How to Make Financial Planning a Year-Round Process

There’s no doubt that holding on to legacy planning technology and processes can cost your company more than it saves. That’s especially true in today’s data-driven, accelerated world where business agility is now a determining factor for success. 

Instead, to think fast and move first, organizations must embrace a new, modern planning model or risk being left behind. Yet many financial pros are still bogged down in rigid, time-consuming spreadsheets and old-school annual planning cycles.

Cloud planning technology, meanwhile, can help companies uncover the key drivers that impact teams’ performance—and identify the trends and market shifts that could hit the bottom line in the coming year. Taking a more active approach to financial planning also can give decision-makers the objective intel they need to invest in good opportunities or cut back on those that aren’t performing well.

Making financial planning a continuous, year-round process helps companies make swifter, more strategic decisions. Here are three proven ways to create more dynamic financial plans that will improve your company’s agility and help it reach its strategic goals.

Tactic No. 1: Focus on Strategy

Don’t let yesterday’s processes drive your company’s current and future financial plans. If teams are focused on doing what they did last year, business performance will stagnate.

To succeed in a rapidly evolving marketplace, companies need a clear strategic vision—and a detailed plan to execute it. And that plan needs to be reviewed and updated on an ongoing basis.

But business leaders can’t make responsive, strategic decisions without uniform data from across the organization. If teams are using multiple systems  they’ll lose valuable time logging into each program to collect, validate, and compare data. Everyone knows that manually aggregating data is an error-prone and time-consuming process. Yet many companies continue to house operational and financial data in separate systems.

Conversely, a central data repository acts as a convenient, single source of truth for accurate information about company performance. Cloud-based systems allow people from across the company to upload their team’s data and gather information from other departments to inform their decisions.

With this type of tech, teams can stop wasting time debating whose data is right and focus on deciding which investments will do the most to help the company meet its strategic goals. When all departments are using the same dataset to achieve a shared strategy, the company will stop existing as a collection of independent cogs and become a cohesive business where everyone moves in tandem.

A centralized, cloud-based database also is always up to date and accurate, which lets leaders make decisions based on numbers they have confidence in. The right software will even automate the data collection process, eliminating the potential for human error. And if manual changes need to be made to reports, models, or forecasts, a central repository ensures updates are spread across all datasets instantly. That eliminates the need to make the same adjustment to multiple spreadsheets.

Tactic No. 2: Plan in Real Time

In today’s business environment, market shifts can disrupt a business virtually overnight. And in these transformative times, static reporting can put your company at a significant disadvantage. When leaders need to decide how to respond to an immediate shift in the business landscape, months-old data won’t be much use. What happened yesterday needs to be reflected in today’s key performance indicators (KPIs).

For example, if a competitor suddenly emerges or releases a new product, leaders need to know what kind of threat that could pose to the company’s market share. If they can easily access current figures, they can adapt on the fly. But if it takes days—or even weeks—to gather, verify, and analyze information, the business runs the risk of losing ground.

The ability to feed analytics models with fresher data is a key factor allowing successful financial planning and analysis (FP&A) teams to take a more forward-looking approach. For companies to be competitive, they need access to real-time, structured, and unstructured data that is shared extensively across the enterprise.

In addition to real-time data, dashboard and modeling software can also provide insights into the factors doing the most to drive business results. Plus, cloud technology allows teams to self-report and drill into actuals without asking the finance team to run a custom dashboard. This lets business partners analyze their own performance data, such as the drivers influencing variance over the past few months. It also frees up the finance team to focus on creating forward-looking forecasts rather than managing a constant stream of one-off requests.

Tactic No. 3: Prepare for Multiple Outcomes

While it’s easy to fall into an annual financial planning routine, the company’s ability to adapt and quickly change course can mean the difference between hitting its target and falling short.

An annual planning process constricts the finance team by placing a hard stop at the end of the fourth quarter. It ties the strategic decision-making process to the beginning of the year and limits the company’s ability to respond to changes throughout the year. For instance, if something monumental happens in the third quarter, the company may need to shift resources to react. But if people and budgets are locked in place through the end of the year, that response time could be delayed.

Moving to a continually rolling forecast allows leaders to see how a change might impact company performance over different time frames, whether that’s three months, 12 months, or two years. The finance team can continually look ahead to see how performance might shift based on recent events or likely disruptions on the horizon.

A rolling forecast and budgeting process also makes it easier for a company to make more targeted and effective investments. For instance, if you ask a manager to commit to the number of people they’ll need over the course of an entire year, they’ll round up for safety. But if you make hiring decisions quarterly, you may not get as many new employee requests at the beginning of the year.

Rolling out a process that allows teams to request resources more frequently makes it possible for the company to grow and change more organically. Rather than hiring five people in January, a team can hire one or two people to capitalize on a new opportunity. They can then request additional head count if things pan out as hoped. This has the potential to make the hiring process more streamlined and drive down staffing costs.

Scenario Planning Improves Agility

Scenario planning is another approach that can help make your financial plan more flexible. When leaders take the time to analyze how a few likely obstacles or opportunities could impact the business—and create plans to deal with those changes—your company will be ready to react with speed and agility if these hypotheticals become reality.

Scenario planning can give leaders the tools they need to jump on a new opportunity or dodge a direct hit while other companies are still going back and forth about how to respond to a market shift. Research shows this type of predictive planning is helping companies get ahead. Companies that possess superior analytical powers and excel at pursuing profitable growth use predictive analytics far more extensively to plan and manage risk. 

In short, analytics is changing how organizations make decisions and take actions. But in order to make data an effective business planning and decision-making tool, it must be used and managed appropriately. Data by itself has limited value but when managed as a strategic asset, data can change how organizations compete and win.

With a combination of centralized data platforms, real-time intel, scenario plans, and rolling forecasts, you can take a much more effective approach to financial planning. When your company has planned for the unexpected—and backed up that planning with data—teams will be able to spring into action when change comes knocking. And leaders will feel confident in the decisions they’ve made.