7 actions for simplifying the planning cycle.

• Author: Balogh, Jason
• Position: PLANNING

Much has been documented regarding the vision for planning, budgeting and forecasting in the future. Many thought leaders have advanced practices such as driver-based budgeting, rolling forecasting, planning at summarized levels of detail, Lean Planning principles and advanced planning tools and technologies to enable this end-state.

Many Finance organizations have focused most of their efforts on partnering with the business to support major operational changes (such as M & A and restructuring) and scale the finance organization to accommodate additional analysis/transaction volumes. These competing priorities have, in many cases, limited Finance's ability to address the annual financial planning process and related technologies, despite often being a source of inefficiency across much of the organization.

Finance likely finds itself intrigued by many of the practices noted above, but limited to a finite window of time and resources to affect real, meaningful change.

The annual planning cycle represents one of the most visible roles of the Finance function. When compared to compliance-related activities, it's often the area offering the promise to partner with the business and add analytical value.

For these reasons, it is critical that the process not only deliver value and be executed on a timely basis, but it must also feel like a coordinated, well-orchestrated, value-enhancing activity to all involved. There are several relatively simple steps Finance can take to ease the burden on and all the planning constituencies.

What follows is a brief review of seven short-term action items that can be undertaken prior to the start of the planning cycle. Each action is rated on a scale of 1 to 5 in terms of "Ease of Implementation," (1 = easy; 5 = hard) and "Degree of Benefit" (1 = low; 5 = high). The starred * items provide quick wins.

Action 1

Start at the Finish Line

Implementation 4 * Benefit 5

Iteration is a key contributor to plan cycle time--whether it is the business coming to the executive team with unacceptable earnings before interest, tax, depreciation and amortization (EBITDA) and having to rework the numbers, or whether it is a presentation submitted for executive review that lacks the support necessary to support capital deployment.

As a result, one of the most time-and pain-saving actions that can be undertaken by Finance is clearly defining targets and developing the final deliverable templates at the outset of the plan process.

Target Setting. Much has been written about target setting and its impact to business planning. Does setting targets limit operator autonomy? Do targets stifle true potential, as the business has no incentive to push itself beyond the targeted "ceiling?"

There are certainly pros and cons to setting targets that should be considered based on organizational culture. From purely a process perspective, much is gained by letting the business know, at least within some...