planning process considerations

Planning Process ConsiderationsFinit Webinar SeriesMarch 2016

Presented by Bryan Hogan

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About the Presenter

Bryan Hogan([email protected])

Experience9 years with Essbase4 years with Planning3 years with Enterprise21 years with financial systems, reporting, and dashboards

Certification/EducationBBA- Finance & Banking, University of North Texas

Client TestimonialFinit has a remarkable reputation and no matter who you meet from the company, you can understand where the comments come from. Each of them is knowledgeable in so many aspects and takes the time to make sure the client fully understands the topic. They exceed the bar of professionalism while maintaining an enjoyable atmosphere.

mailto:[email protected]

Agenda• Why Plan?• Process Components to Consider• Accounting vs. Finance• Type of Plans/Forecasts • Methodology Discussion• Consumers of the Planning Process

• Common Pain Points of Planning• Excel vs. Systemic Planning Solution• Final Thoughts to Consider

Why Plan?

Process Components to Consider• Who should be involved in the process?• What type of plan/forecast should I use?• What is the source of the base data and input

data?• What level of detail makes sense to forecast

the business?• Who will be the main consumers of the

results of the planning process?• How will the results be delivered?

Who Should Be Involved?• The following would typically be involved• Finance/Accounting as the core of the Planning team• Key business stakeholders for inputs• Senior Management for review and decision making

• Additional involvement depends on a number of factors• Timing and complexity of the business model• The planning methodology being used• Turnaround time required for the planning cycle• Understanding of the business by the Planning team

Accounting vs. Finance

FP&A/Budget Office

• Every forecast cycle is different based on business trends and management thinking

• Predict future performance to drive management action

• Very few restrictions on models and analysis to be developed

• Helps “create the news”

Accounting/Controller

• Every month end and year end close cycles are similar regardless of results

• Report historical information and comparisons

• Bound by GAAP and accounting rules and principles

• Typically “reports the news”

Types of Plans/Forecasts• Annual Process • Budget• Annual Operating Plan

• Periodic Process• Forecast (BOY, Rolling)• What-If Forecasts/Risks & Opportunities

• Ad-Hoc or As Needed• Strategic Plan • Long Ranged Plan

Timeline of Plan Types

CY+2 CY+3 CY+4 CY+5J F M A M J J A S O N D J F M A M J J A S O N D J-D J-D J-D J-D

Actual (May)

BOY Forecast

Rolling Forecast (12 mth)

Budget

LRP (5 year)

Current Year Current Year +1

What is a Budget?• Tactical or operational in nature• One year fiscal calendar view• Can take many weeks or months to complete

the process• Often involves a cross section of the company

to produce• Very detailed, but not as detailed as actual

results• Typically is tied to compensation (bonus)

What is a Forecast?• Tactical or operational in nature• Typically focus on current year• Should only take days to complete • Not as detailed as actual results or budget• Driven primarily by the finance team

Different Types of Forecasts• BOY Forecast• Focus on remaining months in the fiscal year• Short term perspective and is affected by the year-

end “barrier”

• Rolling Forecast• Focus on a fixed number of months into the future• Mid-term perspective and gives preliminary view

into next year

• What-If Forecasts• Focus on multiple scenarios of key drivers that

impact future performance• Purpose is to model and anticipate potential risks

and opportunities to the businessPage

20

What is a Long Ranged Plan (LRP)?• Very strategic in nature• Has a long range focus of many years into the

future• Initially takes weeks to develop but can be

updated quickly• Builds off of existing budgets and forecasts• Very high level assumptions and very little

detail• Driven by Finance or a specialized Strategic

Planning department and Senior Management• Updated on an as-needed basis

Planning Methodologies• Bottoms-Up• Very detailed, need based planning by each

business owner and/or department head

• Business owners are more engaged and have a greater sense of ownership in their plan/forecast

• If not managed effectively, wish lists can get out of control and will drive an unobtainable corporate plan

• Try to avoid “Use it or lose it” mentality

Planning Methodologies (cont.)• Top-Down• Not as detailed as Bottoms-Up

• Targets are assigned by management and pushed down to business owners with little or no input from the business owners

• Business owners tend to disengage as they are forced to a number and may short cut the process to hit the number with unreasonable assumptions

• Can be viewed as a “check the box” exercise

Planning Methodologies (cont.)• “Hybrid” • A mix of Top-Down and Bottoms-Up

• Finance rolls up plans from business owners and/or department heads.

• Senior Management reviews results and makes topside adjustments that are either allocated back down for business owners to adjust their plans or are held at a higher corporate level

• Keeps business owners engaged and can help control the wish list while not discouraging them with a predetermined corporate target

Other Methodology Considerations • Driver based• Focus on key business drivers: e.g. Headcount,

Production units, or New store openings/closings

• Trend based • Focus on % increase or decrease over prior

year/period

• Risk & Opportunity Analysis• Identify potential impacts to the business and

determine the financial effects and probability they will occur

• Layer in impacts as appropriate to the plan/forecast

Consumers of the Planning Process• Internal consumers• C-Suite/Senior Management• Board Members• Department Heads• Equity ownership group

• External Consumers• Banks (e.g. covenant reporting)• Lending Partners• Financial Markets and Analysts• Other Suppliers/Creditors

Common Pain Points of Planning• Consolidation of multiple, disbursed Excel

files• Version control, reconciliation to previous

versions• Incorrect, absent, or disengaged business

owners• Missing or incomplete information as inputs• Misinformed, incomplete or poor assumptions• Time – never enough• Ever changing business climate – data is

outdated the moment it is published• Planners become victims of their success

(and failure!) Page

27

Excel Vs. Systemic Planning Solution

Excel Solution• Very flexible• Many tasks can be automated

with macros and VB scripts• Dissemination of historical data

and submission of plan data is done manually via email

• Difficult and time consuming to consolidate results

• Version control can be problematic and quick turnaround times of versions can be challenging

• Lack of visibility into methods used by business to derive values

• Complexity of business model and organization impacts viability of using Excel

Systemic Solution• Allows more structure to be

enforced in the process• Centralized control of versions,

reporting and analytics • Historical data can be centrally

loaded and quickly made available to users

• Timely consolidation of data resulting in quicker turnaround times

• Can develop and automate sophisticated calculations and analysis

• Requires that functionality be built and maintained

Final Thoughts to Consider• Are our forecasts accurate? • Are our forecasts being used to drive decision

making and impacting our business results?• How much time do we spend planning?• What are the sources of the data and are they

“clean?”• Are we missing any key people who would

help improve the effectiveness of our forecasts?• Is there anything we would like to do

differently in our planning process and what are the barriers to making those desired changes a reality?

Questions?

Thank You for Attending!

Today’s Presenter:Bryan [email protected]

General Questions:Greg [email protected] [email protected]

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