Making Financial Planning a continuous and popular activity

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Published on the 15/10/2020 | Written by insightsoftware

One of the lessons learned from COVID-19 is that the old way of planning doesn’t work anymore…

Living through periods of rapid upheaval and uncertainty, like the recent pandemic, forces us to adapt quickly to new working practices. One of the long-lasting lessons learned from COVID-19 is that the old way of planning doesn’t work anymore. Organisations now recognise the importance of being able to plan more frequently and integrate planning across business areas beyond finance to enable quick action in the face of rapidly changing market conditions. That’s why Gartner tells us that by 2024, 70 percent of new financial planning and analysis projects will become extended planning and analysis (xP&A) projects – where multiple inputs from across the organisation become the levers finance teams can use to make the right strategic planning decisions.

Incremental planning will give you the edge to be able to nimbly pivot when unexpected conditions arise.

Forward-looking enterprises that are achieving better outcomes have already quickly reworked forecasts on supply chains, materials, and costs. Even further, they’ve pivoted to better manage fluctuating conditions in this new environment for their workforce. These organisations were fast to catch on: they learned that consistently incorporating input from a wide range of departments invites professionals from all levels to share feedback, own their numbers, and feel a sense of commitment in shaping and fulfilling strategic objectives. It takes a modern, flexible approach like this that engages participants at all edges of an organisations through continuous planning, driver-based planning, and collaborative planning to achieve superior results.

Extended Planning and Analysis (xP&A) on demand
Teamwork, no matter how beneficial it is, tends to be pushed aside when the coordination itself gets in the way. We believe this frustration is the root of all silos across the corporate world, severely diminishing capacities to effectively plan as a whole. In fact, although each department may be on top of its own data and plans, the silo it operates within is woefully incompatible with other departments located just down the hall.

For example, imagine that you work at a large multinational with mining, manufacturing, and commercial divisions. Wouldn’t it be great if you could trace how disruptions to your mining operations will reverberate throughout your whole supply chain, affect costs, and help you proactively determine the next steps to take with every impacted entity? This is exactly what those savvy companies are already doing.

When you think about the considerations that go into planning, it becomes clear that having the ability to see all the relevant details whenever you want makes for an accurate and valuable picture to work from. How many times have you had to wait for the operations team to supply the data needed to complete a forecast? This is the type of situation that makes it nearly impossible to do the rapid, scenario-based planning needed to nimbly change direction while facing uncertain conditions.

Making xP&A planning smarter
If you assess multiple entities with differing cost structures, you know how difficult and time-consuming it is to gain access to the right data and then analyse it at a granular level. One area that often goes overlooked is the value that can be achieved from the application of consolidated KPIs to measure major indicators. Imagine having real-time indicators consolidated across sales, marketing, operations, and HR – in addition to metrics on recent acquisitions and overall market trends. By incorporating that intelligence within the context of your assets and liabilities all into one place, you can immediately see and address trends that could boost or derail profits and costs.

Navigating your transition to xP&A
A major goal and requirement in adopting xP&A is to bring people at the edges of an organisation into the planning process, which ultimately drives more accurate forecasts and greater accountability. As you begin to assess the existing data silos and key teams that need to participate, you will uncover various stress points in your organisation’s systems. Often, the addition of data types, stakeholders, and processes can place a strain on current operations and planning technology. Legacy systems weren’t built to handle the size of data we contend with today. Add to that the additional users and number of planning models you now create. The process of establishing a robust xP&A framework can be dramatically accelerated through implementing the right technology.

Multinational organisations share particularly acute pains associated with processing data across multiple regions, entities, and charts of account. The lack of a centralised data store for both operational and financial planning data creates the risk of issues and errors in reports as teams work to bring everything together in their planning. When forecasting across demand plans, capex plans, and labor plans, there can potentially be different dimensions used by each operational business unit, such as sales teams planning on a customer order basis, or product teams looking at SKUs or raw material. Having a centralised system will make it a lot easier to roll up this data to an account level to drive financial plans.

How modern xP&A solutions help
Modern planning solutions can help with these challenges. They are not only designed to handle the complexity, user numbers, and data volumes required to plan across entire organisations, but also to enable professionals at all levels of the organisation to participate. For this, friendly workflows, intuitive software design, and an overall system that speaks to people’s individual KPIs is one of the best ways to ensure that everyone – from store managers to corporate teams – will remain engaged.

What’s so helpful about implementing a system that embraces people across different departments and entities is that it motivates people to contribute real operational data that reflects current realities instead of outdated and often unrealistic perspectives of what’s happened. Operational data is critical for the driver-based modeling component of xP&A, which, in turn, rolls up into the financial plans to create more accurate planning and forecasting. This makes it simple for everyone to get information, answer questions, collaborate, and participate in the decision-making process. This also reinforces a positive feedback loop that ensures ongoing monitoring and engagement. Each loop through the planning cycle solidifies everyone’s commitment and makes the process easier and easier.

Be ready for any situation
When you have a robust plan based on accurate data that have been sourced from your frontline workers, then you are in a strong position to start asking those all-important ‘what-if’ questions. In uncertain times, the ability to test different hypotheses and prepare for a range of potential outcomes can be a huge competitive advantage. When you have the ability to perform unlimited scenario planning and apply predictive and in-process analytics in a flexible and intuitive modeling environment, you immediately position your business so you’re ready to take action, whatever the future throws at you.

Addressing long-lasting changes
The effects of COVID-19 will be felt for years to come as economies slowly rebound and return to normal. With this come many long-lasting changes that will fuel the need for frequent and flexible forecasting and planning efforts. It is unlikely that the pace of business forecasting will ever slow back down to pre-COVID rates.

Now is the time to take charge of identifying and addressing previously unseen opportunities and risks by breaking down information silos to perform continuous, dynamic, and extended planning. By engaging more teams outside finance in the planning process, you can ensure that operational needs are balanced with financial goals. And, most importantly, incremental planning will give you the edge to be able to nimbly pivot when unexpected conditions arise.