Streamline planning and forecasting: Software selection best practices

Financial Services Specialist, IBM

Which of these statements is true?

  • Planning is a waste of time
  • Planning is a critical driver of efficient business operations and growth

Actually, these seemingly opposite points of view are not always mutually exclusive. In fact, they often accurately represent the viewpoints of managers in different parts of the same organization. For many corporate decision makers outside of finance departments, traditional planning, budgeting and forecasting is often seen as a periodic waste of time with minimal operational benefit. Some common complaints of traditional planning practices and processes include:

  • Financial units are not aligned with business-line units
  • Plans are quickly outdated
  • Insight into causes is insufficient
  • Current planning applications and spreadsheets are inflexible, and do not support a dynamic business environment

For finance groups, addressing the challenges of traditional planning, budgeting and forecasting is critical to bringing other functions and business units into the strategic planning process. This strategic alignment offers clear advantages across the enterprise—from ensuring the finance team has more accurate, granular information for planning, to empowering business-line units with the data-driven insights they need to more effectively execute strategy under rapidly evolving market conditions. As reported in an IBM global survey of CFOs, 60 percent of them recognize these advantages and intend to make major changes to their critical financial practices and processes. In this context, the key challenge facing CFOs is choosing among the array of planning software solutions in the marketplace.

The following list—based on the IBM white paper Extending planning & forecasting with analytics—offers insights into current best practices and planning technology capabilities to help you better evaluate and select the optimal planning, budgeting and forecasting solution for your business.

1. Align strategic and operational plans

With the power of today’s advanced planning and forecasting analytics, finance professionals can not only translate strategic goals into financial targets, but even help develop departmental plans and help identify revenue and expense drivers at a granular level. Given these capabilities, it is not surprising that 70 percent of CFOs are now taking a more prominent role in decision-making, beyond the traditional role of finance.

Finance departments must demand that any planning software enables alignment of strategic and operational plans and allows finance professionals to actively track and measure business unit performance against the plan. This helps ensure the company is on track to meet or exceed its objectives.

2. Drive collaboration between functions and business units

Advanced planning software should not only ensure strategic and operational plans are aligned, but also—as a best practice—coordinate plans that affect multiple function areas. CFOs considering a planning solution should choose software that synchronizes financial plans across the company, with direct involvement of line-of-business managers.

Strategic planning is no longer a top-down activity. Managers throughout the enterprise must not only understand the organization’s broad strategic goals, but also know what other departments are planning. For example, a company may be launching a major product. Manufacturing and development teams need to share their rollout plan with marketing—which can use this plan to develop its own strategy to gradually build momentum in target markets. Sales must be informed of the marketing unit’s milestones, as well as the product rollout plan, to identify points to intensify lead engagement. Planning software should support all of this collaboration across the enterprise, empowering the finance group to ensure operational plans are aligned with financial targets throughout the organization.

3. Enable model-based re-forecasting

Today’s global marketplace is defined by rapid, unprecedented change and sustained volatility. In such an environment, even the most detailed strategy is likely to prove unsustainable within a few months after launch. This reality of strategic practice—in the words of one of history’s great strategic thinkers: “No battle plan survives contact with the enemy”—has become a commonplace tenet of planning theory. In selecting the ideal planning software to cope with multiple market pressures, CFOs need to know that the chosen solution supports data-driven re-forecasting.

Advanced planning solutions must not only have the flexibility to support re-forecasting, but also provide accurate analytics to model and assess results. Model-based forecasting gives finance and business units what-if analyses and data-driven insights, and enables these scenarios to be tested against outcomes throughout execution of the plan. This continuous re-forecasting offers answers to critical questions, including:

  • What did we initially predict, and why?
  • How are we performing against our plans, and why?
  • How should we adapt our plans going forward?

An advanced planning solution can feed updates directly to the finance team, which can then revise marketing and sales projections into net revenue projections—giving decision makers the insights they need to adapt the strategic plan within hours or days, instead weeks or months when remedial action to attain objectives may be too late.

4. Streamline planning with cloud-based analytics

Surveys of global industry leaders reveal that while spreadsheets remain useful in daily business practice, spreadsheet-based planning—that is, using spreadsheets as sources of input into the planning process—is not only slow and inefficient but also introduces data inaccuracies sufficient to radically undermine the strategic plan itself. In this context, finance professionals considering an advanced planning solution should determine if their software can streamline and enhance the speed and accuracy of the planning process.

Today, cloud-based technologies are helping finance groups not only address spreadsheet inefficiencies, but also take the entire planning, budgeting and forecasting process to a whole new level. Previously, to model what-if scenarios, predictive analytics required an in-house deployment; now, current agile planning analytics are available in cost-effective cloud solutions that don’t compromise on power or capabilities.

Learn more in this IBM white paper about ways to better evaluate planning, budgeting and forecasting software. It includes a detailed matrix relating best practices and product features to help you select the best solution for your organization.