Things change rapidly in business. And as we’ve recently seen, the impacts of changes such as the pandemic, Brexit, supply chain issues, the Ukraine war and energy surcharges have been felt by all businesses.
Financial planning and analysis can help you gain a competitive advantage and stay ahead of the game. Through planning, budgeting, reporting, forecasting and modelling, you will have a better understanding of your company’s financial health and can more accurately adjust plans and respond to adverse situations.
Financial planning and analysis can help influence the strategic direction of the company. By looking, for example, at which product lines or sales channels are producing the best profits, you can project your long-term growth. This sort of analysis provides vital information that can help inform future strategic decisions, such as expanding a channel that is prospering, moving into markets that are expanding, or dropping a product or service that is declining.
The same can be said for operational planning. But additionally, operational planning is most effective when a company uses a shared platform. By extending the planning beyond just the finance department, all functions of the business can plan according to the company’s overarching goals and by using common data models and analytical methodologies.
It’s not just the board’s decisions that affect the business. Departments – like marketing, sales, HR, and operations – as well as multiple business units – make decisions and take actions that have a financial impact on the company. Employing planning and analysis best practices across the business provides a more unified view of how the activities, strategies and plans of various departments all combine to shape the business as a whole.
Data collection is vital for effective financial planning and analysis but can be difficult and time-consuming. Your staff may need to collect data from different areas of the business, each of which might use different systems or formats. Then they may then need to verify and consolidate it before they can use it.
It is best to avoid manual input wherever possible as it not only takes longer, but it also comes with the risk of errors. Automation can help here, by pulling in the required information from various sources or putting accurate figures into pre-prepared report formats.
In scenario planning, you determine three different scenarios using varying assumptions about sales volume data. This provides an expected scenario as well as the best-case and worst-case scenarios.
This gives you the necessary information to then plan the steps you will take according to the outcomes for each scenario. By setting out plans in advance for each scenario, you are well prepared to implement them as soon as needed. So, you can be ready in advance, for instance, with planned amounts for your capital expenditure or investments.
You can also model the effects of a single decision. So, if the management team proposes a strategic or operational change, the financial team can forecast what the outcomes will be and analyse how positive or negative the impacts on the business will be.
It’s crucial that you incorporate a feedback process in your financial planning. You need, for example, to regularly review your achievements to check how you performed against the budgets you set. This will help with setting and adjusting future plans.
You should also review the KPIs that you track. Are they all still relevant? Are there others that you might usefully add?
Checking your previous forecasts against actual performance can also inform future planning. For example, if your last period’s expenditure forecasts were accurate, then you might apply the same forecasts to your next period’s budget.
What you have already achieved may also have a bearing on your future performance. So, by preparing regular performance and management reports, you can hone your planning.
Using the Right Technology
An ERP system is the perfect tool for financial planning and analysis as it provides automation and works on a single database.
The automation features of an ERP save your staff time, which they can then better apply to the analysis and planning itself. Your finance team shouldn’t just be an admin function. If you can help reduce the time it takes to manually prepare financial reports or obtain and consolidate data, then their financial knowledge expertise can be better deployed. They can focus more on the planning, budgeting, forecasting modelling and analysis.
It is easy to collect data when you use a cross-company system. The information is real-time and based on a single source of truth. Staff can access it quickly, without having to pore over financial reports or collate data across different spreadsheets.
Using a central tool across the organisation also facilitates the approach of extended planning and analysis, whereby the operational planning for separate departments and business units can be undertaken in a way that aligns with the rest of the business.
With automation, cross-company information and data visualisation tools, your finance department can become central to the planning process and can input into key decision-making as a strategic partner.
NetSuite Planning and Budgeting is integrated with NetSuite ERP, giving you accurate, up-to-date information that is accessible to everyone who needs it, facilitating planning and analysis. It has automated management reporting and powerful predictive planning for accurate forecasts and in-depth financial analysis.
Contact us today for more information about NetSuite ERP.