Continuous Financial Planning – A Guide

Continuous Financial Planning – A Guide

Need A Framework for Clarifying Your Organizational Readiness and the Next-Best-Steps for your Continuous Financial Planning Journey?

#FinancialOperationsTransformation #FPandA #ContinuousPlanning

Who this Guide is for:

  • Finance leaders or change agents charged with transforming finance
  • Executives who want to leverage financial operational data to drive decision making
  • Business Leaders evaluating Continuous Planning needs

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Every area of people, process, and technology can be enhanced with the goal of increasing your organization’s financial IQ.

Continuous Planning Defined:

  • Financial planning, consolidation, reporting & analytics capability
  • Managed by competent people using proven processes and systems
  • Providing timely, continuous and trusted information
  • Available to everyone anywhere

Your Take A Ways:

  • Identifying your Continuous Planning “Current State”
  • The Next-Best-Steps for your Continuous Planning journey
  • How to improve finance processes and support strategic decision making

Introduction

Understanding your organization’s financial IQ is the first step as you undertake a Continuous Planning initiative.

At this assessment stage it’s crucial to view Continuous Planning as a journey that finance leaders want to start.

To achieve Continuous Planning finance must lead the organization to effectively address the People, Process and Technology challenges of the journey.

Finance leaders are aware of the pain they’re experiencing in planning, close, and reporting. They understand that they’re challenged with spreadsheets or developing budgets with educated guesses because they cannot get actuals fast enough. Identifying your pain points is essential, but it’s also important to understand the entire journey to achieve Continuous

Planning

Assessing Your Current State and Identifying Your Desired Future State
The different levels of Continuous Planning maturity are discussed in overview.

Level 1: Task-driven, Siloed, and Heavily Reliant on People Repeatedly Doing the Heavy Lifting with Spreadsheets

Finance teams at this level are faced with siloed systems, processes and data, and they’re just focused on your current deadline to get to the right numbers to use in reports, plans, and analysis.

It is typical at this level that Continuous Planning processes are undocumented and in a state of dynamic change, tending to be driven in an ad hoc, uncontrolled and reactive manner by people or events. This provides a chaotic or unstable environment for the processes.

They spend most of their time on the project trying to validate that numbers are accurate or where they came from and resolving inconsistencies rather than analysis and making business decisions.

Common Characteristics

  • Little collaboration between finance and business units
  • Slow and manual processes
  • Lack of accuracy and controls
  • Heavy use of Excel or standalone point solutions
  • Continual checking of formulas to troubleshoot inaccuracies
  • Excel is used for tasks that would benefit from a more sophisticated solution
  • Fund performance only at a summary level in weeks that you can’t analyze
  • Every request to look at the data in a different way requires a new set up spreadsheets that don’t tie to the initial spreadsheets
  • Planning typically happens quarterly or in an ad hoc manner

If you’re at this stage, here are your Next Best Steps:
Document your Planning Pains and their Business Impact. Be sure to quantify the hard and soft costs to the business for time, inaccuracies, rework, opportunity cost and other metrics.

Identify potential incremental improvement quick wins and objectives. Plan to focus on “quick wins” that will demonstrate the benefits of the greater journey. Early success is the foundation for setting additional objectives in the near term and beyond.

Recruit an Executive Sponsor within Finance. Tap an individual as the sponsor for your Continuous Planning vision and journey. This person will be responsible for communicating, motivating and allocating resources for the initiative.

Appoint a Program Leader. Tap an individual to head up your Continuous Planning program. This person will be responsible for project coordination, overcoming or escalating roadblocks and focusing efforts to achieve project milestones.

Level 2: Some Repeatability and Still Very Dependent on People & Spreadsheets
Some automation and repeatability is achieved with financial planning and close tools, but in limited scope and generally within finance.

It is typical at this level of maturity that some Continuous Planning processes are repeatable, with more consistent results. Process discipline is unlikely to be rigorous, but where it exists it helps to ensure that existing processes are maintained during times of stress.

Data accuracy remains a challenge and spreadsheet usage and manual effort remains high.

Common Characteristics

  • Some automation in place, but many process and visibility issues remain unaddressed
  • Data is still pulled from various sources to assemble a planning package
  • Planning, close, and reporting still primarily a finance-driven exercise
  • Incremental improvements made in business collaboration and efficiency
  • Manual data management and minimal quality control
  • Excel fills the gaps not covered by automation for tasks that could be addressed by more sophisticated and integrated systems.
  • No ability to validate asset acquisition assumptions against actuals
  • Fund performance only available at a summary level taking weeks that you can’t analyze
  • The start of the ability to track cash utilization by project and or fund – normally quarterly

If you’re at this stage, here are your Next Best Steps:

Document & Track Benefits. Quantify the impact of the benefits gained and lessons learned from your initial automation and collaboration. Understand the key outputs required and the process and inputs required.

Identify Priority Focus Areas. Map out your next best, larger initiatives to address pressing challenges or opportunities. Aspire to achieve more transformational rather than just incremental improvements.

Engage an Additional non-Finance Executive Sponsor. For this Next Best Step transformation initiative work with a second executive sponsor in a different functional area. Leverage the backing of the executive sponsor to expand the benefits of Continuous Planning beyond finance.

Level 3: The Enterprise Sees the Benefits, and Engages
Continuous Planning has expanded beyond finance at this level to include operational areas like sales, marketing, and product or service delivery.

It is typical of Continuous Planning at this level that there are sets of defined and documented standard processes established and subject to some degree of continuous improvement over time. These standard processes are in place. The processes may not have been systematically or repeatedly used sufficiently for the users to become competent or the process to be validated in a range of situations.

More remains to be done for Continuous Planning to be truly transformative, with use in a wider range of conditions and to develop team and individual competence.

Common Characteristics

  • Financial planning and reporting data are dimensionalized and managed in a central system that provides the foundation to standardize the planning process
  • Reporting has moved past basic financial data to include:
  • Performance of similar assets across multiple funds
  • Visibility into cash utilization by project and or fund – monthly, weekly, inception to date
  • Tracking debt leverage by financer across funds
  • Financial processes are becoming automated to accelerate planning and close cycles.
  • Operational functions are engaged, but finance continues to invest the most effort.
  • Financial planning processes and standards start to emerge, and more people are getting involved.
  • More, but not all data sources are integrated, and some data management and quality controls are in place.
  • Excel is still used in conjunction with the systems to address – “the last mile” of business requirements.

If you’re at this stage, here are your Next Best Steps:

Quantify Business Gains and ROI. Begin to track overall business gains vs. initial baselines and quantify the ROI achieved from Continuous Planning.

Refine and Optimize. Target stubborn bottlenecks that remain and continue optimizing processes that improve visibility and efficiency.

Broaden Business Engagement. Scale Continuous Planning to other key operational processes, focus on delivering wins and linking them to finance in a collaborative manner, where data and information is easily shared.

Level 4: Managed and Efficiently Supporting the Business

Finance proactively supports the business and is essential to providing timely, accurate and relevant information for business decision making and strategic initiatives.

Continuous Planning process automation is well established across the enterprise. It is characteristic of Continuous Planning at this level that, using process metrics, the effective achievement of process objectives can be measured across a range of operational conditions. The suitability of the process in multiple environments has been tested and the process refined and adapted. Process users have experience in multiple and varied conditions and can demonstrate competence.

Process maturity enables adaptations to different projects without measurable loss of quality. Continuous Planning capability is established from this level.

Common Characteristics

  • Finance and operational collaboration is providing speed and agility.
  • Cross-functional collaboration improves alignment
  • Finance is essential in developing data-driven business strategy and setting goals, and earns trust as a partner to the business
  • Financial planning processes and standards are well defined, and managed and business partners are becoming more engaged
  • Financial planning has moved from being used on an annual basis for corporate budgeting to quarterly and event triggered planning at fund or project level
  • Reporting is focused on measuring actuals against:
  • Initial project plans
  • Validation and exception metrics like ROE, ROI
  • Updated forecasts
  • Most key data sources are harmonized into a single dimensionalized source of truth, with robust data management and quality controls in place
  • Excel is used in isolated cases

If you’re at this stage, here are your Next Best Steps:

Develop Analytics Capability. Finance now has more time and resources to focus on developing analytics skills and processes, elevating its role supporting strategic growth initiatives.

Improve Processes & Systems. With most relevant processes automated, it’s a matter of ongoing optimization through continuous review and feedback with operational areas.
External Sources. Look to expand information sources to incorporate external market, industry, location and any competitive or comparable information and analytics.

Improve Flexibility. Identify and expand capabilities to support new strategic and tactical opportunities, you have the agility to make informed, data-driven forecasts and decisions.

Level 5: Transformative and Driving the Business

Finance is the strategic heartbeat of the company and is deeply involved in driving the business forward with accurate and informed recommendations, while process automation is pervasive across the enterprise.

It is a characteristic of Continuous Planning at this level that the focus is on continually improving process performance through both incremental and innovative changes/improvements. Process maturity enables adaptation to different projects without measurable loss of quality. Continuous Planning capability is established from this level.

Common Characteristics

    • liFinance and operational collaboration is providing speed and agility.
    • Complete cross-enterprise engagement drives alignment, and finance is instrumental in developing business

strategy and setting goals, and they act as a hub and a partner to the business.

  • Financial planning processes and standards are well defined, and business partners are fully engaged.
  • Virtually all data sources are integrated into a single dimensionalized source of truth, with robust data management and quality controls in place.
  • Processes and financial plans/models are in place to immediately onboard new projects or funds at the onset and be used to compare to actual progress
  • Planning and investment models can be extended out into the future to handle plans around
  • Tax impacts
  • Cash position impacts
  • Future acquisition or disposal planning
  • Excel is used sparingly in the Continuous Planning process.

 

If you’re at this stage, here are your Next Best Steps:
Sharpen Analytic Insights. Finance now has more time and resources for real-time reporting and analytics, elevating its role in strategic growth.

Continuous Optimization. With all relevant processes automated, it’s a matter of ongoing optimization through continuous review and feedback with operational areas.

Adapt Quickly. Whether adding a new assets or funds, entering a new market or acquiring a new or competitive business, you have the agility to make informed, data-driven forecasts and decisions.

Investing in Your Continuous Planning Journey

Once you’ve determined your organization’s status, you’re ready to start the journey to a higher level of Continuous Planning maturity. Finance has an opportunity to play a more expansive and impactful role within the organization, but it requires an investment in the structure of the finance team itself. Every aspect of people, process, and technology can be enhanced with the goal of increasing your organization’s financial IQ.

People

Modern thinking staff want to work in a state-of-the-art environment where they can learn, acquire new skills, use modern methods, tools and technologies and most importantly feel their efforts are having a positive impact. The journey to Continuous Planning is one that motivates teams and meets their personal goals.

If your team lacks the experience and resources consider teaming with an execution partner who has guided companies through the journey to increase the velocity of the journey and avoid delays, missteps and frustration. This partner should be equipped to help with the initial heavy lifting and delivering quick wins to enable buy in and enable the freeing up of resources to ultimately manage the process internally.

Process

Process maturity is a journey that starts with a phased – walk-crawl-run and just-enough-for-now approach. It is founded on proven process design and requires the harmonization of processes across accounting, finance and operations using the best fit tools and technologies for each step of the journey.

A roadmap of the journey is used so the teams expectations and benefits are know before each step of the journey is taken. It also allows for the expectations of the results to be known to ensure measurable success of each step.

Technology

A foundational design for information architecture and integrations for the business is required to support a phased roadmap for leveraging technology capabilities for automating and controlling the operations of the business.

In Summary

Increasing financial IQ becomes a continuous cycle where insights are found, opportunities are modeled, and plans are formulated together, as a cross-functional team.

Budget and P&L owners benefit because they can run their business better, and have access to more accurate and timely data in a context that ties to their business objectives. Finance benefits because there is more participation and accountability in the planning process, which results in more accurate forecasts and fewer surprises.

Finance is also positioned to better participate in high-impact, strategic conversations with business owners about how to drive the business forward.