A new approach to planning, budgeting and forecasting is not only necessary, but inevitable. Corporations need a powerful tool for executing business strategy and informing company leaders, leading to better business decisions. This article explores how.
Come up with a plan that makes sense.
According to Strategic Finance Magazine, an effective planning process includes seven critical components: resource allocation, the planning horizon, management accountability and participation, transparency, internal communication tools, the level of detail to include, and how to adjust to changing conditions. Resources should be aligned with strategy and coordinated across the organization. When it comes to planning, look at each department and operating system; the length of time you’ll need will depend greatly on how your business operates. In putting a plan together, stamp out the roles and responsibilities for key members in your management teams. Determine how to measure progress and align financial targets with progress. Establish incentives to motivate the correct behavior by clearly articulating accountability that links the plan to each individual’s performance. Each part of your plan should be concise and detailed, and your company needs to be fully present in ever-changing conditions with the ebb and flow of the financial economy.
C-Suite executives need to play their part.
Once a reliable plan is in place, in order to be effective and successful, it not only needs to be reliable, but also consistent with the input and output of information. This is where top-level management needs to provide common business language, a set of definitions and agreed-upon standards used for data models that adhere to a common set of standards. Software and other supportive technology (like cloud-based technology) is a key component in consistently gathering the correct data and offering a unified view of business execution.
Roll with the punches.
Financial reform is necessary for any business to thrive in today’s economic marketplace. According to a report from the Aberdeen Group, rolling forecasts allow for accuracy and flexible business planning. Top-performing businesses mitigate risk related to volatile business conditions by continuously updating forecasts to better reflect current business and economic conditions. The financial market is not static, therefore businesses need to mimic the conditions of the marketplace and provide a plan that allows for growth, change and precise reporting to reflect that change.