13 Financial Planning Challenges To Overcome in 2023
Financial planning isn't as simple as moving your business from point A to point B because multiple variables, departments and players can drastically affect your business and its revenue throughout the year. Therefore, what you have on paper and what occurs rarely match up. Thankfully, there are solutions to the most common financial planning challenges to help you predict and prepare for changes in the most efficient and organized way possible. Learn how to overcome the thirteen top financial planning challenges of 2023 so you can experience more significant business growth with fewer wasted resources. 💡Key Takeaways: Disconnected departments can lead to data silos, poor data quality and inconsistent information when analyzing your financial health. Unpredictable consumer behavior makes predicting future financial needs difficult. Using a unified financial planning software unites your data and allows you to make adjustments in real time to account for changes in consumer behavior and business needs. Adopting new technology that works with the system of spreadsheets you already use reduces costs in training and increases the efficiency of your processes. Top FP&A Challenges 1. Disconnected Departments Disconnected teams often lead to data silos which negatively affects your financial planning as you won't have access to all the available information. Data silos most often occur in larger companies that have several moving parts. Each department has its budget and goals, but without proper communication and connected systems, those might not align with other departments, which can cause contradictory strategies. Disconnected departments can lead to: Incomplete data: You can't see the complete financial picture of each department Inconsistent data: The information you receive might not match the reality of the situation Duplicate data: You end up performing tasks twice and overspending on the budget Limited collaboration: Departments aren't able to work together towards the same financial goals Our Solution The root of the problem lies in disconnected systems. Each department has its programs and data management systems, so no one has a complete picture of the company's financial health. Instead of every department purchasing its software separately, you can unify your departments by using a consistent and centralized financial planning and analysis system where everyone can import or input data directly into the same database for a single source of truth. To avoid data silos, look for the following signs and quickly address them so you can continue running smoothly as a unified whole. Some of the primary signs of disconnections in your departments include: Inconsistent data Missing information Multiple out-of-budget costs Address these issues by implementing a unified data system everyone can access and use. Find out how Active Exhaust breaks down international data silos with greater agility and smarter growth with Vena. Read this Customer Story. 2. Lack of Communication Roughly 86% of employees say poor communication is responsible for most errors in the workplace. In contrast, businesses with effective communication see an increase in productivity by 25%. A lack of communication will hinder effective financial planning as it prevents you from aligning your financial goals between departments, learning each team's challenges and addressing issues quickly to stay on track with the budget. One example of poor communication in the workplace is long response times. If your departments are looking for feedback or approval for spending, this can set them back in their schedule. It might also cause departments to make financial decisions on their own to avoid the wait time, which can cause an imbalance between your financial plans and actual spending. Our Solution Connect your teams through software integrations that automatically upload information into a centralized system for everyone to see and work from so all departments are on the same page. In addition, using collaboration platforms such as Slack, Microsoft and Asana will significantly improve your cross-departmental communication to ensure your company's financial plans align with each department's goals so you all move towards the same objectives. Discover how Boskalis harmonizes its financial and operational reporting by implementing Vena as a single source of truth. Read this Customer Story. 3. Limited Data One of the most significant sources of data for planning for the future is looking at the past. What worked the last few years and how can you build on that for the future and prepare for potential changes? However, that isn't possible if there isn't available data. This can occur when you're trying a new business model, launching a new product or service or making another change that would significantly affect your future financial plans. In those cases, you might feel like your financial planning relies on guesswork or depends on third-party research from other businesses that adopted similar models or changes. However, no two companies are alike, so you're still left with many potential financial outcomes with little data to guide you. Our Solution Use scenario modeling to predict the future and take some of the guesswork out of your financial planning. For example, you can ask endless "what-if" questions and run a scenario analysis in minutes with Vena's Scenario Planning and Analysis Software, which visualizes how potential changes might affect your revenue and expenses. To understand the ins and outs of scenario planning, read our Ultimate Guide to Scenario Planning. 4. Poor Data Quality Most finance professionals know the feeling of performing account reconciliation just to run into a discrepancy. While minor differences are often easy to resolve, major ones can throw your entire financial plan into disarray. Discrepancies often occur because of poor data quality. For example, individual teams may have recorded their spending in their accounting applications but haven't sent the data to the finance department. Another example of poor data quality is multiple errors. When you enter the same information in various databases, there's a greater chance of introducing errors in the data, which will cause inconsistencies with your numbers. Our Solution Connecting all your databases to a centralized database ensures you have the most updated and accurate information. For instance, when each department records its spending, it is updated in the master database in real time so your accounts always match, reducing discrepancies during account reconciliation. For example, you can connect your HRIS data and payroll information by integrating your applications, such as Paylocity or Peoplesoft, into your master database. As HR inputs information in their system, that data is uploaded to your centralized database for the financial team to track and analyze with minimal errors in the transfer process as no re-entering is necessary for the transfer. Learn how data consolidation drives growth for ACME Lifts. Read this Customer Story. 5. Too Many Manual Tasks Repetitive manual tasks are when you complete the same action several times in a row, such as inputting numbers into a spreadsheet, which has enough repetition and predictability that you can program a computer system to replicate those same actions. Not only do manual tasks take your team away from other essential tasks, but it also increases your error rate. For example, errors can occur either during the initial data entry process or when someone manually transfers that data between systems by re-entering the numbers and information on a new spreadsheet. The average error rate from manual data entry is 1%. However, that varies drastically depending on the format of manual entry. For example, if someone is entering data from a written form, there is a higher chance of errors. This is because when transcribing written information, you must account for handwriting that's difficult to read. Our Solution Thanks to the latest advancements in automation and artificial intelligence, computer systems can perform many error-prone tasks that take up so much time. Automation can save your company resources by removing those cumbersome and repetitive manual tasks that steal valuable time. Instead, your employees could use that time growing your business in other ways. Some examples of tasks you can automate include: Collecting data Approving requests Updating systems and information Looking for errors Entering data Learn more about FP&A automation. Read our Complete Guide to FP&A Automation. 6. Multiple Security Risks and Breaches Security risks are on the rise. The number of data compromises rose from 419 instances in 2011 to 1,862 in 2021. One of the main contributing factors to the increase in data breaches is the advancement of technology which gives hackers the tools they need to break into company websites and financial databases that aren't adequately secured. There is a cyber attack every 39 seconds. In addition, 23% of data breaches are due to human error. When you perform all your financial tasks online, you also open the door to data breaches if you don't have a system to secure that data. For example, payroll information is at significant risk of a security breach. When dozens of employees can access the system to view and adjust the payroll, you also increase the chances of information being altered, stolen or misused. Data breaches can be disastrous for businesses. First, you will face financial ramifications due to lost trust from customers and employees. However, you can also face legal ramifications from those impacted by the security breach. Our Solution While hackers have the technology for accessing data, businesses have even more advanced technology for securing their information. Many data breaches are avoidable by taking the proper steps to secure passwords, limit access and control your financial data flow. For example, Vena limits access to data on the central database so employees can access just what they need, such as payroll data, without putting other financial information at risk. Another way to reduce your risk is by performing regular security training. The training will alert your employees to all potential risks so they can take necessary steps to avoid putting data in vulnerable situations. Training will also teach them the proper way to enter and store data in your systems to ensure it remains secure. Read this blog to learn how to keep sensitive Microsoft Excel data secure. 7. Drawn-Out Planning Stages A thorough business will create an annual financial plan that covers the entire year. It should include detailed reports and budgets, such as forecasted profit and loss, for each month over the next year. However, the challenge of creating a detailed report is the time it might take. While you might want to start earlier to ensure your plan is complete before the next fiscal year, you risk working with outdated information. However, if you plan at the last minute, you might be more rushed, increasing the number of errors. Our Solution Working with financial planning software dramatically reduces the time it takes to plan for the year. You won't have to start as early and risk working with outdated data months in advance. Instead, you can work with the most updated information and create detailed reports on your projected spending and profits. For example, Vena software streamlines payroll and benefit planning by using pre-built calculations that can prepare for benefit changes, salary increases and bonuses, which reduces the amount of time you have to spend on those calculations. Learn about Vena’s workforce planning tools and capabilities to help you grow by visiting our Workforce Planning Software page. 8. Lack of Scalability Your financial planning tools should grow alongside your business. For example, while a traditional spreadsheet might have worked when you were a small business of fewer than 100 employees, you will reach a point eventually when you can no longer perform the same tasks on that spreadsheet. Financial planners struggle with keeping up the same detailed financial plans while working with outdated budgeting tools and software that didn't grow along with their business. However, they also aren't ready to adopt new software because they are comfortable and familiar with spreadsheets. This can cause delays, inefficient processes and errors. For instance, if your business hired a dozen new employees over the next year, how easily can you add those new payrolls into your financial plan? If you're working with outdated systems or manual spreadsheets, it might be a very tedious task as you would need to adjust your numbers and perform calculations by hand, increasing the chances of errors. Our Solution Finding financial planning software that can scale your spreadsheets up or down is essential for staying on top of your business needs. Instead of spending hours manually entering tasks, you can easily import new data into a familiar system. For example, Vena allows you to add to your spreadsheets to make them scalable, so you don't have to abandon your current system when growing your business. As a result, you can update your financial plans in real time as you enter new data into your HR system. Because each department is integrated into your financial planning software, that data is updated in your centralized system for everyone else to see. In addition, your platform will perform any reconciliation necessary for adjusting to the new data to take that task from your plate and ensure you have the most accurate information. Over 1,300 leading companies grow with Vena. Learn how they are growing a healthier business through a smarter approach to planning by reading our Vena Customer Case Studies. 9. Accounting for Unexpected Occurrences Your financial plans are projections, but rarely will they match your actual numbers each month because business is full of the unexpected. COVID-19 reminded many companies of the potential challenges a sudden and unexpected change could cause. Even those with contingency plans in place still struggled to adjust their plans. Unexpected changes are more likely to disrupt your long-term financial goals as you have to forecast two to five years in the future and struggle to plan for the following year. For example, will gas prices rise over the next year? Will there be a supply shortage for something you need? Will your business see a sudden boom in sales, or will a new competitor cause a sudden dip? Our Solution While you can't predict the unpredictable, you can build a flexible financial plan that allows you to adjust as new challenges arise, equipping you with the financial tools necessary to take on any new hurdles in your way. Agile project management has come onto the scene since businesses have shifted to more dynamic models. Gone are the days of setting up one plan that will last over several years. The large amount of available information, advancing technology and increased power in the consumer's hands fuel today's fast-paced market. It's constantly changing, which requires businesses to change along with it. Agile planning accounts for changes as it doesn't rely on a set plan. Instead, it uses a probabilistic financial plan. You then receive frequent feedback from employees and customers so you can adjust that plan in real time to meet needs as they arise. One example of agile financial planning in action is budgeting each team for the long term rather than accounting for every small project. This allows teams to adjust their budgets to meet customer and staff needs rather than feeling tied to the original plan. Today, about 71% of companies in the U.S. use Agile project management. Those that use it saw a 60% growth in revenue. The best action plan for the unexpected is a proactive plan. Preparing before significant changes occur will help you quickly make the necessary business adjustments to meet the challenge instead of scrambling after it happens. Find out why finance teams need agile forecasting to plan through uncertain times. Read this blog. 10. Factoring in Unknown Consumer Behavior Financial planning would be much easier if you could climb inside the consumer's mind and predict their behavior over the next year. For example, if you plan to release a new product, you might want to account for growth in sales in your financial planning. However, what happens if consumers don't respond favorably to that product? Another scenario is predicting how a price change might influence consumer spending. Because of the increase in raw materials, gas prices and other supply chain costs, businesses also increase the price of their products. When you do so, you can't always predict the impact this will have on whether your customers will continue using your product or whether they will look elsewhere. Economic uncertainty can cause a host of new behaviors. For example, it might drive consumers to rely more on credit, which often causes them to spend more as they don't feel the financial impact as strongly. However, it might also cause consumers to reduce spending because of economic uncertainty. Those are just a few samples of ways consumers have reacted in the past, which will influence your financial plan for the year. Our Solution While you can't read the future of consumer behavior, you have the next best option. You can see the impact of consumer behavior in real time. Adopting financial planning software that integrates with your other systems allows you to track and manage financial changes due to consumer behavior as they occur. For example, you don't have to wait till the end of the quarter to look over your accounts and realize consumer spending is down due to economic factors. Instead, you can see the slow changes in real time as your central database collects data from all your other integrated software. Therefore, you can react faster and adjust your spending so you still come out at the end of the year with a profit. In addition, you can use financial forecasting to look at potential scenarios. For example, you can see how your budget will be affected if there's a boom in credit card spending versus if consumers cut back on their purchases so you can have plans for either scenario in place. Find out how to use the scenario planning process to navigate business uncertainties. Read this blog. 11. Migrating to New Technology Excel spreadsheet software is a versatile tool for financial planning that still holds a prominent place in businesses today. Even though it has been around since 1985, it still manages to stay up with the times and allows users to perform similar tasks as more complex technologies. However, the system does have its limits, which is why financial planners look to other software to create their annual budgets and predictions. Despite introducing new technology, businesses still incorporate Excel in their tasks because it's easier to understand and use. Meanwhile, many of the latest financial software options take weeks to learn and adapt and migrating all your data from Excel to the new software is time-consuming. Our Solution While financial planning software might ask you to choose between your familiar spreadsheets and their new tech, Vena says you can keep both. Vena is built for Microsoft 365, allowing you to continue using the already familiar platform instead of spending hours training on new technology. Through Vena, you can integrate your other platforms into Excel and turn an ordinary spreadsheet into a centralized financial planning database for storing and updating information in real time. In addition, we offer Excel templates to save you time so you can perform even more tasks with greater ease. Jumpstart your growth with our library of free Excel templates. Get started by visiting our Free Financial Excel Templates page. 12. Lack of Organization When Planning Disorganized businesses cost employees six hours a week. In contrast, companies with organized systems see a jump in their revenue from increased productivity and efficiency. There is a wide gap between having a system and an efficient financial planning method. For example, your system might include entering numbers into a spreadsheet. However, that system can end up being counter-productive if very few other employees understand what each number means and how they connect. Disorganization is a nationwide challenge as employees work with different systems or don't have any set standard for entering information. It can cause delays as other employees have to search for the data they need. They also can't make immediate decisions because they often need to reach out to those in finance for clarification on the budget or financial plan. Our Solution Switching to complex software might only add to the chaos if your employees don't know how to use it. That's why sticking with a system they already understand, then standardizing their use of that system is far more efficient. For financial planning, that system is Excel. Most finance teams are already familiar with Excel and use it regularly. What's missing is standardizing the data you input during financial planning so everyone is on the same page and can access the information they need when they need it. Vena offers templates that set a standard for data entry. In addition, you can lock and secure the template to limit where employees can enter new information to guarantee consistency in data entry and create an organized system for recording and storing financial data. 13. Reliably Measuring Results The most crucial piece of your financial plan is real-time reports that allow you to reconcile your finances and compare them to your plan to see whether you're on track. Compiling comprehensive reports takes time as you sift through paperwork from dozens of departments and databases. In addition, you don't always know whether your data is reliable. These challenges can cause unneeded stress during reporting. Our Solution Automated reports relieve that stress by performing those tasks for you. For example, Vena integrates with all your systems, allowing you to pull data from each department's software in real time, so you have the most updated financial reports. In addition, it compiles that data into an easy-to-read and understandable analysis of your financial health to save time in gathering and organizing that data. You are in control of the reporting template and can choose from various reports depending on the time of year, use or detail, ensuring you always have the data you need for every situation. In addition to easy reporting, you can also share those reports with others through our secure system. In one easy step, you can import your Excel files to your favorite cloud storage so all relevant parties can see the numbers. Learn how you can create accurate reports in less time with Vena. Visit our Financial Reporting Software page. Overcome Your Financial Planning Challenges With Vena Growth is achievable, even amid economic uncertainty and overwhelming technological development. However, changing with the times doesn't mean you have to throw out all you know and are comfortable with. Vena makes it possible to keep your Excel spreadsheets while also adopting new technological advancements that allow for advanced data entry, forecasting and analysis to ensure you're always on top of your financial goals. Boost Your Business’s Financial Growth With Vena See for yourself how Vena transforms Excel into a Complete Planning platform for your business.