A proper financial planning and analysis process results in faster decision making, the mitigation of revenue and cost risks and performance optimization for the entire organization. Upon entering an annual planning cycle, it is critical not to take for granted the obvious questions that can provide key insights to financial assumptions in your model. And more importantly, the actions you take in your planning cycle can set the stage for avoiding financial distress for the organization and all its supporting departments.
Annual Planning Cycle Key Questions
Here are five(ish) recommended questions to consider as you approach your next annual planning cycle:
Who are the key stakeholders in the financial planning process, and who should be involved in the budget discussions?
It is important not to get trapped in relying solely on the numbers and past financial performance. To optimize planning results, it is important to meet with those on the front lines who have a direct impact in the operational movements of the organization.
The list of key stakeholders should include salespeople, the marketing team, service providers, accounts payable and accounts receivable. It is important that for each segment of your organization’s value chain, you have a direct contact that can inform the assumptions included in your model. More importantly, it is important to have liaisons in these divisions to empower real-time visibility as events are happening. This will help prevent addressable issues from being discovered a month or quarter after the fact, only when you are performing your variance analysis.
What drives your business?
At the beginning of each planning cycle, take a fresh approach to evaluating the key points of leverage of your company. It is easy to assume that rents only increase by the standard cost of living, that staffing requirements need to be leaner in the coming year, etc.
Keep away from assumptions and have fresh conversations with the key stakeholders in the value chain to understand:
- What has changed in the past six months?
- What will the needs and demands be for the next three to 12 months?
- What are the expenditure areas that remain unresolved or where is revenue being missed?
Take an approach of curiosity, and see yourself as a true business partner in your organization—not just as an analyzer.
What does the executive management of your company monitor and measure?
Now that you know you have established strong lines of communications with the key stakeholders and have a clear outline of the top ten levers in the production and delivery of your service/product, how do all these inputs align with the expectations of upper management?
Does upper management have a clear understanding of the underpinnings affecting the performance of your organization and how each lever may impact expected or demanded performance? It is important to know early in the planning process where misalignment may exist. It’s equally important to begin to have conversations to ensure realistic targets are met and maintained.
How are you leveraging technology, and how would you grade your data integrity?
With so many cloud-based services and other smart software, move away from solely relying on Excel models. Excel models are great staples in the world of finance, but as technology evolves, so should the means to mine, reconcile and interpret data. Find ways to leverage data warehouses, implement operational software that feeds into your financial software systems and establish best practices to maintain data integrity.
How will you approach the workload?
Do you operate like a project management team and allow for flexibility and an ongoing, as-needed sprint approach that can be integrated into your schedule, or do you create your budget in a single phase?
In a time of increased demands and a stretched workforce, I recommend moving away from a “to-do” list mentality and approaching the planning process like a project manager. Work backwards from the budget submission deadline and break the work into “sprints.” Design these short milestones that take into consideration all the above tips and allow for more flexibility and efficient efforts, resulting in a viable budget with marginal variance.
Improve Your Annual Planning Cycle
The best piece of advice is to align with your business and build a beneficial budget for the entire organization to use. Know in advance how you will report against the budget, and manage to the goals the team has set. Asking and answering the questions above will help guide you and your team in the right direction.
If you’d like support with your planning, you can contact us to learn more about how our team of 100+ Consultants can help. You can also visit our FP&A page for more information:
About the Author
Casandra has more than 15 years of finance and operations experience primarily in the entertainment and media distribution industry as well as the pharmaceutical industry. Casandra started her career at PwC in the New York Metro Area and participated in Johnson & Johnson’s Financial Leadership Development Program, before moving to California. She worked for more than four years as a Finance Manager at NBC Universal, in International TV Distribution, a $1.5+ billion business. She holds a B.S. in Business Administration from Montclair State University in New Jersey. Casandra is also obtaining her Executive MBA at UCLA Anderson School of Business.
Categorized in: Financial Planning & Analysis