Blog: What support do modern system solutions provide in the planning process?
This is the fifth part in a series of blogs on dynamic control. You can find the previous parts here.
The system support for budgeting and planning available on the market today has many good functions that support dynamic and agile business management.
Unfortunately, many companies have bought modern systems and then implemented budget/planning solutions based on cost center/account, which means that they do not provide much added value. It is still a number crunching at a level of detail that does not provide any support in planning for an uncertain future (after all, the future is always more uncertain than the past).
The functions that we see that many companies have failed to implement are scenario modeling, rolling forecast and predicative forecasts.
- Scenario modeling: By creating models that are derivative based, one can create robust solutions to analyze different scenarios. It will probably be important even in the future to be able to contrast different future scenarios in order to be able to make informed decisions. There are many variables that are significantly more volatile now than 2 years ago, such as, for example, prices of input goods, output prices (how can we compensate for increased input goods), wage trends and exchange rates.
- Rolling Forecasts: The functionality is there – just get started and work. But think about the rhythm of your company so that you set the right planning horizon. Not many companies have a natural start on January 1 and a stop on December 31. Think about the difference between planning for a business that sells soft ice cream and building apartments to be sold as condominiums. Definitely different planning horizon. Organize the management process dynamically according to the business rhythm and or the events that govern the business - not around calendar years.
- Predictive forecasts: Predictive forecasts – have been introduced a little later in the technical platforms, i.e. forecasts that use statistical methods based on historical data. Our recommendation is to start working with this tool and see and learn. You should not replace the manually prepared plans with an automatically calculated forecast but supplement it with predictive forecasting. It creates a good discussion and takes some of the politics and budget cushions out of the planning process.
Get in touch if you have any questions or concerns about how you can use your system support more effectively. You are also welcome to join Ekan's network regarding CFO office and dynamic business management.
Did you know that Ekan Management facilitates a network with a focus on dynamic management / beyond budgeting aimed at economists at companies in the Stockholm region? Contact Julia Viklund if you are interested in participating.
Ekan is also Sweden's representative for the international network Beyond Budgeting Round Table (BBRT). Contact us if your company is interested, and we will tell you more about what a membership means.