Top-performing finance teams are constantly looking forward and shaping the future of their businesses. Whether preparing for probable market changes or adapting to unexpected ones, strategic finance leaders are veterans at business planning in the face of uncertainty today and tomorrow.
But, as almost every finance team is experiencing today, some periods are much more uncertain than others. When you’re expected to plan for anything, but you can’t plan for everything, it’s understandable if you’re feeling some added pressure these days.
In addition to rolling out business continuity plans, finance leaders the world over are now asking themselves, “How can we factor today’s uncertainties into our five-year plan without compromising revenue targets? How can we plan for the next 60 days? What operational changes do we need to incorporate into new plans, whether for survival or continued growth? How can I help my business adapt to current uncertainties and better prepare us for future ones?”
Successful uncertainty planning ultimately comes down to being able to quickly revise financial and operational plans, and the good news is there are proven processes and best practices you can use to become an agile planning expert. To get you on your way, consider the following four tips for planning through uncertain times with agility and confidence.
Seize Opportunities for Scenario Modeling
Every uncertainty you face is an opportunity to dive even deeper into your numbers and estimate future outcomes with scenario modeling. Seismic market shifts or sizeable project are obvious event-driven examples where you would want to assess possible futures. But to tear a page from top-performing strategic finance teams, scenario modeling should be a matter of regular practice—done every time you reforecast, for example—especially during uncertain times.
Scenario modeling involves testing the implications of your business plans against assumptions about existing and future scenarios and making agile models to assess the impact of those plans on things such as revenue, costs and cash flow. When planning for your business in uncertain times, levers to test could involve operational steps to weather cash crunches such as headcount planning. In that case, your scenario models should answer questions such as:
- How sustainable is the business’s cash flow if we stick to our existing hiring plans?
- What are the implications of a complete hiring freeze on cash flow and operations?
- What key roles or types of roles—e.g. executive hires, roles that work well remotely—can we maintain without adversely affecting our cash flow situation?
- How can we adjust compensation plans fairly to lengthen our financial runway?
- What other hiring plan changes can we make to maximize performance while minimizing cash flow implications?
Scenario modeling is an effective way to hone in on critical metrics and their impact on your business results, arming you with the insights you need to make tough decisions quickly AND confidently. Doing it well is a combination of picking the right variables and business drivers to test, and combining key performance indicators (KPIs) from across your business to see the direct implications of adjustments to those variables.
Cash is King – Anytime, But More So in Uncertain Times
Today’s top-performing, strategic finance teams may be able to keep their businesses on track to meet growth targets even in the most uncertain times. But every finance team is also directly responsible for ensuring the business has enough cash on hand to weather those downturns and periods of uncertainty. From taking on additional debt to putting a hold on new hires, it’s on finance to quickly make the tough calls needed to keep the business operating under any market condition.
In periods of uncertainty more than any other, effective treasury and cash management are the difference between weathering a storm or being sunk by it. So scenario modeling around cash flow is a natural priority, but other important things to consider include:
- Assessing your cash flow on a more frequent basis – monthly cash flow statements don’t cut it when you need to understand immediate impacts. In uncertain times, your treasury situation should be assessed on a weekly basis, if not more frequently.
- Examining all the levers at your disposal – ensure your business is sufficiently funded, including accessing additional credit and changing your accounts payable procedures or major decisions around hiring and headcount.
- Providing management with dashboards, data and other visibility measures – (e.g. involving HR in the case of headcount decisions) so they’re part of the decision-making process and appreciate the role cross-functional collaboration plays in the overall success of your business.
Adopt Agile Forecasting
In uncertain times, finance teams need to be able to identify key performance trends on demand and modify their plans quickly based on agile analyses of how market conditions today will influence their bottom line.
Unlike static annual budgets which are tedious, manual and rendered obsolete the moment a change is made, rolling forecasts give finance leaders a reliable prediction of long-term business results based on real-time actuals and business drivers. Agile forecasting takes the rolling concept a step further—not relegating reforecasting frequency to quarters or months, but being able to reforecast on the fly.
Being set up for rolling forecasts will certainly help you prepare for agile forecasting, but it’s not necessarily a prerequisite as long as you’re set up to quickly and easily:
- Use historical data and your most recent actuals to guide reforecasting.
- Reforecast at a frequency that makes the most sense for the purpose at hand—quarterly may suffice for large, operational expense items, but for cash flow and headcount, a weekly cadence is more suitable under current conditions.
- See—in part through scenario modeling—the impacts of tomorrow on decisions you need to make today.
Even under the most predictable conditions, agile forecasting gives strategic finance teams the ability to identify new growth opportunities for the business. And in times of uncertainty, it’s among the best ways to adapt your business quickly, consistently and intelligently to unexpected changes in market conditions.
Combine People, Process and Technology
Odds are you’ve already got some of your company’s most analytical minds in finance. Help them do what they do best by giving them the tools and data they need to drive smart, agile planning decisions across the business.
- Data Integration – combining internal and external, financial and non-financial data in a single system that stakeholders can easily access for a full view of the business and levers that can be pulled for a quick pivot.
- Familiar Interface – (with Excel as an obvious finance example) so your team has the flexibility to focus on quick modeling and analysis with a platform they know rather than having to learn a new software package.
- Data Visualization – so you can turn data into insights on performance that can be presented to management in a way they easily understand and can quickly put into action.
Working together, these capabilities make the processes covered above—scenario modeling, agile forecasting and cash management—systemic and scalable. They also help to enable integrated business planning with easier cross-functional collaboration and data discovery, ensuring that you can:
- Involve business managers early and often throughout the planning process, collaborate on high-level KPIs and departmental budget numbers and ensure your core business strategies remain a north star in your planning efforts.
- Give business managers visibility into the processes—for transparency and to demonstrate the direct impact of planning decisions on their business units.
- Easily assign members of your finance team to work alongside business partners, rotating them across departments for first-hand perspectives on company-wide operations.
As part of your integrated planning efforts, your finance team should have the means and first hand exposure to be able to look at scenario modeling, cash flow and agile forecasting with a big picture view of your entire business—and how a change in one decision will have cascading impacts across other areas of the company.
In short, the right people, processes and technology are all required to become an agile planning company that can navigate uncertain times.
Learn More at Vena Nation week Starting May 12
The four tips above are essential items to have in your finance toolbox for planning with agility and adapting to uncertainty, but this article only scratches the surface of their value and how to put them into action.
To learn more, sign up for Vena Nation week, your definitive resource for best practices, case studies, expert panels and more, all centered around the theme of planning to grow in uncertain times.
Starting Tuesday, May 12, enjoy free, unlimited access during Vena Nation week to more than 40 keynote speeches, panel discussions, how-to courses and one-on-one training sessions. Learn agile planning and budget orchestration tips, best practices and success factors from more than 60 finance luminaries, finance and operations peers and front-line industry experts.
A bonus for customers and industry pros alike, earn CPE credits through CPE-accredited training. Customers will have exclusive access to comprehensive product and industry training modules with the chance to earn 15 extra CPE credits for 30 in total.
Discover, network and learn more about agile planning and budget orchestration in uncertain times. Register for Vena Nation week today.