Learn how finance leaders can continue business planning with agility and confidence, even in the face of change
How can you factor current market conditions into our future plan? What can you do to plan for the next 60 days? How can you help your business adapt to today’s changes while better preparing for tomorrow?
If you’re part of a finance team navigating through change—good or bad, expected or unexpected—chances are you’ve already asked yourself one or more of these questions. As you look towards the future of your business, there are likely even more tough questions to come.
To truly drive strategy and navigate wisely, though, you need more than just questions. You have to be able to access the insights and information that let you answer those questions with foresight and confidence. This means having the right practices and processes in place, as well as the people, tools and data to keep them running smoothly.
It all starts with a business continuity plan that includes other processes that will let you build agility into your finance functions, revise your financial and operational plans quickly and move forward with flexibility and confidence. All to give you the power to react to what’s happening today while navigating a path for tomorrow.
To get you on your way, consider three best practices for agile finance-led business planning.
1. Seize Opportunities for Scenario Modeling
Scenario modeling allows you to test your assumptions and build a more robust future plan. It also arms you with the insights you need to make tough decisions quickly and confidently. It turns every uncertainty you face into an opportunity to dive deeper into your numbers and estimate future outcomes, allowing you to hone in on critical metrics and their impact on your business results.
Doing it well means picking the right variables and business drivers to test and combining key performance indicators (KPIs) from across your business to see the direct implications of adjustments to those variables.
For finance teams experiencing seismic market shifts, large-scale projects or other market or organizational change, scenario modeling can be particularly powerful. It allows you to envision the future and to navigate wisely through those changes. Teams may choose to test operational steps to weather cash crunches, such as headcount planning, to answer the following questions:
- How sustainable is cash flow of the business if we stick to our existing hiring plans?
- What are the implications of a complete hiring freeze on cash flow and operations?
- What key roles or types of roles—e.g., executive hires or roles that work well remotely—can we maintain without adversely affecting our cash flow situation?
- How can we adjust compensation plans fairly to lengthen our financial runway?
- What other hiring plan changes can we make to maximize performance while minimizing cash flow implications?
Even when change isn’t a factor, strategic finance leaders will often make scenario modeling a matter of practice. By testing the implications of their business plans against assumptions regarding existing and future scenarios, they can create agile models to assess the impact of those plans on factors such as revenue, costs and cash flow.
2. Consider Your Cash Flow
Every finance team is directly responsible for ensuring that a business has enough cash on hand to weather a period of change. Whether that means taking on additional debt or putting a hold on new hires, they often need to make tough decisions to keep the business operating no matter what’s happening around them.
In periods of change, especially, effective treasury and cash management are the difference between moving forward or falling behind. This means scenario modeling around cash flow is a natural priority. But there are other important things to consider as well, including:
- Assessing your cash flow on a more frequent basis: Monthly cash flow statements don’t always cut it when you need to understand immediate impacts. In times of change, many finance teams choose to assess their treasury situation on a weekly basis, if not more frequently.
- Examining all the levers at your disposal: To ensure your business is sufficiently funded, you’ll want to consider assessing your access to additional credit, changing your accounts payable procedures or making potential major decisions around hiring and headcount.
- Providing management with dashboards, data and other visibility measures: This means involving all the necessary departments (e.g. HR in the case of headcount decisions) so that they’re part of the decision-making process and appreciate the role cross-functional collaboration plays in the overall success of your business.
3. Adopt Agile Forecasting
To be flexible to change, finance teams need to be able to identify key performance trends as necessary and modify their plans quickly based on an analysis of how those changes will influence their bottom line. That’s where agile forecasting comes in.
Unlike static annual budgets—which are tedious, manual and rendered obsolete the moment a change is made—agile forecasting doesn’t relegate reforecasting frequency to quarters or months, but reforecasts on demand. In doing so, it gives finance leaders a reliable prediction of long-term business results based on real-time actuals and drivers.
Even under the most predictable conditions, agile forecasting gives strategic finance teams the power to identify new growth opportunities for their business. And when faced with market or organizational change, it’s among the best ways to adapt quickly, consistently and intelligently.
To get started with agile forecasting:
- Use historical data as well as your most recent actuals to guide reforecasting.
- Reforecast at a frequency that makes the most sense for the purpose at hand. Quarterly may suffice for large operational expense items, but in times of change, a weekly cadence for cash flow and headcount may be more suitable.
- Use scenario modeling to visualize the impacts of decisions you need to make today on tomorrow.
Facilitating Change Through a Foundation of People, Process and Technology
Introducing new practices like these isn’t always easy. Integrating them into your organization requires a foundation of people, process and technology to build a culture and flow that keeps your business moving forward—in times of change and not.
You probably already have some of your company’s most analytical minds on your finance team. The right tools and data will help them drive smart, agile planning decisions across the business. A few things to look for include:
- Data integration: You’ll need a way to combine financial and non-financial data (internal and external) into a single system that stakeholders can easily access for a full view of the business and the levers that can be pulled to pivot quickly.
- Data visualization: To navigate forward intelligently, you need a way to turn data into insights and to present those insights to management in a way they can easily understand and quickly put into action.
- A familiar interface: Your team has a better chance of succeeding if they have the flexibility to focus on quick modeling and analysis in a platform they know, rather than having to learn a completely new software package.
Working together, these capabilities make the processes above—scenario modeling, agile forecasting and cash management—systemic and scalable. They also help enable integrated business planning with easier cross-functional collaboration and data discovery.
And it’s through that combination of process and technology that finance teams can begin to:
- Involve business managers early and often throughout the planning process, collaborate on high-level KPIs and departmental budget numbers and ensure core business strategies remain a north star in the planning efforts.
- Give business managers visibility into processes, for transparency and to demonstrate the direct impact of planning decisions on their business units.
- Easily assign team members to work alongside business partners, rotating them across departments for a first-hand perspective on company-wide operations.
As part of an organization’s integrated planning efforts, the finance team should have a big picture view of your entire business—and the ability to drill down to see how a change in one decision can have cascading impacts across other areas of the company. These best practices offer that—empowering finance teams to navigate all types of change.