Managing financial planning and analysis is an end-to-end process that starts with strategy271565_l_srgb_s_gl definition and documentation. It then goes through the detailed planning, budgeting, and forecasting processes that define the activities and resource allocations necessary to achieve the strategic objectives. This is followed by profitability and cost analysis, and other modelling and simulation scenarios.

Underpinning this whole process is the need for constant reporting and monitoring. So, unlike external reporting, which is mandatory based on various regulatory requirements and needs to happen only at certain points in the financial year, internal reporting is ongoing. Similarly, we can think of the analysis activities (like profitability, cost, and risk) as either occurring at the end of the planning cycle, or becoming input to the next round of strategic planning.

To outperform financial expectations, companies need to focus on being able to better predict outcomes, to execute on the necessary tasks and activities, and to ensure there’s control over costs, profitability, risks, and compliance with the various global and local regulations in place.

Big Data presents big challenges for financial planning

Financial planning processes have the possibility of leveraging increasingly large volumes of data. This brings benefits in terms of more detailed and accurate plans, but it also leads to extra challenges in terms of ensuring data quality, access, and the ability to process the information and use it to make more informed decisions. This information can be used in scenario planning as part of the strategy development process to help determine, for example, the expected worst case, best case, and middle of the road performance targets.

In the past, an over reliance on short-term financial and historical metrics has proven to be a poor indicator of future performance. So organizations are increasingly taking a more holistic view by incorporating into their planning processes more operational indicators, more leading indicators, and longer-term objectives.

Better tools lead to better planning and analysis

It’s long been noted that the key to top performance is doing a better job on execution. Good decision making is not enough – there needs to be follow through on the activities necessary to achieve the planned goals. This starts with better identification of value-creating activities, followed by better management and monitoring of progress.

Providing employees with self-service tools to get necessary financial information relieves finance employees of this burden. Mobile devices allow employees real-time access to data anytime, anywhere. Better collaboration between stakeholders during the budgeting process can help ensure better prioritization of key initiatives with resources being assigned where they can be used to create more value.

Lastly, in the area of control, more use of tools to enable analysis and optimization of resources can help ensure costs are better controlled and more informed decisions can be made to enhance profitability. As no strategy is devoid of risk, being able to better manage liquidity will ensure cash is on hand to fund necessary initiatives and keep performance on track. Appropriate risk and compliance solutions are also required to identify risks, manage exceptions, and ensure compliance with the rules and regulations that apply to the business.

This all sounds like a three-legged stool: predict (BI), execute (EPM) and control (GRC). Within each of these product categories there are a host of applications targeting specific processes. Same with the stool though, if you don’t have all three legs then you aren’t sitting comfortably and it is hard to really focus on anything.