How to Modernize Your Planning By 2020

by Rob Hull

A successful planning transformation requires optimizing these 5 mission-critical components.

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The growth of data is accelerating at unprecedented speed. In fact, 90% of all the world’s data didn't even exist  two years ago. Imagine what that will look like in another two years. What does that mean for the state of our organizations today and in the near future? Within two years—close to the end of 2020—businesses will likely be trying to manage and make sense of at least twice the volume of data they’re working with today. 

To thrive in an environment where nothing seems to stay the same, it is more important than ever for organizations to gain sharper visibility into their operations, transform massive amounts of data into useful insights, and respond quickly to changes with confidence. 

This requires planning—but not the kind most finance professionals are accustomed to.

Diagnosing the static planning model

Traditional planning—often top-down, concentrated in finance, performed once per year, and usually performed on spreadsheets—was a great fit for a more predictable time. But in the age of urgency, traditional planning stunts a company’s growth potential and drains internal resources. It’s an inherently inflexible, static planning approach that simply doesn’t fit with today’s pace of business. 

At the very moment businesses need to operate with agility, these old, siloed, manual static planning processes still force finance professionals into an annual budgeting and reporting scramble marked by late nights and lost weekends. Tied up with data entry, manual consolidation, and email-based verification, FP&A teams lack the time to unearth data-driven insights that could help them fine-tune forecasts or identify potential growth opportunities, thus keeping finance from becoming the strategic force is should be in the organization.

 Adapting to constant change 

If we accept a state of constant change as the new normal, then finance’s focus shifts from avoiding change to anticipating it and adapting to it. This starts with the business-critical processes at the nucleus of any organization.

Planning is one of those processes—one that, like many others, has undergone dramatic change with the advent of cloud software. This has led to an undeniable distinction between the success of those who have adapted and those who have not. Organizations still operating from annual plans that take months to prepare, with heavy reliance on instinct and little visibility into operational details , tend to be less nimble and responsive to market shifts. Their business suffers as a result. Compare that to data-driven businesses, which on average grow a healthy thirty percent annually. Business cannot achieve this by being slow, rigid, and myopic in their planning and decision-making processes.

For organizations eyeing the impact of change and the implications of the data growth that is a part of it, there is time to recover from the effects of a traditional planning environment. It’s not too late to redefine core business practices and tools and ride the tsunami of immense data growth rather than drown in it.

Moving away from static planning

The answer is to adopt an active planning model—one that leverages cloud-based planning technology infused with real-time data, is accessible and adoptable regardless of role, and scales as needed to extend planning beyond finance.

Active planning processes are defined by three characteristics: they lead to planning that is collaborative, continuous, and comprehensive.

Collaborative. Planning strategies shouldn’t be siloed within finance or guarded by a few key stakeholders. Instead, planning must involve an ongoing collaboration between everyone in the business. Multiple roles and departments should be empowered to easily access critical information and KPIs, align themselves with organizational goals, and make data-verified decisions. This leads to more accurate plans, forecasts, and budgets based more on data-driven insights than gut feel assumptions.

Continuous. Instead of a painful annual planning process that results in a plan whose data rapidly becomes outdated, modern planning is ongoing and infused with a constant stream of trusted, always-current data imported automatically from enterprise systems. With a cloud-based, active planning approach, businesses can continuously assess and refine forecasts without being tethered to traditional financial planning cycles. Analysis is ongoing, decision making is data-driven, and forecasts are updated to provide timely, relevant direction to all teams.

Comprehensive. Lastly, an active planning model allows for a holistic view of the business, integrating planning, reporting, and analytics across finance, sales, HR, and other operational functions. This empowers companies to develop and maintain a comprehensive and integrated plan with alignment across different business units and departments.

These characteristics lead to businesses that operate with greater agility. For instance, organizations that rely on cloud-based planning processes are four times more likely to be able to respond to a market change than those still stuck with a static planning model.

Take the popular Asian-fusion restaurant P.F. Chang's, which operates more than 400 locations around the globe. Prior to adopting an active planning model, P.F. Chang’s financial department was drowning in the minutiae of busywork, spreadsheets, and siloed decision making. After implementing an active planning environment, the finance team was able to cut the time required to develop forecasts by 80%. And at global entertainment company Legendary Entertainment, FP&A professionals would spend months manually updating budgets with actuals—a process so tedious and slow that by the end, the budget wasn’t accurate, up-to-date data. Now, the company prepares budgets in a fraction of the time, so executives can make business decisions quickly and confidently.

Active planning by 2020? Start now

Thousands of companies that have abandoned traditional planning methods and embarked on their own journey toward an active planning model. They’ve done this by replacing outdated legacy planning platforms with flexible cloud-based planning solutions built to handle future demands, scale quickly, and integrate with any ERP environment or operational transactional data source.

Technology is a powerful enabling force in this journey, but it’s not the only one. A successful planning transformation also requires optimizing a few mission-critical components. Finance professionals should ensure that they consider each of these dimensions when transforming their planning environment in a way that’s built around best practices.

  1. Process. Identify the necessary planning, reporting, and analysis processes to implement, including more granular pieces like periodic forecasting, scenario analysis, operational reporting, board reporting, and long-range planning.
  2. People. Account for every stakeholder participating in the identified processes and define how they will participate. This includes people both internal and external, such as board members, investors, or regulators.
  3. Model. Pinpoint the forward-looking models and historical analytics required to support the desired business outcomes, starting with the core expense, workforce, and revenue planning required to create an income statement. Models typically evolve to include more operational drivers, KPIs, and cash flow and balance sheet details.
  4. Data. Define the necessary source systems, data, and integrations required to provide historical/transactional data that will support the chosen models and analytics driving the processes.
  5. Time. Structure implementation timelines as quarterly goals to help avoid the kind of aimlessness that threatens adoption and erodes ROI.

Turn planning into a competitive advantage

With an active planning environment, organizations can leverage real-world, real-time data to model what-if scenarios, course-correct when change happens, and lower overall risks. Modern business planning is now a strategic advantage, freeing companies from the drudgery of manual, static planning processes and the drag on their business caused by fractured and instinct-based decision making. Active planning positions finance to close the gap between today and the future.  

With 2020 just around the corner, companies are facing a defining moment. Those that are prepared for constant change and to make the data explosion a tool for insight will succeed in a marketplace that rewards agility.

The question is, will that include you?

A former CFO, Rob Hull is founder of Adaptive Insights, a Workday company.