Reforecasting Amid Upheaval: Best Practices for Financial and Workforce Planning

Our team of finance professionals shares tips for dealing with revenue shocks and workforce and capacity planning when income is hard to predict, and strategies for emerging from this pandemic in a position of strength.

If your role includes financial planning and analysis, you likely had just completed your 2020 revenue, headcount, hiring, opex, and capex forecasts, only to find that COVID-19 rendered them moot. So where to go from here? How can you chart a new course when time is of the essence and the waters are murky? 

At Workday, our team of finance professionals has gathered timely and actionable tips for dealing with revenue shocks and workforce and capacity planning when income is hard to predict, and strategies for emerging from this pandemic in a position of strength.

The tips reflect what we’ve learned as we’ve been helping customers adapt and respond to the current climate. In these engagements, we’ve seen an increased need for two things across the board: more granular forecasts and a finer time horizon. 

These two dominant asks point to the demand for business agility. As Kinnari Desai, senior director of FP&A at Workday, points out, “Flexibility and the ability to react quickly are the two most important things.” 

For CFOs and their teams, navigating an uncertain future requires up-to-the-minute, data-driven forecasting that can be done monthly, weekly, or even daily. With the COVID-19 pandemic sending waves of disruption throughout every aspect of an operation, businesses need a real-time view into their cash flow to make the right decisions in the moment. 

3 Actions You Can Take Now

When implementing driver-based top-line modeling, Desai says to focus on three key elements. 

  1. Align around the metrics that matter. Query your senior managers across the business on which metric or metrics are the most important in these times so you know what to optimize for when you run what-if scenarios.

  2. Identify your largest business drivers. Focus on adjusting those levers to realize the largest financial impact (rather than trying to optimize for every single lever).  

  3. Home in on the top two to three meaningful scenarios. By now, you probably have a sense of the impact the pandemic has made on your business, so focus your energy and recommendations on the three most likely or meaningful scenarios. Don’t waste your time, cycles, and sanity spinning 10 or more scenarios that are only slightly different from one another. Iterate and refine the scenarios that will matter the most.

Especially in a time like this, the most valuable role of FP&A is to provide expert insight and well-modeled scenarios to senior management.

Execs are Focused on Scenario Planning and Reforecasting

These tips should help finance executives, no matter what challenges they’re specifically facing at the moment. In a recent webinar, we asked finance professionals where they’re focusing their attention in terms of scenario planning and reforecasting. More than a third of attendees (34%) are interested in planning for the top line to accommodate unexpected changes in sales or demand. Nearly one in three (31%) want to better understand and game out their cash position. Nearly a quarter (22%) are focused on how to plan for workforce factors like headcount, hiring, capacity, and utilization. For 13%, the priority is determining a way forward for opex, capex, and discretionary expenses.

Taken as a whole, these concerns paint a picture of businesses working hard to anticipate what the future holds when they realize many of their prior assumptions no longer apply.

Workday Adaptive Planning can help you tee up your top-line model without a lot of versioning headaches, number crunching or toggling between spreadsheets. Top-line modeling also helps ensure you and your leadership are marching toward the same goal—something that’s never been more crucial.  

Taking a strategic approach to planning will only help this effort. Namely: Understand how the common data model will help your planning efforts; and be sure to make managers active participants in your ongoing forecasting process.

Understand the Value of the Common Data Model 

As these changes impact your data model, as you encounter unforeseen expenses, and as you face the prospect of making critical decisions on an accelerated timeline, the true value of a common data model becomes clear. “At Workday, our common data model really helps us,” explains Desai. “At the end of the day, having the same data model being used in your planning system and your cloud ERP system (and if it’s one and the same, that’s even better) is very important to react quickly and understand the data. I can’t emphasize enough the value of the common data model when you need to know what’s really happening in the business right now.”

Working from a single source of truth, notes Desai, you can better explore data, understand the source of that data, and identify viable, numbers-backed opportunities. Say you’re exploring the idea of moving all your new hires out by a quarter. Historically, that may have been done on a quick Excel workup or even a back-of-the-envelope calculation, with decisions based on a glance at the actual data. But neither of those comes close to what anyone would legitimately describe as “data-driven.” With Workday Adaptive Planning and a common data model, we’re seeing customers forecast quickly, adjust variables in real time, and identify the right moment for taking specific action. 

From our own experience at Workday, we realized that to move quickly, we had to iterate multiple times. And we realized that revenue, headcount, and cash flow are all driver-based. A single source of truth is making those iterations easier because those drivers are always accurately represented.

Another key advantage: The platform also helps you isolate and measure the impact of specific variables, instead of the detail just disappearing in a never-ending stream of formulas and sheets. For example, many companies now face (hopefully) one-time expenses like supporting a remote workforce. (We created a special “COVID-19” project code so we could track these one-off expenses, like the relief package Workday provided its employees, separate from typical ongoing business expenses.) Operating on a common data model helps you trace the impact of that expense and present true business-related actuals-to-forecast variance.

Keep Management in a Forecasting Feedback Loop

Especially in a time like this, the most valuable role of FP&A is to provide expert insight and well-modeled scenarios to senior management early on so they can make informed decisions on issues like expense reduction, hiring, workforce deployment, customer payment options, and more. The faster they can understand and digest those scenarios and the data, the better suited your organization will be to see the other side of this with minimal lasting damage. 

This new pace will most likely not let up anytime soon, so now more than ever, the tenets of active planning—including ensuring your models, plans, and forecasts reflect the latest expectations and data—are vital. You have to be able to make changes on the fly and be ready with an answer when you’re asked, rather than spending the next two to three days calculating it.

For those using Workday Adaptive Planning, to ensure your leadership is up to speed:

  • Build your Active Dashboard to showcase the top business drivers for quick reference and fast, high-level adjustments.

  • Drill down into a specific number, or into specific areas of the company to better help understand relationships and correlations across departments or business units. Top-line numbers don’t always provide the insights you need, but discovering what’s behind the numbers can help you see, say, where that opex increase is really coming from.

  • Automate as much as you reasonably can, including ingesting data instead of copying and pasting into reports, to free yourself of the manual minutiae and save time to serve as the strategic force you are.

How Quickly Can You Get Workday Adaptive Planning Up and Running?

The webinar had good news for attendees interested in moving their teams to Workday Adaptive Planning. Depending on what you want with your initial build, getting up and running could take as little as a couple of weeks. As with anything, the timeline depends on a variety of considerations.

Change is always a constant. Yet unprecedented changes such as those we’re seeing today require more insight and support. That’s why we’ll be rolling out more webinars and education for you to learn how to get the most from Workday Adaptive Planning—and keep your business agile and responsive in these uncertain times.

Watch the complete webinar, “Reforecasting in Times of Uncertainty.”

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