Recent world events have roiled the global economy, sending businesses of all sizes and industries looking for safe harbor. No one can say for sure what the rest of 2020 holds, but there is widespread concern that may be more storms on the horizon.
For this reason, planning is more important than ever. In this blog post, we’ll cover the 3 critical components for smarter financial planning so you can be prepared for what’s ahead.
1. Integrate planning tools and technologies
In the past, technology was subordinate to the task of financial planning. Yet the roles are now reversed: technological developments such as BI and automation are now drivers of the financial planning process, taking it in new directions that were previously impossible. Choosing the right BI tools – and getting your team out of spreadsheets and .CSV files – will enable you to leverage new planning methods and ideas.
For example, by crunching massive amounts of point-of-sale data, cutting-edge BI tools can identify discrepancies between supply and demand at the SKU level. Automated data integration pipelines can funnel this data directly from inventory management to ERP systems and procurement databases. BI tools can also generate data visualizations that provide instant insights to non-technical managers, executives, and board members.
Integrating the right planning tools and technologies into your strategic planning will help you make smarter, easier, data-driven decisions when charting a course through choppy waters.
2. Use the right planning processes and techniques
With the business landscape constantly evolving, the current economic climate favors companies that are quick to make adjustments for various risk profiles. Unfortunately, not every organization is able to be so light on its feet. According to an IDC survey, for example, 75 percent of respondents believe that the lack of real-time data analytics has inhibited their business opportunities.
The good news is that there’s an active interest in improving financial planning among many organizations. Almost three-quarters of financial executives say that they’re currently engaged in improving their FP&A processes.
Fine-tuning your EPM software, moving to the cloud, and shortening your financial close & consolidation cycles are some of the most valuable ways to improve your financial planning processes. Learning how to use the right planning techniques is also worth its weight in gold.
3. Align plans with strategy
Organizations have increasingly discovered that the once-a-year model of annual planning is too slow and infrequent to be effective. All too often, quarterly earnings reports are focused on explaining the outcomes of poor decision-making, revealing the leadership team’s lack of foresight and inability to deal with risk and change.
Kenneth A. Merchant, chair at the USC Leventhal School of Accounting, gives the following advice:
“Stop using annual budgets for strategic planning. Many important business decisions should be based on a realistic business plan. But the traditional annual budget quickly becomes obsolete. Some planning assumptions in such budgets inevitably turn out to be wrong. Managers need to update their plans whenever something happens to change their business unit’s prospects in a material way.”
Forward-thinking companies are looking to align their financial planning with their broader business strategy. What’s more, this vision needs to be effectively communicated both internally and externally—for example, by generating clear, insightful financial reports on demand.
These critical components are a great start in your preparations for what 2020 and 2021 holds. For more financial planning strategies and techniques, download our white paper, “Smart Financial Planning in a Stormy Economy.”
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