The Case for Continuous Financial Planning after Covid-19

As the business climate has changed dramatically over the past year, so too has the planning process for many businesses. Traditionally, planning activities have mostly centered around quarterly and annual cycles, with review and adjustment typically happening on a monthly basis. As we find ourselves in a highly volatile and unpredictable economic environment, business leaders have shortened their outlooks, revisiting the numbers on a far more frequent basis.

For many, that has resulted in a new paradigm toward adjusting planning continuously, in which monitoring data in real time facilitates rapid assessment and business decisions that are more appropriate to rapidly changing economic conditions. Historically, financial planning and analysis have typically involved a multitude of data sources, manual processes, and lengthy planning cycles. In the context of 2021, though, the old ways of working simply no longer serve us effectively.

Achieving organizational consensus can itself be a challenging and time-consuming endeavor. This is especially true in cases when departmental leaders develop their own independent forecasts that must be rolled up to a company-wide plan. The events of the past year have highlighted the critical importance of collaboration, aligning leaders across the organization around a common understanding of where the business is currently, what challenges it must address, and where it ultimately seeks to be.

At the same time, top-level leaders focus more than ever before on gaining visibility across the organization. For businesses dispersed across multiple time zones and geographies, this is especially challenging. The abrupt shift to a largely remote workforce has made this even more difficult. Fortunately, advances in technology have made collaboration easier and more effective, and purpose-built reporting tools have removed many of the roadblocks that have slowed the flow of information in the past and made it more difficult to facilitate a unified vision based on the current state of the business.

Why Continuous Planning Is a Modern Business Imperative

Briefly stated, continuous planning is about shortening the intervals at which business leaders assess the organization’s performance against existing plans, adjust forecasts based on the latest available information, and take action to address any issues to improve outcomes.

Practically speaking, that means accelerating the flow of information throughout the organization and moving from longer forecast cycles (e.g., quarterly or annual) to rolling forecasts (e.g., monthly, instead of quarterly or annually). Shorter forecast cycles tend to focus the organization more intensely on the near-term future, and corrective action tends to happen sooner, at a time when it can potentially have a greater impact on outcomes.

In many respects, continuous financial planning requires a cultural shift in which team members regularly engage in the process of monitoring and adjusting for better business performance. Employees must be able to draw a clear connection between their daily efforts and the business objectives outlined in the plan.

Another key feature of continuous planning is that it frequently incorporates non-financial data. Many organizations, for example, track the sales pipeline in a separate CRM system or in Microsoft Excel. Many businesses track pipelines by individual salespeople, each using their own tools and methods. Continuous planning requires visibility to all of that information. It demands a more unified approach that breaks those silos down and eliminates all of the manual effort required to collate data from different sources into a single quarterly or annual forecast.

Continuous planning means having the ability to see what is happening in the business on an up-to-the-minute basis. It requires streamlining and optimizing any processes that involve reporting and analysis. By moving to a single, unified platform, you can achieve the processes of collecting, managing, and analyzing information far more efficiently than if you continue to rely on the off-the-shelf reporting tools that come with your existing ERP and CRM software systems.

A New World of Possibilities

As business leaders rushed to adjust to the new reality brought on by the COVID pandemic, they had to consider a wide range of “what if” scenarios. What if revenue drops by 50 percent starting next week? What if our customers suffer from cash flow problems and are unable to pay us promptly? What if we face high rates of absenteeism in our workforce?

While those questions focus on negatives, we have also seen numerous examples of business leaders who explored opportunity in the midst of crisis. What if we shift some of our production to make personal protective equipment for healthcare workers? How quickly can we ramp up our online sales capacity? Can we transition some of our sales to restaurants and institutional dining facilities, replacing them with product packages for the consumer market?

By developing a discipline around continuous planning, business leaders are necessarily putting into place the tools, methodology, and corporate culture of agility and resilience. Companies that had pre-existing capabilities around the clear visibility of information and flexible self-service analytics were at a distinct advantage when this crisis initially hit. Since then, agility and resilience have become key factors that enable businesses to survive and thrive amid any crisis.

Process automation and cloud computing have played a critical role in supporting the move to continuous planning. Today’s financial forecasts are more comprehensive than ever before, incorporating historical financial information from the ERP system, customer information from CRM, and social media feedback from online sources. Organizations can only tap into the inherent value of these new data source possibilities when they have the right analytical tools in place to manage data volumes, users, and the complexity of integrating multiple operational and financial data sources around a single platform.

By cataloging those data sources and building a unified strategy for harmonizing and unifying them within a single reporting platform, businesses can achieve forecasts that reflect the current reality on the ground. This reduces the amount of time spent gathering data and reconciling information, tasks that typically fall to the finance team. Businesses can automate external sources of data when necessary, for example incorporating exchange rates, commodity prices, or even weather events.

Getting Started with Continuous Financial Planning

If your organization is considering a shift to continuous planning, here are some important things to keep in mind:

1. Focus on the numbers that matter most. Identify the metrics that represent the key drivers for your business success. Which factors are most important in driving revenue and expenses in your organization, and how do they relate to one another? Follow the Pareto principle and focus on the 20 percent of accounts, products, or locations that drive 80 percent of the results. Look beyond conventional wisdom to identify metrics that might not have been highlighted in the past. By zeroing in on the 5 to 10 measures that have the greatest impact on revenue, expenses, and cash, you will be in a better position to steer the efforts of your organization toward successful outcomes. Finally, be willing to start small and adjust your approach as you identify what works and what does not.
2. Make continuous planning a company-wide effort. Strong leadership drives organizational culture. When management clearly articulates what matters most and leads by example, the rest of the organization usually follows suit. Help employees to connect those key metrics with the work they do on an everyday basis. By incorporating non-financial measures into your continuous planning efforts, you are driving greater accuracy in the plan, but you are also creating a meaningful link between the work that various departments perform and the organization’s top priority goals. When leaders clearly communicate desired outcomes and provide a yardstick against which to measure performance, the entire organization is marching to the same drummer.
3. Facilitate collaboration. As remote work has become the norm for many organizations, it is more important than ever that business leaders supply their teams with practical mechanisms for frequent communication and collaboration. This is especially true for finance teams, but it also includes numerous others whose input is critically important to the planning process. Reporting and analysis tools that offer robust collaboration capabilities can go a long way toward ensuring that everyone is operating from the same page. Centralized file storage not only ensures that you will not lose the information, but it also guarantees that everyone is operating with the most current information. Good planning and analysis tools should include automated report distribution, the ability to add comments and annotations, or advanced collaboration features such as discussion threads.
4. Everyone should be operating from the same version of the truth. Many organizations share plans and forecasts via email. People share spreadsheets or static reports among themselves and store them on local hard drives where they may be lost if a laptop is stolen or a hard drive crashes. Non-secure email can expose such information to authorized parties. Version control is also an issue; if multiple users are editing different copies of the same file, it is easy for the data to be out of sync, resulting in confusion and additional work tracking down errors. When evaluating planning and analysis tools, look for features that enable central storage and maintenance of reports, and secure distribution, sharing, and access by authorized users working from a remote office.
5. Automate as much as possible. Continuous planning is virtually impossible to achieve without real-time reporting capabilities. The out-of-the-box reporting tools that come with ERP, CRM, or other software systems are inadequate for continuous planning because they fail to deliver a unified view of the organization, incorporating multiple sources of information in real time. The most common workaround to the drawbacks of existing reporting tools involves a time-consuming copy/paste process that is highly inefficient and inevitably introduces errors. Because you need to repeat that process every time you produce a new version of each report, it can only provide a rearview snapshot of the business. The information is obsolete as soon as you produce the report. Robust reporting tools eliminate that manual effort and have the ability to pull data from multiple software systems at the same time. Perhaps even more importantly, they provide real-time access to those data, which means that reports are always accurate, delivering accurate, up-to-the-minute information from the company’s various software systems.
6. Empower your people. Inevitably, you will need to modify your planning forms and reports as the needs of the business change. This has been particularly true over the past year, as business leaders dealt with an entirely new set of challenges and questions. Most planning and analysis tools, unfortunately, are dependent on specialized IT experts to modify existing reports or build new ones from scratch. If you need information quickly, that simply doesn’t work. If the IT department is scrambling to deal with remote access issues or handle a backlog of requests, that dependency can be costly. For some organizations, the backup plan is to pay expensive outside consultants to get the job done quickly. Not only does that have a financial cost, but it can introduce significant delays. Look for tools that enable frontline employees in finance and accounting (or elsewhere throughout the organization) to create and modify reports without IT expertise.

The business case for continuous planning has never been stronger. COVID-19 has compelled finance to think differently, breaking the mold of quarterly and annual planning cycles and replacing it with processes more suitable to business agility and resilience. The new normal requires automation, collaboration, and a willingness to deploy technology to work smarter, not harder. Whether or not the business climate settles into a less volatile groove, your competitors will leverage continuous planning to develop greater agility. Agile companies will be quick to respond to threats and capitalize on opportunities.

Robust planning and analysis tools help business leaders develop and update their plans whenever external conditions change. By connecting forward-looking plans to operational data, managers have a clear view of what’s happened and where the business is headed. At insightsoftware, we have been helping businesses with best-in-class reporting tools since 1973. To learn more about how insightsoftware can help your organization, contact us for a free demo, and download our free ebook, Eight Key Factors to Consider when Evaluating Continuous and Extended Financial Planning Software.