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How Have Global Fluctuations Changed Your Planning Process?

insightsoftware -
January 4, 2021

insightsoftware is a global provider of reporting, analytics, and performance management solutions, empowering organizations to unlock business data and transform the way finance and data teams operate.

12 2020 Tidemark Blog How Have Global Fluctuations In 2020 Changed Your Planning Process Blog

As organizations work through their 2020 year-end closes, it’s likely that many are only now beginning to realize the full extent of the chaos inflicted by the pandemic. This isn’t surprising, though. The events of 2020 were nearly impossible to predict and almost as impossible to confidently respond to. Border shutdowns and business closures impacted sales and trade in numerous ways, just as the different government support programs had their own diverse impacts on organizational planning. And now it’s time for financial planners to take stock of what happened.

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Yet we’re finally in the home stretch, and 2020 is a year that many planners are happy to leave in the past. However, it would be a mistake to believe that everything will go back to the way it was before coronavirus appeared. This is because global instability is becoming the rule rather than the exception. When epidemics aren’t disrupting businesses, a slew of other disruptors around the world are just as likely to cause confusion and throw financial plans for a spin.

Instead of ctrl+alt+deleting 2020, it would be wise to ensure that the lessons learned are built into improving the processes and resilience of financial planning. We should begin with the most obvious: the traditional once or twice a year planning process no longer cuts it for organizations today. Instead, it’s now crucial to promote the ability to routinely capture operational data from the frontline and integrate it into updated operational and financial plans. Doing this on a regular basis now means the difference between success and failure in rapidly changing business conditions.

Capturing data from an organization’s frontlines within the framework of continuous financial planning is not always so simple. However, the unique demands of 2020 hopefully pushed organizations in the right direction to achieving this.

Let’s take a look at some of the ways organizations may have responded to the year’s instability.

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1. Top-down planners found themselves collaborating more with frontline managers

For many organizations, a frequent complaint related to financial planning has been the level of disconnect that sometimes exists between Finance and Operations. After all, if financial planners only base their projections off the numbers they look at, they could be missing out on vital qualitative insights that only the frontline workers can provide.
Coronavirus likely brought this disconnect front and center. Financial planners suddenly found it imperative to strengthen the lines of communication with operations personnel to figure out jointly what operational steps should be taken, as well as how those measures would impact the organization’s working capital.

Effective cooperation should now be taking place in two ways: via shared data pools and via collaborative interaction across departments and geographies.

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2. Planners began to integrate functional and departmental plans into their own forecasts

Coronavirus was a frighteningly effective stress test in many ways for organizations’ resilience. Speed was one of the main qualities tested. As volatility in pricing, sales, and trade flows spiked around the world, financial planners bore witness to their forecasts going out of date at an alarming pace. In order to keep up, and as a natural result of their increasing reliance on operational input, savvy planners began to directly incorporate data from operational plans into their financial plans.

This was a healthy change. Rolling up functional and departmental plans into organization-wide financial plans leads to insights that are better grounded in the realities witnessed by all parts of the business. The final result? Well integrated plans are estimated to be 20% more accurate.

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3. Planners revisited their scenario planning capabilities

“If Brazil closes its borders, should we shut down our operations there?” “What happens if California extends its lockdown?” “Will the UK’s furlough scheme apply to us? If so, who do we furlough and for how long?”

Organizations faced many critical business decisions throughout 2020, and their ability to take the best course of actions often hinged on the results of proactive assessment. If planners were able to think through all potential outcomes of the different possible arrangements before reaching decision time, organizations were much better prepared to avoid costly mistakes.

Effective scenario planning requires steadfast organizational support and sound frameworks, though. While coronavirus likely jumpstarted many organizations’ efforts to improve in this area, it’s likely that ongoing development in these capabilities will be required.

Read how effective scenario planning is conducted by tax departments

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4. Planners began tying operational plans and scenario planning together for better forecasts

Ultimately, organizations needed to understand if they were going to successfully weather 2020. Medium- and long-range financial forecasts provided the answers to this question, but their accuracy largely depended on how those forecasts were constructed. If they were built upon integrated operational plans and the potential outcomes of different scenarios, the resulting predictions would be much more accurate than if they were developed in isolation.

As organizations visited and revisited their forecasts throughout the year, they likely uncovered procedural and technical shortcomings that led to flawed forecasting.

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5. Planners realized where they need the most support

2020 and its stress tests likely showed many planners exactly where their departments need extra support. Because the year’s volatility and high stakes required top notch work in a demanding environment, most organizations probably updated their internal roadmaps to improve particular capabilities and processes throughout 2021.

Thankfully, many processes and technical capabilities can be resolved through proper use of quality planning and analysis software. The best solutions are able to pull operational and finance data together into a centralized framework, facilitate scenario planning, and combine all of this into accurate forecasts that the entire organization can depend on.

While the work that goes into quality forecasts cannot be understated, the right software can reduce the logistical burdens to make it actually feasible to sustain continuous planning efforts.

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Why choose Tidemark?

With Tidemark, organizations gain four unique advantages within the context of their integrated planning, scenario planning, and forecasting.

  • Put Your Business First: Configure around your business processes so you don’t need to conform to inflexible software, cubes, or spreadsheets.
  • Make Finance a Participation Sport: Make it easy for everyone to get information, answer questions, collaborate, and participate in the decision-making process.
  • Run in the Now, Impact the Future: See immediate results by running your most complex calculations using a fast computational engine and rich data integration.
  • Act on the Story Behind the Numbers: Share easily digestible information across your organization to improve decision-making, reduce risk, and enhance business performance.

Want to learn more? Request a demo of Tidemark today.

 

Sources:

  1. https://blog.ventanaresearch.com/2015/11/18/tidemark-enables-more-effective-business-planning
  2. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/planning-for-uncertainty-performance-management-under-covid-19
  3. https://www.pwc.co.uk/issues/crisis-and-resilience/covid-19/mitigating-risk-responding-effectively-coronavirus-covid-19-scenario-planning.html
  4. https://smallbusiness.chron.com/managing-risks-associated-multinational-corporation-78224.html