Finance veterans in the CPG and Manufacturing sector know the high price paid for poor and archaic Planning and Performance Management. This is especially true in a business environment where change can be unsettling. The solution is in the Financial Planning and Analysis (FP&A) function stepping in to ensure the organization misses no opportunity to maximize revenue, improve margins and minimize risk. In this series of three blogs, starting with this one, we will explore the evolving nature of Planning and Performance Management. The second blog will outline processes that meet today’s needs by incorporating industry-accepted best practices, and the third and concluding blog will present the sequence of activities and authorizations for a typical planning and budgeting process following industry best practices.
Today’s high-performance finance teams know they must go beyond traditional reporting. These teams must double up as chief performance managers, providing models, plans and forecasts that link business goals with resource management. However, most FP&A teams are handicapped by manual methods, spread-sheets and different information systems for collecting, consolidating and analyzing data. These outdated and time taking practices impede the ability of finance professionals to create business insights.
Broadly, the overarching goal of every FP&A team should be to provide a steady outlook across the organization through driver-based planning for sustained growth. This should be done without compromising turnaround time. Today, the average time consumed for a typical planning cycle is between four and five months—making the analysis irrelevant as market conditions have changed by the time the output becomes available. The process also absorbs precious bandwidth of middle and higher management (20 to 30 percent of senior executives’ time). Some organizations have attempted to place a cost on the planning and budgeting process. They have found it can cost anywhere up to a staggering $1.2 billion or more per annum.
Smart organizations are therefore aggressively eliminating non-value added and redundant manual planning and budgeting processes while pushing for best-in-class practices that lead to intelligent and highly flexible planning, budgeting and forecasting operations.
Intelligent planning and budgeting serve two key purposes:
- Management control
- Through goal setting: Control is primarily achieved by setting up goals. The control ingrains organizational values (related to vision, mission and objectives of the organization) into employees.
- By establishing boundaries: To make management control simpler, easier, and more effective, boundaries are defined to establish organizational limits and regulations on employee activities and conduct.
- Performance measures
- Diagnostic: This acts as a lagging indicator of organizational and employee performance against an accepted benchmark, allowing the leadership to set improvement goals.
- Interactive: A set of performance measures proactively captures organizational dynamics and feeds them to a coherent decision-making system to make the organization more responsive—allowing the organization to be prepared for exigencies and even be able to drive change proactively.
Figure 1: Intelligent Planning and Budgeting as a control and performance measure
Effective planning and budgeting processes begin by communicating strategic goals to the frontline (see Figure 1), followed by continuous two-way action that covers driver-based intelligent planning and interactive monitoring with scenario-based analysis.
The benefits of adopting planning and budgeting as an ongoing practice, rather than as an annual or a half yearly exercise, are substantial. By making performance management a continuous exercise, execution and forecasting remains accurate, allowing the business to understand the precise impact of strategic decisions while smoothening daily operations. A rolling plan provides assurance and confidence to employees, investors and other stakeholders.
The Intelligent Planning and Execution service of ITC Infotech is based on the cumulative knowledge acquired through years of experience invested in analyzing the planning and budgeting cycles of our global customers. We overlay this knowledge with our expertise in deploying the most advanced best practices in the CPG and Manufacturing sectors (for phase-wise details of our practice see Figure 2).
Figure 2: ITC Infotech’s Intelligent Planning and Execution Practice and Implementation Approach
The combination of industry-specific knowledge and subject matter expertise accessible at ITC Infotech has supported the vision of CFOs and assisted FP&A teams elevate their function to effortlessly deliver reliable analysis and rolling forecasts through simulation and financial modelling. End result: Their organizations can predict business, anticipate change, dynamically re-align resources, achieve operational agility, and are in a constant state of readiness to respond to competitive and business change.
- Learn about industry-accepted best practices for Planning and Performance Management
- Learn about the sequence of activities and authorizations of a typical planning and budgeting process of a CPG or Manufacturing organization following industry leading practices
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General Manager – Data
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- Overcoming the challenges of conventional Planning and Performance Management through leading best practices
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