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Integrated planning, budgeting and forecasting: best practices!

21 December 2020 | EN Planning & Analysis

The latest IBM report states that the best-performing companies use integrated planning solutions to support decision making based on data. How do they do it? What are the problems they face and how do they deal with them? Discover the best practices!

The latest IBM report states that the best-performing companies use integrated planning solutions to support decision making based on data. How do they do it? What are the problems they face and how do they deal with them? Discover the best practices!

The integration challenge

Over the past two decades, companies spent extremely large resources on implementing ERP systems that were supposed to manage diverse business processes from one place. Up to this day, most of the planning still takes place outside these systems – in Excel spreadsheets and emails. They are handy tools designed for simple tasks but unfitted for enterprise-wide analytics or forecasting. They only slow down important processes. And it’s not only about spreadsheets being prone to mistakes and errors, which, in the long run will weigh the entire budget. A system consisting of separate spreadsheets that are not updated frequently enough won’t properly represent the business model. It won’t allow for identifying ineffective processes thus contributing to the formation of grey areas.

How it’s done by the best

Leading companies put their trust in solutions that cover the entire planning process. Starting with data collection, through modeling, analytics, to reporting – they do all that within one planning platform, based on lean infrastructure requirements. Such platforms are capable of handling a diverse range of business functions, from budget-focused finance tasks to, for example, supply chain-focused planning for retail environments with thousands of SKUs.

This way, an integrated planning and forecasting solution  becomes literally a nervous system of the whole enterprise – receiving stimuli in the form of data and responding by resource relocation that fits changing business conditions.

Best business practices:

  1. Compare strategic and operating plans

Finance translates long-range strategic goals into financial targets. These, in turn, can be expressed in a form of plans and statistical data used by other departments. With strategic goals transformed into operational plans, it’s possible to define KPIs, and measure a company’s performance. This, in turn, allows leaders to carry out and even exceed their projects.

  1. Start at the top—end at the bottom

One of the most important components of effective budgeting and forecasting is combining top-down financial goals with bottom-up plans. Many companies provide their finance departments with ready-made financial goals and the task of implementing them in other areas. In other companies, management requires detailed annual plans building up from the lowest level structures, and then formulates final financial goals on their basis. Neither of these approaches, however, are complete. Leading companies provide initial guidance from management’s strategic goals, objectives and expectations. Accordingly, the employees and managers build a plan from the bottom up, indicating how they intend to meet those goals. This process requires many iterations during which top-down and bottom-up actions are confronted in order to achieve the assumed plan.

  1. Utilize continuous planning and rolling forecasts

With the economy connected on a global scale and business conditions changing constantly,  forecasts should be updated quarterly or even monthly. Forecasting allows managers to get an idea of the plan’s implementation and changes that should be done to it. With accurate forecasts, the company can constantly grow and remain competitive. Take the financial industry for example – if the bank’s forecast revenues are too low at some point, it may introduce a product that will attract new customers and retain existing ones. In this case, an important element of continuity planning is the model that formulates business driving forces and bases what-if analyses on them. It allows estimating the financial result of the newly introduced product. Resulting data is then forwarded to the finance department, which calculates future sales and revenues.

Going with continuous forecasts you may implement rolling forecasts, which, in short, consist of systematically repeated, realistic predictions of key indicators in a fixed time horizon. This way, after each month, the updated plan predicts future events much more accurately.

  1. Employ predictive analytics

Thanks to advanced analytics, enterprises are able not only to analyze historical data but also use it to determine what will happen in the future. Predictive analytics builds upon traditional planning methods, supplementing them with statistical and machine learning, data mining and natural language processing techniques. They discover patterns in giant data sets and diagnose factors affecting consumer and market behavior. Equipped with advanced data analytics, companies are able to discover the factors behind, for example, the customer churn, and take steps to stop it.

  1. Turn to the experts

A modern planning solution is invaluable for integrated planning, budgeting and forecasting. Implementing such a tool, look for a team of experienced experts, who will be able to map your company’s business 1:1. Incube CPM employs the highest number of planning & analytics consultants in Poland. Our experts carried out dozens of projects. We work with market leaders, implement the most complex financial models and provide our clients with the highest level of support on a daily basis. We perform best with IBM Planning Analytics technology. Our clients appreciate it for its flexibility, speed and user-friendly appearance.

Contact us and discover the hidden potential of data. Learn how the planning & analytics platform can help your organization grow.

Planning, budgeting and forecasting: Software selection guide, IBM, 2018
Elevate your Enterprise, IBM, 2018