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Learn about the Microsoft Dynamics 365 Finance Insights Capabilities – Budget Proposals (Part 1 of 5)
This is the first blog of a 5-part blog series that highlights different capabilities in Microsoft Dynamics 365 Finance Insights. Finance Insights is especially helpful because it offers configurable and extensible solutions for predicting cash flow, receivable payments, and generating budget proposals, as well as the ability to use machine learning templates to build models with data you provide. In this blog we will cover the budget proposal capability in Finance Insights.
Organizations spend a large amount of time and resources in preparing their budgets. Much of that work is repetitive low-value-added effort, such as gathering the data that’s used in the budgeting process.
Using the budget proposals capabilities in Dynamics 365 Finance Insights provide the following benefits:
- Makes it easy to gather historical data from actuals or budget to be used for budgeting within Dynamics 365 Finance.
- Lets you make revisions to the budget using different timeframes or combinations of budget and historical actuals.
- Generates a new budget that can be further refined and iterated on with the high-value attention to apply knowledge and insights that may not be present in historical data.
- Provides the budget proposal output as a budget register document, which is easy to modify, import, export, and use for standard reporting throughout Dynamics 365 Finance.
Importing sufficient data for a good prediction
The quality of the predictions depends on having sufficient cleansed data that are consistent for several years. In some cases, three years of consistent data are sufficient, but often five to 10 years is best. If 10 years of historical data do not exist in the system today, consider cleansing previous historical data that may not exist in the system, and uploading that as a historical budget.
The term cleansing data refers to ensuring that the data is consistent in terms of accounts and financial dimensions when a reorganization has happened, or importing legacy data generated before a change in the chart of accounts or financial dimensions.
Budget proposals setup
Complete the following steps to set up the Budget proposals feature.
- To access this functionality, the corresponding feature of Budget proposals (preview) needs to be enabled in feature management.
- After enabling a feature, a new menu item named Budget Proposal under Budgeting > Setup > Basic budgeting will be accessible for users with the Finance Insights Administrator role. The setting of the Enable feature field must be changed from No to Yes. No predictions will be generated until the feature is enabled.
Proving out, refining, and trusting the machine learning productions
The Budget proposals feature uses historical data, as well as your input, to build a machine learning model. The following points offer guidance that can help optimize a model’s results, and guide your use of the data.
- Machine learning models work best when they analyze a consistent data set over time. As noted above, it’s optimal to have 10 years of data that uses the same chart of accounts and dimensions. Models that use more data are likely to be more effective than models that use less.
- Models use historical data and sophisticated math to suggest a reasonably likely outcome. The proposals that are generated can help you create more effective budgets with less work. However, generating the best possible budget occurs when your managers are engaged and participate in refining the budget proposals that are generated.
- Some activity is easier to predict accurately than others. For example, the activity of some payroll and expense accounts might be more regular, and therefore be easier to predict than accounts that track more volatile activity.
- The results should be compared against actuals using the standard actual versus budget reporting, as well as the actual versus budget financial reporting report, with monthly columns added to display detailed variance amounts and variance percentage analysis.
- You can generate predictions for historical activity and begin evaluating the predictions by comparing what the predictions would have been for the current year, against activity from the current year.
Proving out with actuals versus budget inquiry
The actuals versus budget inquiry can be used to have a line-by-line view of actuals versus the budget proposal. In Inquiry parameters, set the start date and end date and your output budget model. Also set the Budget register entry status to Draft.
A yearly view that includes the actual amount, budget amount, variance amount, and percentage used is available in the results. This page can then open the Period balance page where you can review any account on a period-by-period basis for deeper evaluation showing variance amount.
Proving out with financial reporting
You can use the Actual vs Budget – Default financial report to see summary and detailed views of actuals versus the budget proposal. The default report design includes a single yearly view for original budget, revised budget, actuals, variance amount, variance percent, and percent of budget. The report can be easily updated to include 12 monthly columns with corresponding values, rather than a single amount with variances. You can set the budget proposal budget model by selecting Report Options and then selecting the budget model from the Scenarios drop-down menu. This will refresh the report to the correct budget model.
When a 12-month financial report is exported to Excel, you can easily insert a line chart or sparkline to provide a graphical view of the input or output data that helps reveal trends in the data.
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