For the Record Straight-talking treasury
See all articles

The Case for Continuous Financial Planning after Covid-19


Financial planning has always been vital to businesses in order to make sound, long-term decisions. Companies use forecasting to make critical investments, plan for covenant compliance, and even decide on future mergers and acquisitions (M&A) strategies.


In the past few months, planning has changed – and it has changed dramatically. The way we perceive business risk, and how we manage it, is fundamentally different for every finance leader on the planet. Even the most careful and diligent financial planning process is vulnerable, running the risk of being obsolete.

Why change the process?

Traditionally, planning is performed on a quarterly, bi-annual, or annual basis by finance departments, with a big push for the annual budget. Quarterly updates are typically top-down assessments to the annual budget, based on updated actual results and new management initiatives. Financial planning and analysis are usually categorised by a multitude of data sources, slow manual processes, and long planning cycles, which are out of step with the speed of the business. Put this into the context of 2020, and you know exactly why the planning process needs to change. With new announcements and changes daily (if not hourly), most planning cycles are no longer fit for purpose.

Furthermore, obtaining organisational consensus on a forecast can be as difficult as getting the organisation to contribute to the planning process in the first place. This is especially relevant when other departments create their own forecasts in separate systems that are also disconnected from the financial plans. Again, 2020 has exposed the need for better collaboration across businesses and the importance of integrating operational and financial plans. If you don’t know what’s happening on the ground in different regions, how can you produce accurate plans?

Rapid advances in technology are helping to address these issues, enabling an organisation to adopt a continuous planning mindset across all teams. Planning is no longer completed in silos in finance – it’s inclusive of many different business departments.

What is continuous planning?

At its simplest, continuous planning is a forecast that is up to date with current information and does not involve an organisation going through a one-off planning cycle. Instead, many internal and external inputs to the planning cycle are automated, enabling finance teams to concentrate on scenario modelling rather than data reconciliation. During periods of uncertainty, this helps us plan for – and be ready to respond to – different outcomes.

The past few months have shown the benefits of continuous planning. Covid-19’s impact on business has completely changed the forecasts and outlook for organisations both large and small. It has driven the need for more frequent re-forecasting, which has shown that the old ways of doing things do not provide the agility and efficiency required. How companies adapt to these huge shocks and alter and manage their cash flows could be the difference between growth and survival.

The ability to see the impact on business forecasts enables management to make decisions on costs, restructuring, or take advantage of other market opportunities.

Finance leaders are increasingly being asked for more accurate and flexible cash forecasting, with some businesses now performing this on a daily basis as they navigate the current crisis.

The impact of the pandemic on business models is yet to be determined, but it has the potential to transform how we work by moving to a more continuous planning versus more cyclical model.

A new world of data possibilities

The emergence of cloud and process automation is setting the stage for true continuous planning. Today’s financial forecasts are more comprehensive than ever before, collecting data from many more sources. The planning process can be set up to update forecasts based on historical financial information in your enterprise resource planning (ERP) system, customer information in your customer relationship management (CRM) system, and even social media ‘buzz’ from your feeds. These new data source possibilities are only realised when you possess the tools that scale to manage data volumes, user numbers, and handle the complexity of integrating a multitude of operational and financial models into one place.

Identifying and automating your internal data sources enables forecasts to be updated in real time, reducing the amount of data gathering and reconciliations that typically falls to finance teams. Furthermore, it is possible to automate external sources of data where this is relevant to a particular business – this could be anything from commodity prices to airline passenger numbers.

Scenario planning on a global basis

Automating and making the planning process relevant to the business in real time allows the Financial Planning and Analysis team to spend more time on actual analysis. The global nature of business means that there is a constant stream of new opportunities to explore. For example:

  • What would happen if we sourced materials from Argentina? 
  • What if we moved production to the UK? 
  • What if we increased the US marketing budget by 3%?

Having a planning system that supports this type of scenario analysis is critical to maximising opportunities, together with bringing financial planning outside the realm of just finance and into business operations. If you extend planning to people on the front line of the organisation, as well as the Finance team, you allow the people who understand what is happening on the ground to participate. As their feedback and entries roll up from operational plans into the finance plans, it gives us a more accurate view of forecasting than ever before.

Critical success factors to continuous planning

To adopt a continuous planning mindset across your organisation, here are a few pointers.

1. Spend time forecasting what matters:

  • Identify Key Business Drivers
    a) It is critical to understand the key drivers of Revenue and Expenses and how they interrelate
    b) By identifying five to 10 key business drivers before starting the planning process, you greatly enhance the relevance and achievability of your plan
  • Follow the 80/20 Rule
    a) Spend your time planning material accounts. For example, if a given Revenue account makes up <1% of the total, don’t spend a lot of time and effort planning it. Pick accounts that are material
    b) Spend time analysing the data vs number crunching
    c) Challenge the status quo
  • Focus on historically material variances
    Where do you historically see material variances? Accounts? Products? Departments? Geographies?
  • Value
    Significant time savings, ability to perform more analysis

2. Automate where you can and leverage internal data:

  1. Planning has historically been a time-consuming spreadsheet-driven exercise, often resulting in errors and manual reconciliation of data
  2. Automate inputs where possible, which (among other things) can link new leads in your CRM system to updated revenue forecasts, or facilitate a clear connection between the sales team and the actual forecast updated in real time

3. Involve all functional areas in the planning cycle: 

  1. Planning can be finance-centric, involving a handful of senior management
  2. Today’s mobile- and cloud-based technologies enable greater collaboration between sales, marketing, operations, supply chain manufacturing, and finance within a single, unified system. This could involve functions updating the forecast for latest projections, but also providing qualitative information from the front line (e.g., a salesperson learning that a customer is expecting lower than anticipated sales)

4. Simplify inputs and outputs:

  1. If you are to include more functions in the planning process, it is important to ensure that they have access only to their specific, relevant areas
  2. Although the underlying planning model may be complex, it is important to reduce the inputs and outputs to only the core information that functions need access to.

5. Communicate the key performance indicators:

  1. Identify the key metrics that senior management will use to monitor the business on a daily, weekly, and monthly basis
  2. The output of the planning process should enable management to easily monitor actual vs forecast and test the impact of multiple scenarios on the business
  3. Consistent KPIs throughout the planning process ensure that management are making decisions on a like-for-like basis

Never before have teams been asked to be this agile and flexible, pivoting and changing as underlying financial and operational drivers are turned upside down.

Covid-19 has pushed finance to think in different ways and break cyclical and quarterly patterns. Agility now comes from collaboration and the automation of more manual processes in order to form the continuous picture required to make realistic and sound decisions.

The business case for continuous planning has never been stronger.

Richard Sampson is SVP of EMEA at insightsoftware, a global provider of financial reporting solutions with more than 25,000 customers worldwide.


Photo of Richard Sampson
Richard Sampson
SVP EMEA, insightsoftware