Financial Planning During Coronavirus And Crises

So, what specific challenges has this uncovered and what does this mean for the CFO and the Finance Team? This article sets out some thoughts around financial planning to consider in the long term.

An illustration of the issues faced

You just need to look at the Government Budget delivered by Rishi Sunak on 11 March 2020. By the following week, as a result of the global crisis, the assumptions and economic forecasts had been completely ripped-up. Within only a few days, ‘Plan A’ was out of date and everything had changed. A new ‘Plan B’ was proposed. There is little doubt that ‘Plans C’ and ‘Plan D’ will follow.

Yes, this is extreme. However, if recent years are an indicator of the future, major events are looking likely to occur more frequently as the pace of change accelerates.

How does this impact the Finance Team?

There are a number of impacts on an already stretched Finance Team. What is absolutely clear is that, more than ever, the Finance Team will be central to organisations in the coming months. For many the first concern will be cash and the ability to pay the bills in the short term. Just consider those in the retail and travel industries – this is critical to survival. Government intervention with the offer of guaranteed loans will help, but what level of funding do you require? What is the best- and worst-case scenario? Accurate cashflow planning is essential.

When we emerge from this crisis, the CEOs will then turn their eyes firmly to the future and how trading will be restored. How quickly will this happen? What actions can be taken to maximise recovery? What will this mean in terms of financial results? For those who are listed, City regulations and institutions will still expect organisations to have a reasonably accurate profit forecast that they will be judged against in the future.

The need for financial planning to be agile and adaptable

What is increasingly apparent is the ‘need for your planning process to be agile and adaptable’. This is a phrase often trotted out by technology vendors. But what does this mean in practice?

Well, agility can be defined as “the ability to move quickly and easily”. Putting this into the context of planning, you should be able to create new plans in a short timescale (perhaps only a few days), potentially with multiple scenarios. Adaptability is about being “able to adjust to new conditions”. Again, putting this into the current context, this would mean having a model that enables the organisation to make key operational decisions to gain a competitive advantage.

If you have an agile and adaptable planning process, then the Finance Team will meet the expectations of the organisation. Not only this, they will do it efficiently and effectively, reducing the impact on working hours and an increase in stress levels.

A return to reality

Many organisations, even those with sophisticated consolidation processes, are still planning using Excel spreadsheets and models that are complex and unwieldy and that lack control and visibility. As a consequence, the planning process is manually intensive, inefficient and performed infrequently as a result. The other consideration which has become apparent with employees being forced to work at home, is accessibility to data and systems. So many organisations are reliant on users accessing systems and data held on internal servers and have struggled to provide this at short notice. With a best-practice planning process, a high number of users need to collaborate and access the model. SaaS and cloud delivered solutions enable this collaboration. There are other examples, however, we can conclude that many planning processes lack agility.

If we go into the detail of the planning processes, many are built at a financial level with a disconnect from the operational drivers. For example, revenue is a single financial value with the supporting calculations held elsewhere (if at all). If revenue is changed, the supporting calculations need to be separately changed or vice versa. Worst of all, there can be a disconnect between sales and operations. Without the ability to modify assumptions and values which then directly change operational plans, it is difficult to understand the impact on the whole organisation and drive decisions. In this respect, most planning processes lack adaptability.

The reality is that few organisations have a planning process that is both agile and/or adaptable to the level that they would like it to be.

How can you transform your planning process? 

There is no short-term solution, no silver bullet that will help you solve the problem immediately. The reality is that Finance Teams will do what they always do, absorb the current crisis in their everyday role by increasing the hours worked. Whilst this may work in the short-term, this is not a sustainable position.

In our opinion, most organisations need to transform their current planning process so that they are agile and adaptable. There are two aspects to this:

• Improving the efficiency of the process itself. This can be achieved through automation of manual tasks and gaining control and visibility of the planning process. This will improve agility.

• Developing the process. This could include initiatives such as rolling forecasts, driver-based modelling, integrated and connected plans, use of predictive analytics. These will improve adaptability.

Everyone’s requirements are different. However, in our experience the technology platform is fundamental to enabling transformation. Identifying and understanding your specific needs, setting a vision for the future and finding the right solution (and delivery partner) are key to making transformation of your planning process a success.

Having an agile and adaptable planning process is critical in times of uncertainty. Many finance professionals and their organisations accept this is the case but, for a number of reasons, few have made this a reality.

Once we emerge from the current situation, then is the time for the Finance Team to initiate and lead the transformation of the planning process. By doing so and being successful, your organisation can gain a competitive advantage, and, in addition, you can elevate your Finance Team to be thought leaders and strategists.