Month: August 2024

Expense/Cost Allocations – Simplified Approach using Oracle EPM

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Introduction 

Evidently every organization, whether small or large, performs various financial and non-financial activities throughout its existence. These activities range from focusing on daily business activities, recording financial transactions, maintaining an efficient supply chain, managing human and other resources, to generating revenue to cover various expenses.  

As the organization expands, complexities in all the business areas increase hand in hand. As a result, to let people focus on dedicated areas, responsibilities are delegated to various responsibility centers such as cost centers, revenue centers, profit centers, etc. 

Responsibility Centers and the Expense / Cost Allocation 

 

Both Revenue Centers and Profit Centers have their sources of income to meet their expenses. On the other hand, Cost Centers incur expenses related to their operation but do not directly generate income. Hence there should be some income source for the Cost Centers to meet their expenses and run their operations. In addition to that, there are various other indirect expenses as well as overheads at the organizational level that also need an income source to pay for. Here’s when the Expense / Cost Allocation comes into the picture. 

 

The impact of expenses incurred by the Cost Centers (Finance Department, HR Department, IT Department, Admin Department, etc.) needs to be distributed across different departments of the organization. The objective is that all the departments are aware of and responsible for their share of costs, can efficiently use their resources and accurately perform financial planning. 

 

Challenges in Allocating Expenses / Costs 

As good as it may sound, more than 30% of organizations across the world face difficulty in allocating expenses to Revenue / Profit Centers because they perform this operation manually / traditionally. The difficulty in allocating the expenses manually / traditionally can vary based on several factors: 

  1. Lack of Transparency and Visibility: In the allocation process, more than 50% organizations struggle in terms of transparency, which eventually leads to confusion and reduced efficiencies in tracking the way expenses are distributed across the cost centers. 
  2. Allocation Bias and Subjectivity: There exists unfairness and inconsistencies in expense distribution because of non-standardized procedures as approximately 35% of organizations experience bias in their allocation process. 
  3. Lack of Communication and Collaboration: For accuracy in cost allocation, effective communication and collaboration between Cost Centers and Finance Teams is crucial. Around 25% of organizations face difficulties in terms of effective communication and collaboration. 
  4. Size and Complexity of Business: The larger the size of a business, the more will be its departments and products, resulting in a more complex cost structure. It makes manual allocation error prone and more time consuming. On average, 40% of the large-scale organizations have very complex cost structure and methods that they struggle with the manual allocation process.
  5. Allocation Methods and Allocation Keys / Basis: There exist multiple allocation methods and accordingly exist multiple allocation basis. Around 30% of organizations find it challenging to establish appropriate allocation methods as each method (Direct Method, Step / Sequential Method, and Reciprocal Method) has their own advantages and disadvantages. The simpler methods may be less challenging to manage, however, for more intricate ones, manual spreadsheet-based / traditional processes can become cumbersome.
  6. Data Unavailability: In manual spreadsheet-based / traditional processes, gathering accurate data from various sources with no data loss can become tedious and requires very much back and forth process. More than 30% of the Organizations face significant challenges with respect to limited data access or poor data quality. 

 

Sources: 

  1. Common Challenges And Solutions In Cost Center Expense Allocation 
  1. Common Challenges In Expense Allocation And How To Overcome Them 

 

For Example:  

In the Healthcare Industry, revenue streams are typically identified based on inpatient and outpatient days, categorized by the services provided by hospitals and clinics. The more services a hospital or clinic offers, the more complex and detailed the allocation process becomes. 

Similarly, expenses in hospitals and clinics can be classified as direct, indirect, or overhead, depending on the cost centers and services provided to patients. For example, expenses like doctor fees, radiology test charges, or laboratory test charges can be directly allocated to the patient. However, allocating costs such as the salaries of ward attendants or supervisors to inpatients or outpatients requires a specific allocation method. Many other expenses cannot be directly assigned and require the use of drivers or activities to timely perform transparent and unbiased cost allocations with sufficient data being available. 

 

Oracle EPM: Overcoming Manual / Traditional Challenges in Cost / Expense Allocation 

Every organization has actual expenses that need to be allocated between the departments. It also has budgeted expenses that require allocation between the departments to perform efficient financial planning and forecasting. 

To eliminate all the manual allocation challenges mentioned in the above section, you must have a robust software solution that automates the accurate data integration process as well as expense / cost allocation process using various allocation methods and allocation basis, for as big an organization as you have. Oracle Enterprise Performance Management (EPM) is the best fit for these requirements. 

The modules of Oracle EPM help you perform the end-to-end process of allocating actual as well as budgeted expenses / costs in quick succession, in one click, and using simplest to most complex allocation methods and basis. Let me walk you through two of the best modules of Oracle EPM, i.e., Oracle EPBCS and Oracle EPCMCS, that best suits your needs. 

 Oracle EPBCS (Enterprise Planning and Budgeting Cloud Service) 

  • If an organization needs robust financial planning with options for direct or single-step allocation methods, both for actual and planned data, Oracle EPBCS is an ideal solution. 
  • In a SaaS deployment, Oracle EPBCS offers all the advanced budgeting, forecasting, data management, and analysis features of Oracle Hyperion Planning. 
  • It provides immediate value and boosts productivity for business planners, analysts, modelers, and decision-makers across every part of an enterprise. 
  • Oracle EPBCS supports organizations in various planning processes, including financial, workforce, capital, and project planning, along with what-if scenario analysis and modeling. 
  • These processes come with built-in best practices, including predefined content like forms, calculations, dashboards, drivers, and KPIs. 

How can we eliminate challenges & meet the allocation requirements through Oracle EPBCS? 

Oracle EPBCS can address the challenges of manual cost allocation in several ways: 

For Example: If a service industry or any other industry wants to allocate overhead costs like office rent or administration charges across their revenue centers, Oracle EPBCS can handle this efficiently. With actual and budgeted data already stored in the system, business rules, groovy scripts, and allocation driver logic can automatically distribute these costs across all revenue centers in a single step. If the budgeting or finance team wants to adjust the allocation pattern, they can easily select or create drivers based on their preferences, such as percentage allocation, gross margin percentage, revenue figures, or employee headcount. 

  

Oracle EPCMCS (Enterprise Profitability and Cost Management Cloud Service) 

  • If an organization needs to perform direct, multi-step, or reciprocal allocation methods for both actual and planned data, Oracle EPCMCS is the perfect software choice. 
  • Businesses must be able to accurately measure, allocate, and manage costs and revenue to maximize profitability. 
  • Oracle EPCMCS helps manage the cost and revenue allocations needed to determine profitability across various business segments like products, customers, regions, and branches. 
  • It also allows you to use cost decomposition, consumption-based costing, and scenario analysis to measure profitability, providing valuable support for planning and decision-making. 

How can we eliminate challenges & meet the allocation requirements through Oracle EPCMCS? 

 Oracle EPCMCS tackles manual cost allocation challenges in several ways: 

 

For example: If a Healthcare Industry wants to allocate its Direct Costs, Indirect Costs, as well as Overheads to its Revenue Centers, it must go through multiple allocation logics, drivers, and layers for the same. The more cost centers, expenses, and overheads involved, the more complex the allocation becomes. Suppose, the cost of surgical supplies might be directly allocated to the surgery department, while the maintenance department’s costs could be distributed first to other departments like radiology and surgery. Then, radiology’s costs might be further allocated to surgery and other departments. If the radiology department provides services to the laboratory, and the laboratory also serves radiology, a reciprocal method would allocate costs to reflect this mutual relationship. No matter how complex the allocation mechanism, Oracle EPCMCS is fully equipped to handle it using various drivers, logics, methods, and bases. 

 

 

Conclusion 

 

Overall, Oracle EPBCS as well as Oracle EPCMCS transforms cost allocation from a belief-driven manual process to one grounded in solid data and automation, helping you to take more informed decisions, improved cost control, etc. However, choosing one of the two or selecting both of them, is dependent on the business requirements. 

 

  • If the need is to perform robust Financial Planning as well as to perform Direct or Single Step Allocation, Oracle EPBCS can be chosen as it contains actual data through Data Integration, and the planned data is generated through the system itself. 
  • If the need is to focus on accurately measuring, allocating, and managing costs and revenue to maximize profitability, using Multi-Step Allocation or Reciprocal Allocation along with Direct Allocation, Oracle EPCMCS can be chosen as it contains actual data through Data Integration, and the Budgeted Data needs to be integrated from other planning systems like Oracle EPBCS. 

Employee Compensation Pre and Post COVID19

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The Compensation and Benefits Package an employee receives is considered the main motivator for them (outside of a personal sense of purpose). As such, it plays a crucial role in determining successful recruiting, engagement, and retention strategies. Failing to offer the right mix of benefits and compensation will translate into additional costs for the organization. According to a survey by Pew Research Center, low pay, lack of opportunities and feeling disrespected at work are the top reasons why Americans changed their jobs. Findings related to the COVID-19 impact showed that employees’ lifestyle has changed, and flexible working hours are the top benefit, followed by more paid time-off options.

The COVID-19 pandemic has had a significant impact on the compensation of employees across various sectors and industries. According to a survey by WorldatWork, in the USA an average salary structure has seen upward adjustments of 1.9% in 2020, representing a significant slowdown from 2.2% in 2019, affected by a much larger number of organizations reporting no salary structure increase. According to a report by Willis Towers Watson average actual salary increases hit 5.4% in 2023 as compared to 5.0% in 2022 among organizations in the top 15 economies around the world. It is estimated that the increase would be around 5.0% in 2024.

Compensation trends that have emerged or intensified during the COVID-19 pandemic:

  • Variable pay: Many employers have shifted from fixed pay to variable pay to align their compensation costs with their business performance and to incentivize their employees based on their results. Variable pay can include bonuses, commissions, profit sharing, stock options, or other forms of contingent rewards. According to a survey by Aon, 42% of companies in India plan to increase their variable pay budgets in 2021, up from 33% in 2020. This is to reduce the fixed costs and can modify costs based on company performance and market outlook.
  • Total rewards: The pandemic has also prompted many employers to adopt an integrated approach to compensation, which considers not only monetary rewards but also non-monetary benefits that employees receive. According to a study by timesjobs.com bureau, 70% of companies in India plan to enhance their total rewards strategy in 2021, up from 56% in 2020. This results in a change in employee perspective, giving them the impression that the organization is looking at the overall well-being of the employee.
  • Proximity Bias: The recent shift to remote or hybrid work has created a “visibility” concern for many employees. Proximity bias describes how people in positions of power tend to treat workers who are physically closer to them more favorably. This stems from the antiquated assumption that those who work remotely are less productive than those who work from office. Additionally, this is an example of the out of sight out of mind” effect.

A survey by the SHRM (2018) showed important correlations between compensation and benefits and job satisfaction, where 92% implied compensation and benefits were critical to their job satisfaction; while 32% stated that the reason why they loved working in the company was exactly the benefits and compensation they received.

Factors that have affected the compensation pre and post COVID-19:

  • The type of industry and occupation: Some sectors, such as health care, technology, e-commerce, and logistics, have experienced increased demand and growth during the pandemic, while others, such as hospitality, tourism, entertainment, and retail, have suffered severe losses and closures. This has resulted in different compensation trends and strategies for different industries and occupations. For example, some employers in high-demand sectors have offered bonuses, incentives, or retention payments to attract and retain talent, while others in low-demand sectors have implemented pay cuts, furloughs, or layoffs to reduce costs and survive.
  • The mode of work: The pandemic has also accelerated the shift to remote work for many employees who can perform their tasks online. This has created new opportunities and challenges for compensation management. On one hand, remote work can offer flexibility, cost savings, and productivity benefits for both employers and employees. On the other hand, remote work can also pose issues such as communication difficulties, isolation, security risks, and performance evaluation. Therefore, some employers have adjusted their compensation policies to reflect the changing nature of work and to reward employees based on their outcomes rather than their inputs.
  • The employee expectations and preferences: The pandemic has also changed the expectations and preferences of employees regarding their compensation and benefits. Many employees have prioritized their health, safety, and well-being over their financial rewards during this crisis. Therefore, some employers have enhanced their non-monetary benefits such as health insurance, wellness programs, paid leave, flexible work arrangements, and employee assistance programs to support their employees’ physical and mental health.

Insights:

Some of the changes that companies need to do to their compensation policies post covid are:

  • Change performance evaluation: Review the performance evaluation and incentive systems to align them with the new goals and challenges of the post-covid era. Instead of leaving it up to chance, create clear guidelines for each role. Define responsibilities, expectations, and next steps for career growth. Having a defined path for growth makes it easier to evaluate both in-office and remote employees. And your team will appreciate knowing what they need to do to be rewarded for their hard work. Our recommendation is to schedule regular check-ins with the employees to develop a more inclusive workplace for remote workers.
  • Change pay structure: Employers may also need to redesign their bonus, commission, stock option, and other incentive plans to motivate and reward employees for achieving the desired outcomes. This will help in reducing the fixed costs and keep the employee motivated at the same time.
  • Enhance benefits: Evolve the benefits and rewards that support employee well-being and work-life balance. Companies need to offer benefits and rewards that address these needs, such as health insurance, wellness programs, mental health support, paid leave, childcare assistance, learning and development opportunities, etc.
  • Communicate: Employees are happy if they feel they are being paid fairly for their work, but they are more engaged if companies have a transparent compensation policy. Employees trust companies more if they understand the company’s decision-making process for employment packages, and employers need to be able to explain this clearly to the rest of the organization. Even if an employee disagrees with the company’s process, it opens a path for them to communicate their opinions and concerns, leading to a healthy discussion for companies to improve their compensation and benefits packages.
  • Conduct Employee surveys: Surveying employees from all rankings on their needs and what they look for in a company gives perspective on what the company can do to improve how they take care of the workforce. Employees from one company can have diverse needs and wants compared to other employees from another company, so it is important for employers to understand their workforce and not solely rely on and copy other companies’ compensation and benefits packages. Employee surveys and feedback also reveal what employees think of the company and can help clarify any misunderstandings or catch any grievances employees could develop towards the company in the future.

The Importance of Design in Digital Transformation: A Designer’s Perspective

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The world is so ever-changing that we had to invent terms like VUCA, BANI, TUNA and the ilk. The world of Digital transformation evolves even more rapidly. Design plays a bigger role than ever in shaping user experiences and driving business success. It’s no wonder why design-driven companies have outperformed the S&P Index by 219% over 10 years (https://business.adobe.com/blog/the-latest/15-mind-blowing-stats-about-design-led-businesses). As we see a deluge of AI generated content and design, we need to lean in and become more human for us to have any true differentiation. From creating intuitive interfaces to developing cohesive user journeys – we need to ensure that technology not only meets functional needs but also resonates with users on a deeper level. One area where the impact of design is particularly profound is in the realm of Enterprise Resource Planning (ERP) systems.

Digital transformation is more than just dropping new technologies into existing business processes. It is a holistic approach that reshapes how organizations operate and deliver value. This transformation encompasses a range of innovations, from cloud computing and artificial intelligence to data science. It also encompasses process redesigns and mindset overhauls. At its core, digital transformation aims to improve efficiency, enhance customer and employee experiences, and drive innovation.

In a world of perfect competition with over 80 “popular” ERP vendors and hundreds of smaller products, features and abilities start to blend in and become similar across the spectrum. A major differentiation for products then is in their User Experience and Design. Similarly, with hundreds of ERP System Implementors, the major differentiation can come from Design Thinking and Service Delivery Design.

The Role of Design in Digital Transformation

Design is the bridge between technology and the user. It translates complex functionalities into accessible and engaging experiences. In the context of digital transformation, design ensures that new technologies are not only functional but also intuitive and user-friendly. As my Design Office colleague Niyam might put it – in the world of ERP, “Adoption beats Perfection”. If you don’t have the user at the centre, you may get a “perfect” system, but you will never realize the value you hoped to reap from it. Here are several ways design contributes to successful digital transformation:

  1. User-Centered Approach: Design thinking, a methodology centered on empathy and understanding user needs, is crucial in digital transformation. By focusing on the end-user, designers can create solutions that are tailored to specific pain points and requirements. This approach ensures higher user adoption and delight. By imbibing this, we make sure we never veer from the purpose for which the ERP was selected as a tool.
  2. Simplification: Digital transformation often involves complex systems and processes. Design helps to simplify these complexities through clear and concise interfaces, making it easier for users to navigate and perform tasks efficiently.
  3. Consistency and Cohesion: A well-designed digital transformation strategy ensures consistency across all touchpoints. This cohesive approach not only strengthens the brand but also provides a seamless experience for users, whether they are interacting with a mobile app, a website, or an ERP system. Design consistency when designing solutions can reduce the learning curve of the new system.
  4. Innovation: Design Thinking lets us quickly empathize, experiment and evolve our service delivery, our solutions, and our products to fit the unique context of each of our customers. Some of our most innovative ideas like our AI Assistant Orbri and our Video Game & AR based onboarding process come from our Design Thinking sessions.
  5. Analysis: Decision Dashboard Design is another major aspect of the work I do with Orbrick. It is important to highlight the right information in the right context and the right time so that ERPs can be used to take the right decisions.

Conclusion

As digital transformation continues to reshape industries, the role of a Design Office becomes increasingly important. Designers bring a unique perspective that ensures technology is not only functional but also engaging and user-friendly. In the context of ERP consulting (which is a traditionally non-design-led industry), design can significantly enhance user experience, drive adoption, and ultimately contribute to the success of digital transformation initiatives.

APEX vs VBCS: How to make the right choice?

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Low code tool is new buzzword here from sometime now. Platforms which enabled developer community to produce applications, with fraction of efforts and very few line of codes. These platforms empower developers to create software solutions with minimal manual coding, leveraging visual interfaces, pre-built components, and drag-and-drop functionality.

Absolutely, Oracle has recognized the importance of low-code development and has positioned itself as a key player in this space. Instead of one, Oracle has 2 solutions in Low-Code tool space: APEX (Application Express) and VBCS (Visual Builder Cloud Service). But Why 2 low-code tools? What is oracle doing? & Which tool to choose as developer or end customer?

Here are how oracle places both tools on its site:

APEX:

VBCS:

The main difference is clear in title itself – APEX: “Data Driven Application” & VBCS: “Build Extensions for cloud applications”.

Apex is here from around 20 Years, and it is one of the oracle’s prime development tools. They have invested a lot into it and improved it constantly. Although it builds very robust modern looking webapps but at the core it uses simple SQL and PLSQL. Old school developers find this very friendly. It can be run on cloud or on premise. This tool is for both citizen and professional developers. Citizen developers are those who knows only very basics of coding and intend to create lighter applications. It allows developers to leverage their SQL and PL/SQL skills to build data-centric applications rapidly.

On the other hand, VBCS is a newer addition to Oracle’s low-code offerings. The reason was to have a tool which truly cloud, web-based platform using JavaScript. VBCS is based on Oracle JET, which stands for JavaScript Extension Toolkit. JavaScript is de facto standard for web application development. It gives web application developer an advanced experience of what they generally do. It supports git management, docker and CI/CD which makes it more robust from DevOps perspective. For simpler apps it is near no-code. The main use case of VBCS is for expanding and add extensions to any oracle cloud service like oracle fusion. VBCS integrates seamlessly with other Oracle Cloud services, making it a compelling choice for organizations already invested in Oracle’s cloud ecosystem. The data source is generally a rest end points, making it truly neutral to database. One of the main advantages is its ability to create truly native mobile application.

APEX VBCS
Positioning 20x Faster w 100X less code Extensions to oracle cloud apps
Cost Free with oracle database. $ per OCPU. It counts message packs in relation to active users and OIC integration calls it makes
Data Source: Developer Mindset Oracle Database: You can think of as a relational data model structure underneath  Rest End points: Plan/Design Rest endpoints carefully. It can be any rest enabled database schema also
DevOPS APEX Team Development: APEX Maintains application inside database hence do not compatible with DevOps Tools Visual Builder Studio: Better than APEX DevOps as it supports git, CI/CD, Docker etc. Visual Builder has better product life cycle management
WebAPP Y Y
Mobile Application development Y
Oracle SaaS extensions Y
Product Maturity and bigger community Y
Deployment It sits on top of Oracle Database hence it is tightly coupled with it. APEX can be deployed at both on-premise or on cloud It is neutral to oracle database and truly webapp/mobileApp development platform. Deployed on-cloud.
Developer Skill as Prerequisites SQL & PLSQL Javascript, Rest, Oracle Jet, Database

So now let’s try to answer the questions we raised initially:

Why two low-code tools instead of one?

The decision likely stems from Oracle’s recognition that different developers have different preferences, skill sets, and project requirements. By offering both APEX and VBCS, Oracle can cater to a wider audience and provide solutions tailored to various use cases. Additionally, having multiple low-code platforms allows Oracle to address different aspects of application development, from data-centric applications with APEX to more modern, user interface-focused applications with VBCS. This strategy enables Oracle to stay competitive in the rapidly evolving low-code development market and better serve the diverse needs of its customers.

Which to Choose?

Go for VBCS if require oracle fusion extension app. Go for VBCS if want mobile application. Go for VBCS if want truly platform neutral webapp.

Go for APEX if current skillset if SQL/PLSQL. Go for APEX if want to keep maintenance cost low.

By considering these factors, organizations or developers can make informed decisions about which Oracle low-code platform best suits their specific requirements and goals. Whether prioritizing skill compatibility, cost-effectiveness, or specialized functionalities, Oracle offers options to meet diverse needs in application development.

Conclusion:

It is indeed a tale of 2 siblings. Both are children of powerful father named Oracle. Both, APEX and VBCS, benefit from Oracle’s vast resources, developer community, user group and commitment to provide an ease to learn & continuous product improvement.

Elder One, APEX, is traditional old-school (SQL/PLSQL), robust, proven, well established in life and conservative with money (free with DB).

The younger child, VBCS, is modern (JavaScript, mobile & true webapp), innovative, looking to solve many futuristic problems, expensive but promising.

The Oracle Redwood Saga: Upcoming Updates in Responsive Self Service Procurement UI

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Oracle Redwood has been gaining attention due to its recent updates and announcements. The Redwood theme is designed to provide a high-quality user experience to its users. As per Oracle, “The idea is to transform the whole company’s communication and its vast portfolio of technologies and applications to share a common vision and user experience.”

Many of you might ask: “What’s the need? We’re accustomed to the classic UI/UX, and it does the job very well. So, why go through such a significant change?”

A simple explanation would be that when you compare the UI/UX and animations of modern web pages, Oracle Fusion Cloud might come off as a bit outdated. Even when compared to its newer competitors, the design may seem less attractive at first. The user interface becomes more challenging to navigate. And last but not least, the current pages aren’t responsive on devices like mobile phones or tablets. In today’s world, where we’re used to doing everything at our fingertips, this might seem like a turn-off.

But don’t worry; Redwood has you covered. It has an eye-catching modern design. It also has a responsive UI and module-specific apps. Mobile devices run them without a hitch.

Now, many of you might be thinking, “So, is it all about user experience and theme?” The simple answer is ‘NO.’ It goes beyond that and certainly brings a lot more features as well. Oracle has definitely seized the opportunity to enhance features wherever possible. In this blog, we’re listing down some of the key features, with a focus on ‘self-service procurement.’

  1. Secure the catalog by delivering it to locations.’
  2. Procure goods from preferred sources during catalog shopping (applicable for supplier-sourced as well as internal transfer requisitions).
  3. Bill-only requisitions and other requisitions requiring special handling.
  4. A dedicated field is for extra supplier contact emails. It ensures that further communication to the supplier will also go to the extra contact.
  5. It provides a powerful, smart new search experience. For example, you can search for items by the manufacturer or supplier part number mentioned in the item master.
  6. Enhanced Requisitions Status, which goes beyond ‘approved’ status. Many new statuses, such as Action Required (for invoice hold), Ordered, Shipped, In Receiving, Billed, Order on Hold, etc., are being introduced.
  7. View the current requisition approver and the refined approval tree view of all the approvers.

The above features offer just a brief overview of what Oracle has recently announced. Many more features have already been announced or are expected to be announced in the coming months.

Important Announcement:

If you haven’t heard, the classic requisition UI is being retired starting from update 25A and will be replaced by the Redwood-themed Responsive Requisition UI. An approximate timeline for the retirement of the classic UI would be 7-8 months from today. Now is the perfect time to start planning the transition to the RSSP.