It feels like the perfect storm. Business leaders are facing uncertainty from Brexit, US–China trade and fear of the next recession. In response, organizations are innovating beyond the traditional sales and operations planning (S&OP) process to align financial and operational goals with executing business strategy across the organization’s key functions – including finance, sales, operations, HR and marketing.
As finance leaders expand their roles, many are leveraging integrated business planning (IBP) to set organizational strategies and optimize operational plans. In doing so, IBP creates a continuous cycle to review and analyze financial results and compare actual results with detailed operating plans and develop action plans.
So how do they do it? One way to start is with an effective corporate performance management (CPM 2.0) platform. Unlike fragmented legacy CPM tools (e.g., Oracle & SAP), Excel spreadsheets and inferior cloud products, a CPM 2.0 platform unifies financial consolidation, reporting, and planning with BI and analytics – all within a single application.
Finance and business leaders are also evolving how they plan the business. They’re thinking bigger to ensure their organizations have a process to dynamically plan, communicate and execute against key business drivers.
Create Focus on Business Drivers and KPIs
It’s important to focus on what the organization actually plans for. Did you know that 50% of finance leaders report that they get little value out of their financial planning processes? Why do you think this is?
It’s because financial plans completed in isolation add little value to managers and don’t drive the business. So what does impact the business? The business itself. The underlying business drivers do. Like changing customer and market demand and volatility in commodity prices.
Remember, business planning is NOT only about finance. It’s not only about revenues or expenses. It’s also about unleashing value across the organization. It’s also about driving measurable business performance. And to do that, organizations develop integrated business plans (see figure 1) to focus on what actually impacts the business. As modern finance leaders, part of our job is to create processes to help translate how changes in the business impact the P&L, balance sheet and cash flow.
Static Budgets No Longer Work
Working in a fast-paced, sophisticated organization isn’t easy. Especially if you want to stay on top of the business. So many factors can change – and change quickly. What factors? Competitive wins or losses, external factors like changing oil prices or interest rates, commodity pricing, staffing needs or inventory levels. The list goes on. And while the annual operating plan (AOP) is a good tool to level-set expectations or anchor compensation targets, it does little to help plan a dynamic business
To actively plan the business, sophisticated organizations are adopting rolling forecasts (see figure 2). Some organizations undertake rolling forecasts monthly. Some do it quarterly. The forecasts can extend anywhere from 12 months at a time to 18 or even up to 24 months. The good news is that there’s more than one way to do it. What’s more important is to start the process.
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Why? Because it pushes the organization to think differently. To think bigger. And when delivered consistently, a rolling forecast process can eventually eliminate the need for an annual budget and affect the DNA of an organization.
Align Detailed Business Plans with Financial Goals
By aligning detailed business drivers and KPIs to financial plans, organizations create focus on what truly moves the needle. As a finance leader, you can create opportunities to better engage your business partners. And with better dialogue and engagement, you can help drive accountability. For example, consider the following potential dialogue with your business partners in Sales and HR:
- What are the top 3 new customer opportunities for the next quarter?
- Why is “customer X’s” forecasted volume up 25% in the next 6 months vs. the trailing 3-month run-rate?
- How many new Operations people are required to handle this new volume and potential new customers coming on board?
Do you notice the key theme? Not one of these questions are about revenue or expenses. They’re focused on the actual drivers that Sales and HR live and breathe by day in and day out – and are held accountable to. And of course, by focusing on key business drivers, you become a finance leader who can ensure your business partners are dialed in and have the flexibility to shift on a dime.
Addressing the Challenge
OneStream works with hundreds of global organizations to help align detailed operational plans with financial goals with integrated business plans. A few examples of these customer successes include:
- Guardian Industries develops global, driver-based integrated business plans including sales, people, and operations planning
- The Carlyle Group replaced 4 Oracle Products with OneStream for driver-based people planning, financial budgeting, modeling, and real-time reporting
- Terex replaced 2 Oracle Products and Prophix with OneStream for sales planning and risk & opportunity analysis
To learn more about the benefits of IBP, download our whitepaper “Integrated Business Planning – Driving Business Action with Agility” here.
 Ventana Research: “Let’s Talk About the Business Not Just the Budget”