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Why Agility in Planning Leads to Better Business | Kepion Solution


The phrase “agility in planning” has become a common discussion thread in finance and sales organizations and across all industries. 2020 brought widespread instability in businesses; no one could have predicted the impact of a global pandemic, a new virtual standard for company operations, and unknown impacts to markets across all industries. Many companies have used the pandemic as a way to shift their business plan or even to simply change up their messaging to include this more volatile market environment where we must all be more flexible to survive.

For planning solutions, it has provided the perfect reminder of the importance of agility in planning. Companies must be able to change strategic and operational direction quickly and without too much pain, while accurately predicting performance based upon those changes and assumptions.

What does it mean to have agility in planning?

When managing your budget, plan or forecast, an agile solution allows you to adapt and respond to external market forces. Your planning solution provides you the ability to tweak and adjust your plans easily, without needing to recreate your solution. In a nutshell, agility in planning means you’re ready for your best days as well as your worst days.

Budget, Plan or Forecast

In addition, your planning process should follow your organization, and should be flexible enough to incorporate the nuances and specifics of your business, without the planning software or technical details getting in the way. You should incorporate your business processes into the solution, with the solution guiding your organization through planning tasks, ensuring the solution is user friendly, and not requiring training or technical skills to plan, report or even administer your planning application.

Finally, an agile planning solution should allow the creation of different versions of your plan depending on how your planning process needs to be managed. For example, you may want to develop 3 plans – one optimistic, one pessimistic, and one realistic. If underlying assumptions and drivers shift throughout the planning cycle, you can create new plans that reflect those shifts. By incorporating the latest actual data, re-forecasting is possible at any point in time. Your solution should provide the ability to shift data, dimensions, drivers, and assumptions to support these new versions.

Why is your planning stuck?

One of the most common causes we see when organizations are stuck in their planning process is the most loved yet reviled: the spreadsheet. They’re an easy, flexible way of storing and analyzing data, but in many cases they create more problems than solutions. The spreadsheet is a vital tool in finance and other departments and is the most common tool for analysts. But spreadsheets cannot be the underlying platform for your planning solution. They are unable to handle the complexities of business logic and calculations, let alone the sheer amount of data you’re processing. In a data-driven world, we require drivers and assumptions to populate some of our key KPIs, but having these company-wide calculations and allocations are next to impossible to maintain and execute within spreadsheets. This problem compounds if we need to update or change the drivers or algorithms midstream.

Another reason your planning lacks agility is by having too many manual, time-intensive steps required to develop your plan. For example, in some organizations, the process of creating an annual budget takes so much time and involves so many hours of preparation, distribution, inputs, consolidations, reconciliations, adjustments etc. that even the thought of generating an updated version of the budget is daunting. Many times the underlying reason behind time-intensive processes stems from siloed departments, data and systems that feed our budgets and plan. The resulting planning solutions are reactive – plans change only if absolutely necessary, and making the changes is incredibly time consuming and error prone.

Is agility in planning required?

In today’s reality we all know one thing for certain – that we will encounter change. The markets will change, business climates will shift, organizations will be sold or merged. Your plans will need to adjust as these changes occur or you will lag behind your competitors and the market.

Also, having a once-a-year budget is not cutting it anymore for businesses. If you are waiting for the budget season to plan, you are already behind. Many companies are foregoing this annual budgeting process altogether and have moved to a rolling forecast. Through this change they experience improved accuracy in their planning and predictions, better and more definitive decision-making, and the ability to consistently be forward-looking in how they run their business. Without that time-consuming budgeting process, focusing on data clean-up, consolidation and reconciliation, organizations can focus on more strategic initiatives that drive performance.

How to implement a flexible planning solution

First and foremost, you need a flexible planning solution that supports this agility. The solution should be able to keep up with constant changes in your business processes, company strategy, organizational structure as well as shifts in policies and regulations. It should be able to seamlessly combine all departments and their relevant data and processes into the same solution. In this way you will remove planning silos and can take full advantage of using data from one department to develop the plan for another. The solution should integrate your data and systems seamlessly so that you have a single source of truth to turn to when you need to make decisions.

The main aspects to implement are:

  • rolling forecasts;
  • driver-based modeling;
  • what-if scenarios;
  • cash flow forecasting.

Lets go over what each of these are.

Rolling forecasts

Another step towards agility in planning is implementing a rolling forecast for your organization. You can incorporate the latest actuals into the plan to quickly and consistently generate new forecasts. These are as up to date as possible and change as your business changes. This prevents you from having a once-a-year budget, taking months to develop, but obsolete by the time upper management consolidates, reconciles, and approves inputs. A rolling forecast ultimately saves time, eliminates gaps between assumptions and reality, and ensures a consistently updated forecast that follows actual company performance.

Driver-based modeling

Driver-based modeling is another way organizations are becoming nimbler in how they manage their business. Financial plans should be data-driven, with operational drivers and assumptions being the inputs from finance, sales and operations. Much of the plan generates automatically based upon those drivers. Driver-based plans reflect the most up to date assumptions and drivers and incorporate actual operational data (E.g., sales volume, productivity, utilization) that can predict future performance. Driver-based plans are more dynamic since they are based upon reality, and in well-designed solutions can be spun up easily and repeatedly, with adjustments made to the underlying drivers.

What-if scenarios

Furthermore, an important requirement for agile planning solutions is providing the ability for what-if scenarios. Here you create different versions of your plan, with changes made to assumptions or drivers, or even with widespread changes made across all departments, products or accounts. In this way you’re able to understand performance in various scenarios, and can therefore predict future values with different situations. For example, you can develop multiple independent scenarios with different revenue baselines, in the event that consumer behavior affects demand. You should be able to spin up a new scenario easily, at any time, to model the differences in underlying revenue, costs, products, organization structures, or headcount changes. This ability to create new versions incentivizes responding to volatile markets, abrupt internal changes, and supply chain problems.

5-year projected forecast dashboard

Cash flow forecasting

Another way organizations can be nimbler in running their business: cash flow forecasting. Many organizations do not include cash flow as part of their integrated plan. Instead they employ a one-off cash flow forecasting process, often using spreadsheets. However, to ensure an up-to-date understanding of cash management, cash flow forecasting should be systematized and included in the greater financial plan of an organization. For example, in Kepion, cash flow forecasting is included in the main financial plan, providing the same modeling, reporting and what-if scenario functionality for cash as it does for the rest of the plan. Ultimately the goal would be to have a real-time and consistent assessment of cash management for an organization.

Some final thoughts

Many of the improvements outlined above are changes that are needed regardless of your technology solution. These will need to involve your finance, IT, sales, HR, operations, and other departments across your organization. Therefore, having support and buy-in from upper management is critical in implementing such widespread change. Since many of the changes are cross-departmental, the support should be high enough on the management chain of command to encourage participation across department heads. And these improvements require not only the initial buy-in, but also continued support of the initiatives and processes, as well as the push to implement change management to support the system updates.

In addition, faster isn’t always better. Overhauling your entire plan and its underlying systems at once can be stressful and overwhelming. That’s why these solutions are designed for flexibility, so you can implement change gradually and maximize ROI sooner rather than later and then for years to come.

Finally, there are many resources in your industry and in the planning world who can help you. Typically, assistance starts with an assessment of where you are today, your destination, and how best to get there. Here at Kepion, we’re working with companies every day on these types of transformations.

Request your demo today and learn how companies in your industry are moving towards true agility in planning with Kepion.