Enhancing Budget Management in Manufacturing with Microsoft Dynamics 365 Finance

Posted on: December 13, 2023 | By: Fred Liu | Microsoft Dynamics AX/365, Microsoft Dynamics Manufacturing

In the manufacturing industry, preparing budgets is a significant yet often repetitive and resource-intensive task. Much of the effort goes into data collection, essential for the budgeting process, and crafting detailed departmental budgets. By leveraging Microsoft Dynamics 365 Finance, companies can streamline this process. Dynamics 365 offers robust data management and analysis tools that aid in efficiently gathering and interpreting essential financial and operational data. This integration enables more precise and quicker crafting of detailed departmental budgets, reducing manual effort and enhancing the accuracy of financial planning

Advantages of Budget Proposals in Dynamics 365 Finance

Microsoft Dynamics 365 Finance simplifies this process by:

  • Facilitating the collection of historical financial data, whether from previous budgets or actual financial performance.
  • Allowing for flexible budget revisions using various combinations of historical and current financial data.
  • Enabling the creation of new, more insightful budgets through iterative refinements, incorporating knowledge and insights not evident in past data.
  • Producing budget proposals as modifiable budget register documents, simplifying modification, import, export, and integration with Dynamics 365 Finance’s standard reporting tools.

Data Quality and Predictive Accuracy

The effectiveness of predictions in Dynamics 365 Finance depends on the quantity and quality of historical data. Ideally, having data for five to ten years enhances prediction accuracy. If a decade’s worth of data isn’t available, it’s advisable to clean and use older data that’s not currently in the system, ensuring consistency across accounts and financial dimensions, especially after any organizational restructuring or changes in accounting practices.

Setting Up Budget Proposals

To set up the Budget proposals feature in Dynamics 365 Finance, users with the Finance Insights Administrator role need to activate the feature, making a new menu item named ‘Budget Proposal’ available under ‘Budgeting > Setup > Basic budgeting.’

Creating a Budget Proposal

The process of generating a budget proposal involves:

  • Selecting a date range for the data to be used for predictions.
  • Choosing between actuals, budget, or a combination for the data source.
  • Refining the data selection through individual attributes and filters, focusing on specific account types and budget models.

Dynamics 365 Finance uses historical data and machine learning models to generate predictions. These models are most effective when they analyze consistent data sets over time, ideally spanning up to ten years. While they provide a solid basis for budgeting, the best results are achieved when managers actively engage in refining these machine-learning-generated proposals.

Validating Predictions Against Actual Performance

It’s crucial to compare the AI-generated predictions with actual performance. This can be done through standard budget vs. actual reporting and detailed variance analysis in Dynamics 365 Finance. Predictions can also be retrospectively applied to previous years to evaluate their accuracy.

The Actual vs. Budget – Default financial report within Dynamics 365 Finance offers an in-depth look at actuals versus budget proposals, which can be customized to include monthly breakdowns for a more detailed analysis. This report can be exported to Excel, allowing for graphical representations like line charts or sparklines to visualize trends and variances.

Dynamics 365 Finance brings a transformative approach to budget management in manufacturing, reducing the manual effort and enhancing the strategic value of budget proposals. By leveraging historical data, machine learning, and flexible reporting tools, manufacturers can create more efficient, accurate, and insightful budgets.

Next Steps:

If you want to learn more about enhancing budget management in Microsoft Dynamics 365 Finance, contact us here to learn how we can help you grow your business. You can also email us at info@loganconsulting.com or call (312) 345-8817.

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