NTT DATA Business Solutions
NTT DATA Business Solutions | February 12, 2019

Turn Your Annual Budget Cycle Into A Continuous Plan

Annual financial planning does not allow for real time plan adjustments or efficient financial planning

If you’re like most companies, you’ve devoted a large chunk of time to your annual planning period –that time of year where you spend three months planning the next twelve months; all while knowing the plan will be obsolete within two months.

You send out calendar invites showing all the critical deadlines, attend multiple conference calls and webinars to go over the data that will be required, update the master Excel files for any number of changes, and add what seems like another full-time job to everyone’s workload.

If the only time dedicated to putting together a plan for the future is once a year, the information can be difficult to gather and compile, and oftentimes the reporting and results will be inconsistent and inaccurate. Business is too dynamic and changes too quickly for this type of approach. That’s why there is a trend toward continuous planning.

What is continuous planning? It is simply the idea that finance and other business leaders take part in the planning process on a more frequent, recurring basis. It’s a way for finance to move away from being the scorekeeper and move to being a value creator in the organization.

How does this approach provide an advantage over the once-per-year planning cycle?

Real time plan adjustments – By the time the middle of the budget year rolls around, the budget is usually old news. Internal events have taken place, external factors have crept in that weren’t originally accounted for — making the budget useless. Continuous planning enables a more frequent plan review process which provides business managers a platform to think about changes, determine what financial impact they will have, and make updates based on current information. In addition, global companies can re-translate plan data at current FX rates for up-to-date FX analysis.

More efficient planning process – When finance and business managers interact in a planning capacity on a more frequent basis, there is a greater inclination to put an efficient, repeatable process in place. When the planning process is only revisited once per year, and the involved parties step completely away from the process for 6-7 months, the process for gathering and submitting information is generally clunky and inefficient. Turn-over takes place during that time or process steps are simply forgotten. This can lead to little improvement in the process the next year.

Shorter, simpler plan cycle – When a company revisits the plan more frequently, the tendency should be to move toward a more simplified, less detailed plan. Planning with more current information, you quickly realize that the long, drawn-out process of gathering every detail that may (or may not) impact your financial plan is not what produces a more accurate plan. It is identifying key drivers, knowing how to get the driver data, and using it to produce more accurate plan information.

If you make the decision to move toward a continuous planning process, there are a few key considerations and components you should be sure to include:

  • How often should the plan be updated? – Quarterly may be sufficient for some companies.  Monthly is most common, with more frequent updates such as weekly and daily being less common. As you move through the current year, forecasts will be replaced with actuals.
  • How far into the future should the plan capture? – A rolling 12-18 month forecast should be considered, as it can effectively replace the annual budget process if designed correctly. This means that the plan end date is always moving so you are regularly not just focused on the current year, but the following year as well.
  • What are key business drivers? – Businesses need to identify and figure out how to capture measurable operating activities that can be defined in units. These, along with corresponding rates, will provide the ability to measure actual vs. plan variances at the driver level and really understand what is happening in the business.
  • What technology do we use for our continuous planning process – To successfully do continuous planning you will need a system that makes it easy to move data around, perform quick updates to master data, and provide a simple-to-use, intuitive reporting interface that will allow for all the comparative reporting that is so critical for constant plan vs. actual vs. prior plan type analysis. Trying to accomplish this in large Excel workbooks will be difficult or impossible to maintain, and trying to fulfill all the ongoing reporting requirements will not be a feasible option. Utilizing a state-of-the-art EPM solution, such as SAP Business Planning and Consolidation gives you the ability to do what-if scenarios and build the plan with the fluidity you need.
  • How do we roll this out? – Any change to a process that has been around for a while requires careful consideration and thorough planning. Special consideration should be given to determine whether the way employee performance is measured and accompanying bonus structures may be impacted by any change to the planning process. Users and business customers are not always eager to take on a new process. To win them over and prove that a new continuous planning process will provide more business value, you need to be careful to ease into things in the right timeline and with the right resources. Having the right implementation partner can be a good start, as they can provide the guidance and training to make the switch successful.

Ready to Learn More?

If you think continuous planning might be right for your organization, view our white paper on how to achieve a faster finance close. You’ll learn how SAP BPC can be a powerful tool in the continuous planning process.

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