Make Planning Continuous!

Posted by Steve Berry

Jun 6, 2019 9:53:55 AM

When you only plan once a year, you spend the rest of the year explaining factors that the plan failed to take into account. More time between plans equals more explaining.

With the arrival of cloud-based EPM systems, many of the things financial teams once took for granted have since become obsolete. For an increasing number of organizations, one item high on that list is the once-a-year financial plan. This is where you forecast by quarter both what you expect to collect in revenue next fiscal year and what you will spend. What many businesses are now adopting is the idea of continuous planning — where instead of waiting four quarters to do the financial plan for the next four quarters, you do it every quarter or even every month. This is equivalent to a rolling forecast and a rolling budget. The result is a “forever-young” financial plan. The plan still looks out four quarters into the future, but the plan itself is never more than a month or a quarter old.

Why would you want a forever-young financial plan? Here are five good reasons:

  • Shorter product lifecycles. Companies must constantly innovate to stay ahead of the competition and so their products and services won’t become commodities. Innovation by definition means that you don’t know now what you will know in the future. You don’t know all the innovation’s features and benefits, you don’t know how the market will respond, you don’t know your costs, and you don’t know how much you will charge. The answers to those questions only come into focus with time — which makes an older plan less accurate.
  • Faster decision-making. By taking into account factors that are more clearly foreseeable (like costs, prices, etc.), continuous planning reduces by a lot the constant back and forth that stakeholders endure every time they are called upon to justify initiatives that are not already baked into the plan. So they make decisions faster and take action on those decisions more quickly.
  • Lower risk. More opportunities. Because they have better visibility to what’s ahead and because they can make decisions faster, stakeholders can both make decisions and take actions based on those decisions with less risk. They can also be more opportunistic — meaning they are better able to take advantage of windows of opportunity before those windows close. More opportunities realized with less risk incurred generally translates to better business outcomes.
  • Better planning process. Practice makes perfect — so more frequent planning will likely lead to a process that is more efficient, has fewer errors, and is better organized both in terms of how it is conducted and how it is presented. As a result, plans will be more accurate, and not just because data is fresher.
  • Less overall disruption. When planning becomes a normal part of everyday life rather than a once-a-year occurrence, it is less likely to disrupt people’s other work. So their productivity will go higher and they will be happier.

All these benefits result in a company that is better able to thrive in today’s highly volatile environment. It is easy to believe then that the only reason why some companies still only plan once a year is that they are either in an extremely static industry or they lack the necessary tools for continuous planning — namely a cloud-based EPM system.

How Cloud-Based EPM Enables Continuous Planning

Cloud-based EPM systems bring together the four key elements for continuous planning:

  • Holistic data access. Holistic data access requires two things: 1) integration of financial and operational data (so changes on the financial side reflect changes on the operational side and vice versa); and 2) that up-to-date information is available across operational silos on demand, if not in real time. This type of access dramatically reduces the time, effort, and error that once-a-year plans typically involve just in pulling the needed data together.
  • Enhanced self-service planning tools. Users should be free to work in a spreadsheet paradigm if they want, but should also have easy-to-use self-service tools that allow them to construct and study complex what-if scenarios in highly visual and interactive models. They’ll want to use these tools in the normal day-to-day running of their departments, so that continuous planning becomes an almost automatic byproduct.
  • An environment that promotes collaboration. Having these tools and the ability to share data and models across functional silos means that stakeholders will collaborate better and collaborate more often, so that their individual contributions to the plan are more meaningful, more on target, and more timely.
  • Easy deployment. If an EPM system is cloud-based both the system and the plans can more easily accommodate changes to the organization in sync with those changes.

If given a choice, most companies would want a forever-young financial plan. Cloud-based EPM systems give them that choice.

Topics: Technology Insights, Cloud EPM, Enterprise Performance Management (EPM), Oracle Products