Treasury Today Country Profiles in association with Citi

How to make financial planning and analysis easier

Business people analyising charts and planning their next move

Effective financial planning demands accurate and readily available data. If you struggle to get it, annual budget preparations are a prime source of stress. It need not be this way.

For treasurers whose remit covers financial planning and analysis, annual budget preparations are rarely, if ever, a source of much pleasure. Typically, it takes time and effort to import, export and manipulate data from disparate sources into useable budgeting information. And these sources all too often include multiple, and possibly error-strewn, spreadsheets and outputs from different systems, drawn from across the organisation.

It is well understood that activities such as cash and working capital management, cash forecasting, borrowing base compliance and projections rely on efficient and accurate planning and analysis. The task can be made more approachable with a little help from the right technology.

Integration is the key

The ‘more with less’ mantra is as much a part of corporate finance and treasury as it is with other functions. The shift from the operational to the strategic also makes it necessary for treasurers and financial planning and analysis experts to focus more on value-adding tasks (which often translates into support for senior executives across the business).

The key to making financial planning and analysis easier lies in knowing how to integrate disparate data sources. Doing so is a pre-requisite for being able to consolidate and reconcile it prior to analysis and budgeting.

However, according to one business planning software vendor, Anaplan, it is hardly surprising that a budget goes through several iterations at the hands of different stakeholders. The process can be stressful and hard work. Worse still, where budgeting is executed in silos, it can result in “misaligned departmental plans and consolidated, bottom-up plans that rarely match top-down expectations the first time around”.

This is a common problem simply because legacy system incompatibility limits collaboration. The task would be made easier if each function and hierarchy in the process had access to the same data, as and when required, with only ever ‘one version of the truth’ being presented in real-time.

Getting in step

Because this ‘ideal’ scenario is not exhibited in many businesses, annual budgeting accuracy and relevance can indeed become problematic. This is notably so if sales and operations planning (S&OP) is modelled using one system, and the outputs from this are replicated, eventually, in the budget template held in another system.

Of course, S&OP frequency depends on the industry, but it is still important to maintain a connection between operational planning and financial budgeting. Failure to do so means annual budgets will always be out of step with business actuals. Most businesses need to respond quite quickly to market events. Updating expected income, or spend on areas such as production, inventory, product development and supply chain management, means the resulting financial planning can easily lag behind the reality. At the very least it may need to be re-forecasted, which is rarely a popular option.

A technology fix

Modern cloud-based platforms from vendors such as Anaplan, Workiva and Adaptive Insights, can integrate with existing accounting and treasury systems and ERPs. By removing the need for multiple departmental spreadsheets and other systems, a ‘single version of the truth’ becomes possible.

Aggregating, analysing and reporting on that data and being able to reconcile it with S&OP data in one place means those charged with planning and budgeting can now keep up with changes in the business as they happen, re-forecasting with relative ease. And that means less stress and more time to focus on the value-adding tasks.