Integrating financial projections and non-financial planning: Part 2
In my previous blog post, I discussed why an organisation should integrate financial projections into Integrated Business Planning (IBP). In this blog post, we explore how to construct financial projections out to the planning horizon of the Integrated Planning process.
Three key stages
Design the IBP process to provide the necessary financial projections
Be clear about the data that the Finance Team will have at their disposal; from where it will be extracted and at what time in the monthly cycle. The aim is to avoid an exhaustive and often disruptive bottom up re-budgeting process every month, and instead to focus on changes to crucial financial drivers and to consider their effect on the financial projections. Given the rolling continuous nature of IBP planning, this relies on organisational alignment and an appropriate technology.
What role does the Finance Team play in the Integrated Planning process, and how will they contribute to its implementation? Finance representation input and participation in reviews (Product, Demand, Supply, Reconciliation, and Management Business Review) is essential. Defining the finance role, and how the operational plans will drive the financial plans is integral to a coherent and successful process.
What’s in it for me?
If the Finance Team is unable to see what’s in it for them, then they are less likely to fully engage in the process. Consequently, it’s essential for them to understand the benefits of getting involved and collaborating with other departments across the organisation.
If you’re able to successfully integrate financial plans with the operational and strategic plans, then your organisation will reap the benefits, such as:
- A reduction in non-value added activity undertaken by the Finance Team, as reconciliation and validation activities are no longer necessary
- Improved visibility of the assumptions behind the numbers, simplifying variance reporting
- An endorsement from the whole organisation that the financial plan is supported, as it is based on the operational plans
- Less stress; with one set of numbers to work from, there is no disagreement over differences and divergences