After the pain of your last budget cycle (or as you experience the pain of the cycle you’re currently in), you may be considering new software to help things go more smoothly the next time around. But while you’re thinking about a software upgrade you should also consider how to improve the planning process to make it more effective and relevant, not just faster and easier.
As a Finance manager once told me, “Automating the current bad process only enables us to make the same mistakes faster.” Planning is the means by which corporate strategies and goals drive operational decisions and actions, improving financial outcomes. How can improving the process help make that a reality?
Analysis Team’s approach to implementation projects involves discussing process improvements before we configure a solution and integrate data. What are the goals of your enterprise and what would a more effective planning process look like? Here are just a few basic ideas we examine with our clients:
Driver-based planning: Financial results are driven by activities such as the number of customers, how many of which products to make and sell, or how many people you need. How much do you use business drivers and rates to determine how your financial goals will be reached? Benefits include being able to understand the “why” behind variances and determine how to shift plans and activities to accommodate underlying changes in the business.
Scenario planning: Are you able to develop plan versions based on best and worst case scenarios, how markets and competition might change over your planning horizon, or the impact of launching new products or acquiring another company? Benefits include being prepared when reality changes and staying ahead of the curve when you need to figure out how to adjust plans and actions during the year.
Increasing collaboration: With simpler user interfaces, modern software enables functional managers to participate directly in the planning process without becoming Excel experts. Are you opening the process to include those who actually run the business? Benefits include a more informed plan, increased ownership of the plan at the right levels in the organization, and less time and effort on the part of financial analysts each cycle.
Single method for all cycles: Many companies do a detailed budget once a year, a somewhat less detailed quarterly forecast, and high-level forecasts the other two months of a quarter. As modern software makes planning models and processes easier to manage, why not simplify to one method for all planning cycles? Benefits include smoother transition between cycles, improved analysis of variances more frequently, and a less stressful annual budget cycle.
Rolling forecasting: Fiscal quarter and year-ends are non-events to your customers and your competition; business is a continuous, organic activity. Are you using a “rolling” planning method that always looks out over the next 12, 18, 24 months? Benefits include supporting a bigger-picture planning mindset every cycle and making annual budgeting practically a non-event in your organization.
Modern planning software enables you to make improvements in these areas and in other significant ways. But software by itself can’t make things better – you need to design a better process that meets the specific needs and goals of your organization. Then you’ll understand how to configure a software solution to best support those needs.
If the planning genie showed up to grant you three wishes for a better financial planning process, what would they be?