I predict that when we look back on the situation, a key characteristic of those businesses emerging on the other side will be agility – and this is where Finance plays a key role right now.Profit& is about, and in fact most of my career as an accountant has been about, promoting more relevant and agile planning and forecasting. Decision makers need our best view of the future, not confirmation of the past. I regularly try to persuade management information providers to focus on predicting the future rather than reporting the past. A global crisis such as the coronavirus pandemic has the benefit of underlining how “clunky” (or even non-existent) forecasting processes often are. In contrast, I can report on at least two of our clients that are able to respond rapidly to change in the business environment.
A medical products company has a 5-year plan with P&L, balance sheet and cash flow, all connected to production planning. The latter includes bill of materials and batch planning over a 16 step, three factory supply chain. This week they told me they needed to re-appraise their investment in new production lines against the need for additional equity finance. They were able to do this in a matter of hours using the model we built in Anaplan.
For another client, an IT services company, we built a new 3-year financial plan in Anaplan and had it approved by the Board in just 10 weeks, start to finish. They now recognise that they have little insight, at the tactical decision-making level, of the evolution of the sales pipeline. To address this, we are now working with them to replace a myriad of unconnected spreadsheets by connecting Anaplan directly to their CRM, so that they can provide weekly forecast updates against the 3-year plan. Very soon they will be able to provide a rolling short-term revenue forecast based on qualified sales opportunities, that in turn will increase Board confidence in the sales team’s ability to deliver longer term goals.
A contrasting story is of a service provider to the UK government and privatised health organisations. I don’t need to spell out to you the demands being made upon them by their clients right now! Whilst we are finalising financial management reporting (backward looking) in Anaplan, the Finance team is being pulled every which way responding to scenario requests for different contract options. The current global crisis has highlighted to them in glorious technicolour that a forecasting model in Anaplan combined with an ad hoc scenario process would greatly alleviate this pain. Responding to the current urgent requests is, by a long way, higher priority at present of course, and being ready with a flexible tool will have to wait for now. Needs must.
Which story do you have most in common with right now? We’d be interested in hearing how your finance teams are coping with these events. What we do know for certain is that the world will not be same as before. For now, take care and stay well.