Planning at the speed of business

It’s been all too clear in the past 24 months, that our entire world is experiencing a tumultuous period of change in countless ways. The COVID-19 pandemic is uppermost in everyone’s mind, of course, but other factors are having significant (if perhaps less-noticed) impacts. Logistics and labor issues around the world have snarled supply chains for months. The highest inflation rates in a generation are forcing policymakers to rethink prevailing assumptions about interest rates and the money supply. And the Great Resignation presents challenges that will have far-reaching implications on how and where work gets done.

That’s a lot of disruptive change in just two years. And there is little reason to think that pace of change will slow down anytime soon.

So, business planning needs a rethinking, too. Today, a business can build a plan that starts with a clear, reasonable set of assumptions – only to suddenly find those assumptions radically changing in short order. This presents the Finance department with an unprecedented opportunity to become a strategic change agent within the business, to guide the business when conditions change with speed and agility. In short, you need to plan at the – newer and faster – speed of business.

Outdated planning cycles lead to dead ends

For too long, business planning has remained little more than the annual “million spreadsheet march” – the all-consuming exercise dreaded by every participant:

• Emailing and downloading Microsoft Excel workbooks.
• Cutting and pasting rows and columns.
• Ensuring fragile formulas and links haven’t been broken along the way.
• Spotting the hidden errors in the numbers.
• Accidentally exposing sensitive data (such as salaries and quotas).
• Managing different versions.
• And consolidating so many spreadsheets.

Megan Walker, VP of accounting and finance for Oxford Collection, a family-owned chain of boutique hotels, shared her experience with budgeting and planning spreadsheets for their 16 properties:

Before switching to Sage Intacct, they used to be managed in 17-tab Excel spreadsheets, each with up to 500 rows and 30 columns. Those spreadsheets were massive and formula-driven, so if one formula got messed up, you’d break your whole spreadsheet. We had multiple people entering data, so it was easy for human errors to happen. If we found a mistake in a formula, we’d have to fix it 16 times.

Furthermore, by the time the finance team has cobbled the plan together, months have passed, conditions have changed, and much of the analyses and recommendations are out of date. The disconnect between your assumptions at the start of the year and the current (unexpected) reality can leave you flat-footed. Unexpected threats hit harder, and promising opportunities remain unpursued. 

Instead, many experts advise that companies rethink how they undertake the business planning process and transition from a tactical exercise to a strategic initiative that can reset the corporate agenda, lead the company to its next phase of success, and adapt when internal and external factors unexpectedly change.

That puts a favorable spotlight on the Finance team because they’re bringing newfound speed, agility, and insights to the decision-making process. They’re bringing creative ideas and recommendations to the table in a timely manner. And that translates into new strategic advantage for the entire organization. It’s the role that Finance has traditionally sought but has been unable to achieve because legacy tools and processes are slow and inefficient.

From “business reacting” to business planning

Instead of enduring the annual budgeting process as a necessary evil, suppose instead that you could weaponize it to create business advantage in all areas of the organization – product development, design, logistics, manufacturing, distribution, and more. Modern business planning helps you see things more clearly and sooner by adopting new principles and techniques. 

• Abolish the annual plan – In today’s business environment, you can’t operate in October using assumptions from last January – too much has changed. Modern business planning uses rapid monthly rolling forecasts that enable Finance to adjust for changes as they happen.
   
• Move it to the front lines – A top-down business plan that is dictated by a back-room process only invites resistance from the people charged with committing to and executing on that plan. Instead, modern business planning engages the people on the front lines to get a truer understanding of what’s happening in real time in all areas of the business. Enable department managers, program coordinators, and specialists from every area of the business contribute their forecasts for revenue and expenses. The added granularity and context increase the accuracy of the numbers and fosters broad-based buy-in to the resulting plan. 
   
• Budget in non-dollar terms – Not everyone across the organization has a deep background in finance. Some may not know the fully loaded cost of a FTE or other underlying cost-accounting realities. But they know they’ll need to add three new employees to the team to achieve performance targets. They’ll execute five separate marketing campaigns. They’ll build two new loading docks in the warehouse. Let these frontline experts contribute in the terms they understand best. Then let your planning system accurately convert them into precise dollar figures using approved assumptions and historical costs.

With modern business planning processes and tools, financial professionals can finally sidestep the tedious number-crunching and low-value spreadsheet jockeying to begin to play a larger, more strategic role in the success of the business.

As Megan Walker from Oxford Collection notes regarding their transformation:

The finance team is no longer just a group of number-crunchers. We’ve become a more strategic partner to the business.