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Budget Policy and Guidelines

      1. Principles

 Our Budget policies are based on the guiding principles of:

1.1  Empowerment:

We entrust our employees with budget management, believing they will exercise the same prudence as they would with their own resources. Our policies empower employees to utilize budgets for activities with measurable outcomes. This flexibility instills faith in stakeholders to adhere to pre-approved budgets within set guidelines, fostering ownership and responsibility. Post-facto checks by the finance department ensure compliance and allow for course corrections as needed.

1.2  Simplicity:

Our budget policies are designed to be simple and easy to understand, facilitating effective utilization by stakeholders.

1.3  Spends with clear objectives and measurable outcome:

All budget allocations are earmarked for initiatives with clear objectives and measurable outcomes.

 2.    Budget Policy

2.1 Budget planning should align with the company’s strategic growth plans, business dynamics, and external factors. Link budgets to key activities such as product launches, marketing initiatives, and business expansion. Ensure budgets are backed by measurable outcomes such as licenses sold, marketing reach, and leads generated. Adjust budget allocation based on varying needs across different periods (e.g., loading spends during new product launches as compared to the normal/BAU trend during other periods).

2.2 Budget owners are empowered but not entitled to spend the allocated amount. Spending decisions should be guided by input parameters used during budget planning (e.g., per attendee cost, per event cost). Budget owners to collaborate with Functional Heads (FH) and adhere to the approval matrix for expenditure. However, as part of spend guideline and procurement process, any expense beyond Rs.5lacs would require management approval. For details, please refer to procurement policy and guidelines.

2.3 Review and realign budgets for variable/semi-variable expenses based on quarterly performance. Revisit and adjust budget allocations for marketing, sales, and other dynamic areas as per business requirements.

2.4  Unspent budgets will lapse at the end of each quarter. Budget owners must provide business case justifications for any unutilized funds. Carry forward of unspent budgets may be permitted as an exception with necessary approvals. (refer Budget Exception under 3.3.)

2.5  Overspend in budget during a quarter – These would form part of Unplanned spends as highlighted in 3.3.

2.6. Budget virement (Virement indicates utilisation of budgets of one initiative in another which may arise due to change in strategy arising on account of business requirement)- The ability to vire budgets from one activity to another will not be permitted unless and until they are within the same bucket of budgets. Some examples are below:

  •         Use of budgets between Print and TV in the ATL bucket is allowed, while the use of budgets between activities of ATL and Digital is not permitted. 
  •      Professional fees of CHR, which include charges towards Benchmarking Survey, ER Audit tools, compliance related, etc., can be utilized within the broader bucket of professional charges.
  •         The BD India Sales team can utilize the budgets between activities of Lead Gen, while the use of budgets between broader buckets of Lead Gen and other buckets is not permitted.

2.7. Restricted spends – Prohibitions on spending for bribes, kickbacks, tips on account of events in external locations, expensive gifts(mementos excluded) of > Rs.5,000,undue favors and liquor consumption without prior management approval.

2.8. Certain activities have both centralized and decentralized budgets, depending on the nature of the spend. Listed below are examples:

2.8.1. The decentralized budget is determined on a per head cost basis. The decision on utilisation rests with the functional head for department/team/group trainings. Utilisation is based on the training requirements outlined in the Function-Level Learning and Development Policy published by CHR (CHR policy).

2.8.2. Software Subscriptions – All software subscription-related spends are Centralised and budgeted by CIS team due to their technical competency, with input from other functions. Functions are required to share their COTS/tool requirements during the planning process, enabling CIS to consolidate software/hardware requirements since CIS is the technology enabler for the organisation and its eco system. It is important that the respective function provide this input, including but not limited to standard tools /software requirements.

2.8.3. Branding related spend – Handled by the Marketing function, leveraging their expertise and cost-effectiveness.

2.8.4. Merchandise and Giveaways – Owned and managed by the Marketing function. Includes merchandise and giveaways for partners, customers, employees for occasions across domestic and international locations. (E.g. t-shirts, kits etc)

2.8.5. Server and Data maintenance – CIS owns non-production related cloud expenses.Cloud Ops owns production-related cloud expenses.

2.9. Others:

2.9.1. Food expenses – If any food expenses are incurred during training sessions, they cannot be charged to the training budget.

2.9.2. Employee team welfare budget – The employee team welfare budget cannot be used for personal celebrations for an employee, such as for a new addition to the family or farewell expenses, except for employee birthday celebrations in accordance with HR policy.

2.9.3. Team outing budget – This budget is reserved for team outings, lunches, or any team-related activities that promote team building in line with HR policy. As there is a per head limit per quarter, individuals must adhere to these limits, especially in cases where project or team lunches are applicable. For example, in the Engineering team, team members may join project-related lunches or team lunches, and it is their responsibility to ensure adherence to the prescribed limit.

2.9.4. Review and Planning budget – This budget is exclusively for conducting periodic reviews of team performance and facilitating future planning accordingly.

2.9.5. Allowance for late hours at work – Employees are entitled to an allowance if their work demands them to put in extra hours, in accordance with HR policy.

2.9.6. Capital Expenditure – The guidelines outlined above also apply to the capital expenditure of respective functions. A business case must be prepared for all capital expenditure proposals. No virement will be permissible between revenue and capital expenditure.

 3.0 Budget Process

3.1. Budget Setting Process

The financial plans and resultant annual budgets are based on Tally’s strategic growth plans, business dynamics, external factors, product launch and other developments known at the time of setting the budget.

3.1.1. Top-down guidance – Based on management inputs and the previous year’s actual spend, an outcome/metric-driven approach is adopted to build top-down guidance. This guidance is then shared with functional heads/SPOCs, serving as a guide for budgeting activities during the current year.

3.1.2. Bottom-up build-up – Building upon the top-down guidance, individual functions build their bottom-up activity-wise cost budgets. These budgets consider related cost drivers and outcomes, while also taking into account business requirements and company-wide initiatives planned for the year.

3.1.3. Reconciliation of top-down and bottom-up numbers – Corporate Finance facilitates the reconciliation process of differences in top-down and bottom-up numbers. This ensures that activities and cost budgets are rationalized based on outcomes, justified, and approved by management.

3.1.4. Budget Review – Budgets are revised and updated to respective functions based on reviews of prior quarter budgets, actual trends, and planned initiatives for the next quarter.

 

3.2. Budget Utilisation

3.2.1. Budgets approved at the beginning of the year act as thresholds/caps on probable spends for the year, ensuring alignment with strategic/business objectives, available resources, and outcomes. Approval of budgets at the start of the year does not equate to approval for actual spending.

3.2.2. Subject to the above, planned activities are pre-approved by management and assigned with a unique budget ID. Budgets can be utilized by quoting the relevant budget ID and expected outcome from the activity.

 3.2.3. The spend utilization process is as below:

  •  At the beginning of the month each function will share their commitments.
  •  Non-budgeted spends and spends with higher budgets ask would be part of this process.
  •  High-value spends are shared with management to provide visibility of planned spends for the month as part of the monthly forecast view.
  •  Certain spends, such as recurring initiative spends like Tx pay-outs, customer support spends, retainership and consultancy charges, support staff salary, partner commissions, etc., would be excluded from the approval matrix.

3.2.4. For spends with both centralised and decentralised components, approval from the functional head should be sought, notifying the concerned budget owner before utilising the decentralised portion.

  •  For example, if the PM has a software requirement budgeted as part of the planning exercise, PM’s functional head would give approval for the procurement, collaborating with CIS for their technical expertise.
  • Details on Assisted buy and unassisted buy is captured in “Procure to Pay Policy and Guidelines”

For both assisted and unassisted activities, indents are to be raised on the digital platform https://po.tallysolutions.com/

3.3. Budget Exceptions

3.3.1. Unplanned activity / Increase in the budgeted amounts

Unplanned spends refer to any expenses arising throughout the year that are essential for meeting business requirements but were not included in the Annual Operating Plan (AOP).

·         In such cases, the user function will initially estimate the unplanned expenses.

·         The user function will engage in discussions with the corporate finance team to review and refine the estimate.

·         Subsequently, the user function will submit the Budget requisition with all the relevant details including the impact of the unplanned spend on planned/estimated profitability which can be shared by finance team for management approval.

·         Once approval is granted, the finance team will allocate the budget to the function and call out the same during the budget variance analysis between planned and actual spends.

·         In the case of an increase in the budget for the said activity where requests can be accommodated based on similar nature of spends through virement, the same can be accommodated by the finance team, keeping management informed on the said initiatives, outcome, and the virement approach considered.

3.3.2. Carry forward of budgets –

·         Unutilised budget during a quarter may be carried forward to subsequent periods, provided the Budget owner gives proper business justification for the same

·         Some exceptions to this are:

o   Employee team outing/planning and review budgets can be clubbed and utilised (AMJ and JAS quarter budgets can be clubbed and utilised; again, OND and JFM budget can be clubbed).

o   Employee related decentralised training budgets can be utilised during the year.

Indents for budget exceptions are to be raised on the digital platform https://po.tallysolutions.com/

3.4. Budget Review and Reporting

3.4.1. Budgets vs. actuals review will be part of the functional review process carried out on a quarterly basis. The review will also be done in conjunction with the company’s performance, and based on this, thresholds will be set on budget utilisation for the subsequent quarter. For example, total marketing/sales spends for the JAS quarter should not exceed a set % of estimated net revenue vs. the budgets approved as part of the planning exercise at the start of the financial year.

3.4.2. The reasonability of the budgets as against the initial planned initiatives and actual spend will be reviewed, with unfavorable variances (i.e., unspent budgets/overspent budgets) requiring justification by the functional heads. The planned and achieved metrics will also be reviewed.

3.4.3. One-off transactions, depending on the nature or amount involved, will be reported to management periodically along with the budgets planned/utilised for the said purpose.

3.4.4. All budget exceptions will be reported to management periodically along with the impact on estimated/planned profitability.

3.5. Approval matrix

3.5.1. All spends though pre-approved by the management would require approvals from the SPOC/functional heads/management as discussed and communicated to all functions.

3.5.2. Approval matrix across initiatives and functions is included and available with the functional SPOC for ready reference.