xP&A Extended Planning Across the Silos

xP&A (Extended Planning and Analysis)??is a complete transformation of the FP&A function to move beyond the finance function to challenge the status quo, educate, shape continually, and influence management decisions. Sales and revenue planning are one of the aspects of xP&A: it goes beyond just finance and extends into HR, sales, supply chain and marketing. In many leading organisations it is enhanced by analytics.?

The focus of this article is Extended Planning with Sales and Revenue information.

The challenges of a manual environment

??????To derive an accurate financial and operational forecast and make great business decisions, volume and revenue must be forecasted as accurately as possible. The challenge of a manual planning environment is that the volume and revenue forecasts are often obsolete very early in a financial forecast. New information such as customer wins or losses and other factors that impact demand emerge daily and can drastically impact the forecast.

??????Many businesses have linear forecast processes requiring volume and revenue forecasts to be ‘locked’ early in the financial forecast. Unfortunately, because volume and revenue are so dynamic, the forecast becomes obsolete if these critical variables cannot be updated seamlessly down the P&L if volume changes materially.

The challenge that Covid 19 gave Planning and Forecating finance teams ( FP&A) was like nothing we have ever seen before. So many variables, changing in real time with Business managers and CEOs asking for more and more scenarios

The top 5 benefits of integrated sales and revenue planning:

??????The thought of an Integrated Sales and Revenue Planning model is extremely appealing to FP&A professionals. The benefits of integrated sales and revenue planning include:?

1. Sales and revenue forecasts can be?updated dynamically throughout the financial forecast. This helps FP&A professionals provide real-time and accurate forecasts up and down the P&L. The forecast becomes much more relevant to the business and increases stakeholder buy-in. Allowing all costs to be reviewed based upon the forecast provided and more timely business decisions.
2. An?integrated model allows?FP&A and the rest of the organisation to stay on top of trends impacting the business. Allowing shifts in customer buying patterns can be understood in real-time and sales teams can take actions necessary to course correct or capitalize on opportunities promptly.
3. The organisation’s supply chain can use this information to?adjust manufacturing in real-time?and ensure the organization has the optimal raw material, labor, and logistics resources. Inventory levels have been ballooning due to companies stockpiling due to ongoing concerns of global supply chains.
4. Human Resources?can proactively develop their strategic workforce plans and operational headcount plans. This provides significant advantages to organisations as they can ensure they have their labour optimally resourced. The low unemployment levels are adding lead time to hiring staff, so additional data that can assist with people plans would be very advantageous to many companies.
5. Finance Planning and Analysis (FP&A) teams can run?multiple ‘what-if scenarios that help the organisation develop and manage contingency plans. With Inflation increasing, companies are continually challenged with the impact of cost increases on profitability. Dynamically linking forecast sales , revenue and costs will allow for significantly improved data quality,transparency and timely business decisions.

Implementing integrated sales and revenue planning

Critical factors involved in implementing integrated Sales and Revenue planning successfully include:

• Investing in cultural change.??Start with senior management and extending to all organisational team members. In times of significant change (e.g digital transformation, Covid 19 or levels of Inflation not seen for 40 years) working on Extended planning may bring the entire senior management team together to work on the same goal for organisational success.
• Enterprise wide True collaboration?– FP&A professionals must work collaboratively with cross-functional partners and build trust and accountability to make confident decisions together. And allowing a level of transparency of the flow of data from sales to revenue forecasting and having sales and finance teams working more closely together.
• Develop a?truly extended planning ( xP&A) process?across the organisation that links all participating functions (sales, supply chain, human resources, finance,marketing, Information technology) and enables faster and more accurate forecast cycles. These can be integrated to cash flow and working capital management ensuring increased accuracy of cash forecasting.
• Invest in dynamic models and cloud technology?that enables new processes and provides the capability to integrate sales and revenue into the overall financial system.?As an example using your probabilised sales pipeline with dollar amounts and timing to link directly into the finance forecasts.

In summary

Organisations that invest in integrated sales and revenue planning will have a significant advantage as their FP&A departments will have more accurate financial and operational forecasts. Adding areas including procurement, marketing, supply chain , IT and Human Resources will ensure an over all dynamic planning model with AI and predictive analytics will allow companies to forecast better than ever before.

This will lead to better business decisions, improved innovation and competitiveness and significantly improved financial results. Run Better....

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