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Air Supply

Airservices' budgeting and forecasting system allows its business analysts around the country to better advise management on strategic directionThere's turbulence ahead for the aviation industry. Globalisation is forcing new standards in the provision of aviation infrastructure and services at a time when public demand for safety and minimised environmental impacts has never been higher. And governments everywhere continue to move away from the monopolistic model of public sector provision of air services towards more competitive commercial models. All in all, it's an environment complex enough to leave lesser air service companies up in the air. But air traffic services provider Airservices Australia is off to a flying start to meet a whole fleet of new realities. These include expanded potential markets, unprecedented technological change, increased competition, enlarged customer expectations and continued government regulation. As it undergoes the most radical change program in its history, Airservices is moving heaven and earth to identify ways to become more efficient in its delivery of services and products and more customer-focused while offering competitive services. Its ambitious "Business Transformation" change program should see Airservices reduce its prices by up to 20 per cent overall and improve profitability by 50 per cent. That's the equivalent of a by no means modest recurring reduction in annual costs of more than $100 million.

And for the finance systems group, that inevitably means moving away from being a mere keeper of information towards a position where it can spend more time carrying out critical analysis of business information, actively participating in the decision making process in the organisation. In response, the finance group has equipped itself to spend more time analysing information in the light of the underlying business plans and strategies that underpin the Business Transformation Program. Instead of merely policing expenditure, it is becoming a business partner to the other stakeholders in the organisation. A new financial reporting system is just one of the proactive activities that will help Airservices move forward to a streamlined future. A suite of custom-built business intelligence systems will improve its financial reporting and decision-making and drive best practices. The budgeting and forecasting system allows Airservices to view its data the same way it views its business, which is extremely important when it comes to running the business effectively.

The finance department expects significant savings as a result. Already 60 business analysts around the country are able to better advise management on strategic direction. The system is enhancing reporting capability, visibility of cost and financial information, provision of interactive analytical capability and integration with management functions. According to chief financial officer Andrew Flemming, initial impetus for the system was the newly competitive environment the organisation found itself in. "We were moving from having been a monopoly in the public sector towards a continuum of becoming more commercial, and where competition was being introduced," Flemming says.

"Competition is coming in this space, initially on the periphery and shortly it will be encroaching on our core business. "As a public sector company, we didn't have a terribly strong culture that put a lot of emphasis on forecasting and financial performance. Typically we had a yearly budget set, with monthly accounts, and while a terribly large amount of effort was put to analysing and reporting historically on not very helpful or relevant information, there was little focus on where the business was going in the future."Developed by Airservices' financial systems development and IT staff, the Financial Reporting Package (FRP) is based on Holos, Seagate Software's development language for business intelligence systems. Flemming describes it as a "welcome to the real world: where forecasts can be measured against actuals for the first time in the aviation body's history".

Grand Vision

Established in July 1995 under the Air Services Act 1995, Airservices Australia manages about 11 per cent of the world's airspace stretching from India to Antarctica. With a staff of 4600 and an annual budget of $550 million, Airservices has a modest vision: to become the global leader in the provision of safe and efficient air traffic services. And that means it must become a viable, competitive, commercial business. In a way, the change has been occurring since the mid-1980s. Indeed, Airservices and its predecessor, the CAA, have already gone a long way towards increasing efficiency, reducing costs and lowering charges. But according to the board, that progress by no means meant it had either maximised efficiency or positioned the organisation to survive the onset of competition. So the "Business Transformation" which is under way is addressed at identifying how and where Airservices can become more efficient in its delivery of services and products and more customer-focused, and offer services which will be competitive with potential newcomers to the industry. It is looking for a range of qualitative benefits from the exercise, including enhanced customer satisfaction; improved competitive positioning; a workforce focused on Airservices' future; and an organisation that delivers the expectations of its stakeholders.

In its moves towards a more competitive environment, the body identified an urgent need to improve the accuracy of its budgeting, forecasting and management reporting. And it responded in part by building the new multidimensional financial reporting package that has already completely turned Airservices financial management towards a far greater emphasis on strategic financial planning and management. The new package provides an integrated solution for financial information delivery, facilitating the emergence of business intelligence from myriad financial data. The system is proving to be a valuable asset to Airservices. With its help around 100 high and middle level executives are gaining a deeper insight into Airservices' business processes and finances.

As finance system development manager Kuppuswamy Balachandran (Bala) says: "We are moving from the traditional business role of transaction processing, reporting and controls, to a position where we can spend more time carrying out critical analysis of business information, actively participating in the decision making process in the organisation. In effect, we are moving away from being a mere storekeeper of information to becoming a business partner within our organisation." Contrast the process prior to implementation of the new system with the way it is empowering managers today. Previously Airservices managers budgeted once a year in a cumbersome legacy application. Then the budgets were separately consolidated using desktop tools. About 90 per cent of managers' time was spent consolidating and validating data, and just 10 per cent on analysis, using a variety of Microsoft Excel and Microsoft Access models around the country. Data was consolidated using a budget modelling (loading) tool and consolidating data meant effectively running two systems -- first loading the data then getting hard copy reports using predesigned forms.

Analysis was done semi automatically using Excel models.

Data management was difficult and time consuming. With the budget a time-critical process used to set prices for the coming year, there was only a brief time frame in which to set the budget, pass it by the board, and achieve industry consultation and government agreement. Today those same managers are being empowered by an integrated data delivery platform, enriched with multidimensional analysis capability. They can create realistic financial budgets by analysing both quantitative and dollar information and forecast financial results on a monthly basis. Well under 20 per cent of their time is spent on consolidating the data, and the rest on analysis.

Overnight Delivery

Automation means Airservices can get a new budgetary picture overnight, so that once the budget is in process, it can be revisited throughout the year. "We are now able to prepare a more realistic budget very efficiently in a short turnaround time," corporate financial controller John Lai says. "What's more, at a cost centre level we can quickly recast the budget with unprecedented detail, providing more background information for financial modelling. The system enables us to consolidate and analyse this background data, providing critical capabilities to control staff costs. It has in-built functionality to generate different budget cuts. This means that when underlying assumptions change, say a new workplace agreement is put in force, we don't have to re-key all the data across multiple cost centres -- we just change core parameters in the database, and create a different version of the existing budget." Better still, managers can relate financial budget figures to the outputs and services they are expected to generate. That means every dollar spent on equipment maintenance can be tied to planned maintenance hours. And managers can now record forecast estimates for each cost centre on a monthly basis. Once this is done, the system consolidates the budget, actual, and forecast and provides combined interactive reports for the managers to record comments and explanations against the financial variances. No more sending of separate paper reports and memos explaining the variances.

Another benefit is in terms of managing the future of the reporting process.

Bala says in the past much of the budget was hidden in flat files and countless spreadsheets throughout the organisation. "Now there is more transparency between head office and the regions, which means that things don't get lost and there is greater data integrity," he says. Greater transparency has made it easier to integrate HR and finance. "We can create a very accurate financial picture and monitor our spend versus forecast month over month," Bala says. "We can prepare a more accurate yearly budget in half the time it previously took.

At a cost centre level, we can quickly budget in unprecedented detail, so that divisional managers have far more background data to calculate models."With predominantly salary-based costs, the system helps finance to quickly calculate how changes to salaries or working conditions, such as a new wage agreement, would affect its budgeted spend for the rest of the year. "This is helping us to move to a profit centre, rather than a cost centre, way of thinking and to have more emphasis on the future," Flemming says. That means no more arguments about the true costs of staffing, and detailed low-level information available at the touch of a button. Variables are taken across six dimensions: organisational structure, location, activity, classification, job type, time frame and measures. The company is positioning Holos as a calculation and consolidation engine for application building. Airservices is now budgeting in a lot of detail across both labour and non-labour environments, with payroll data populating detailed models of basic pay, overtime pay, higher duties, penalties and other pay, and drawing on payroll data which is time- and age-based. That ensures that all the modelling driving the payroll budgeting is very accurate.

Budgeting also focuses on travel, another big ticket item. "We also have a budget for generic items like stationery," Bala says. "This allows them to build from the ground up a budget with detail integrated into the higher level that is all going into the RDB and that incorporates all the assumptions." All the data for the budgeting application is stored in RDB files. Holos can bind directly to procedural call-up of the RDB to provide very tight integration with RDB and the ability to read and write back to the RDB. "Seagate Holos picks up all these numbers, accumulates them and then prints out analyses and reports," Bala says. Users can select accounts depending on the variance, and view information in subsets by filtering the information. Users can select a negative variance view, a positive variance view or an absolute view. At a higher divisional level, they can compare divisions to each other. "Users can also type in the notes they like," Bala says. "This is a fabulous feature. They can select an account, add notes, and drill down into lower levels of details.

The real advantage is that a user at the corporate level can type a note to be looked at by the manager of the division."Good, better, best Airservices knows the better its budget, the better its reporting will be. It knows what lets most organisations down in their variance reporting is the inaccuracies of their budgets. Putting in a system that is easy to use and enables data capture at lower levels of detail enhances cash flow budgeting. It also means finance staff can respond faster to questions from senior management without having to go back down through the organisation to the divisions. "This way the system tailors the technology to meet the specific process and needs of the organisation," Bala says. Indeed, this need to budget at a far lower level of detail than had ever been achieved before was a driving force for the budgeting application. Now, when the world changes, finance staff can revisit forecasts very quickly. Still the solution was not easy to come by. Airservices started by assessing a range of off-the-shelf desktop reporting and OLAP (On-Line Analytical Processing) tools, but found none of them quite fitted the bill. Instead it chose to build a series of custom-designed finance applications in Holos to integrate with its core financial transaction systems -- a "Matman"-based supply and accounts payable system and a "Masterpiece" general ledger system.

Bala says desktop tools simply could not handle the complex analysis and reporting capabilities Airservices needed. Holos is a server-based product designed to work in any corporate IT environment and has the ability to handle very large amounts of data. It has tight integration with the Oracle RDB database installed at Airservices. It also has OLAP and financial modelling capabilities. That meant it could provide Airservices with immediate access to the information stored in legacy applications, and then transform this into business intelligence. Now Airservices' business managers can easily analyse everything that drives the business, from staff numbers to dollar values, without resort to an army of programmers in the back room. "We have a system that provides a very accurate financial picture and we can easily monitor spend versus forecast month over month," Lai says. Developed on a foundation of well-recognised data warehousing concepts, the system is special in a number of ways. For one, it can capture underlying quantitative information along with the dollar values. It can also highlight problem areas in colour. Those on-screen, colour-coded "traffic light" reports direct managers' attention to areas where action is needed. "With this they can now provide faster, accurate and more considered responses to questions from senior management," Bala says.

Modelling

The new system also allows detailed modelling. If the organisation changes staffing over time, what is the likely outcome of union negotiations? What is the likely impact of pay increases/decreases over time? How would inflation across time impact on these considerations? And the Financial Reporting/Forecasting System (FFS) gives users better access to data than they are getting from their general ledger system. For Flemming, it all comes down to providing flexibility and visibility of the information. "I see this as driving best practices," he says. "It's enabling managers to see and analyse past performance to let them forecast in a more meaningful way. The bottom line is that our new system gives our managers better information to make smarter decisions and enable true accountability for the performance of their operations."

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