approval like any other type of investment. After approval, the cost plan becomes the current budget plan. You can also associate a benefit plan with a cost plan or a budget plan. After you create a financial plan, you can include it in administrative processes or XML Open Gateway (XOG) transactions.

Note: The actuals in the financial plans, manual transactions, and the chargebacks are not financially enabled.

The following limitations exist for a financial plan on an idea:

• Actuals using transactions are not possible.
• Only a manually created cost plan (plan of record) can be converted to a target investment. A cost plan that you create using the methods Populated from Investment Team or Task Assignment is not converted.
• A budget plan cannot be converted to a target investment.
• A workflow system action is not available to convert an idea financial plan to a target investment. An idea financial plan can only be converted through the user interface.

Create a Cost Plan for an Idea

You can create a cost plan for an idea. Cost plans can go through an approval process to become a formal budget plan.

Follow these steps:

1. Open Home, and from Demand Management, click Ideas.
2. Open an idea.
3. Click the Financial Plans tab.
4. If you see the following error, click the Properties tab, assign a Department OBS, and click Save.

   You must associate this investment with an entity before a financial plan can be set up.
   

   Click the Financial Plans menu and select Cost Plans.

5. Click New Manual Plan.
6. Complete the required fields.
7. To link the cost plan to a benefit plan, click Browse in the Benefit Plan field and select a plan.
8. Click Save.
9. Click the Detail tab.
10. Click Add to list the cost types and transaction classes for your plan. For example, you can add operating costs for hardware.
11. Click Save and Return.
12. On the Cost Plan Details page for an idea, click in the cells under Amounts By Period.
13. Add costs and units for each transaction class.
14. (Optional) To insert costs from an existing investment team, click the Actions menu and select Populate from Investment Team.
15. Click Save.

Create a Benefit Plan for an Idea

To calculate ROI or NPV on an idea, create a benefit plan and associate it with a cost plan. You do not need approval for benefit plans.

Follow these steps:

1. Open Home, and from Demand Management, click Ideas.
2. Open an idea.
3. Click the Financial Plans tab.
4. If you see the following error, click the Properties tab, assign a Department OBS, and click Save.

   You must associate this investment with an entity before a financial plan can be set up.
   

   Click the Financial Plans menu and select Benefit Plans.

5. Click New.
6. Complete the required fields.
7. To link the cost plan to a benefit plan, click Browse in the Benefit Plan field and select a plan.
8. Click Save.
9. Click the Detail tab.
10. Click Add to list the benefits by description, class, and subclass for your plan. For example, you can list programs to increase revenue or reduce cost.
11. Click Save and Return.
12. On the Benefit Plan Details page for an idea, click in the cells under Amounts By Period.
13. Add costs for each benefit class by time period.
14. Click Save.

Create a Budget Plan for an Idea

When a cost plan is approved, it becomes the budget plan for an investment.

Follow these steps:

1. Open an idea.
2. Click the Financial Plans menu and select Cost Plans.
3. Open a cost plan.
4. From the Actions menu click Submit for Approval.

   The cost plan becomes the proposed submitted budget plan.

5. Click the Financial Plans menu and select Budget Plans.
6. Click Approve.

   The cost plan becomes the approved budget plan.