Global Banking & Finance Review: The Impact of Covid-19 on Planning

“The Hackett Group’s EPM Performance Study revealed that top-performing FP&A organizations have invested more in technology, which has enabled them to run more analysis and deliver reporting faster and more efficiently. Of top performers, 67% have implemented a primary financial planning and forecasting system to consolidate corporate and country, region or BU information.”

Read more at Global Banking & Finance Review >

Rethinking the Business Planning Process

“Many plans and budgets are now based on outdated assumptions and data, requiring FP&A teams to rethink the annual business planning process. Discussions with FP&A leaders, CFOs, and Deloitte’s Finance Transformation and Human Capital professionals, suggest several factors have led leaders to challenge the traditional process, including the need for constant scenario development and modeling; a lack of confidence in future projections; the urgent requirement for decisions about courses of action; an unclear decision-making framework, particularly around capital allocation; and time-and resource-consuming manual iteration.”

Read more at CFO Journal >

CFO Priorities for 2021 Includes Digital Transformation

“After surviving the initial wave of the pandemic, many organizations obtained a real-world view of how far along they were in their digital transformation journey. In many cases, the verdict was “not nearly as far as we thought we were.” Although most companies have automated processes, fewer have optimized that automation; fewer still have deployed next-generation technology to transform their business models. In fact, our research and experience with organizations worldwide indicates that very few have taken the necessary steps they need to become truly digital. They may have formed a digital veneer around their core capabilities, but being truly digital means changing the organization at its core.”

Read more at Forbes >

Raw Material Annual Spending – Is it Relevant for Your Budget?

by Ganesh Subramanyan

When calculating the total spend on raw materials in your annual budget, do you evaluate the spending level for varying volume, mix, or inventory assumptions? My guess is no because changes in these areas are irrelevant to the total profits for the year. When budgeting, most calculate gross margin by just subtracting the cost of goods sold from the selling price, ignoring the impact on inventory and raw material spending as it only affects the Balance Sheet.

Current conditions have placed a spotlight on cash flow and understanding the cash requirements of raw material spending is now a critical metric for all CFOs. With shifting customer demands, supply chains, and commodity prices, finance teams need a way to analyze cash flow through the lens of raw material and inventory requirements.

The biggest challenge to getting this level of insight – your ERP. Is it possible for an ERP to take finished goods volumes, explode the bill-of-materials to calculate material requirements, match those requirements with vendor prices and accumulate the raw material spend for the period? Probably, but that would be a challenging – and expensive – road to travel.

Using Where Used logic, most ERP systems can convert annual budgeted volumes by finished good SKU into raw material requirements. But that’s typically where ERP stops, and the spreadsheet analysis starts. To match the quantity material requirements against prices (standard or actual), most build complicated spreadsheets with V-lookups, index matches, and sometimes VB Scripts or macros, to calculate spending requirements.

Then the real-world kicks in. Sales loses (or wins!) a new deal, customer behavior changes, or your suppliers raises their prices. What does that mean for your analytics process? More and more spreadsheets – one for each volume, or customer, or vendor, or scenario – with so many columns and tabs and formulas that make it impossible to decipher. It also means the executive team is asking more questions, expecting deeper insights, and demanding answers faster.

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Finance teams have done the Texas Two-Step since the days of Lotus 1-2-3 managing this crazy spreadsheet process. Others have struggled to manage the process when the person who owns the spreadsheets leaves the company. To compete, finance teams need tools to create a connected process that starts with volume and mix requirements and ends with a calculated P&L and B/S to drive meaningful decisions.

With the ImpactECS platform, you can build and enable models that recalculate raw material spending dynamically when the sales team changes expected volumes or your supplier changes prices of your raw materials. Easy-to-follow model logic creates transparency that leads to better insights and ultimately better decisions when it comes to managing cash flow during uncertain business conditions.

Nine Key Traits from CFOs at Efficient Growth Companies

A recent Gartner survey of CFOs have identified nine traits CFOs should implement for better performance during a crisis including fighting scope creep, protecting costs that support competitive advantages, and using a mix of budget models to identify the activities that truly deliver value.

Read more at Gartner >

Your plans useless but you’re still planning

“Planning in such highly uncertain times must focus on the ability to quickly and flexibly react to fast changing circumstances. Doing so effectively, requires that the company has thoroughly mapped its supply chain, including the physical locations of its suppliers’ plants and warehouses, so it can quickly identify which of its products might be affected by a shutdown at any of the suppliers’ locations.”

Read the article at The Wall Street Journal CFO Journal >

From Uncertainty to Agility

“The COVID-19 crisis has highlighted the need for sophisticated, institutionalized risk management, including real-time scenario planning, business continuity planning and “sense and respond” capabilities. In the aftermath, we will likely see greater flexibility in network capacity, more local and multi-sourced supply, and multi-skilling of employees.”

Read more at SCM World >

When You Have Too Much Tech

Surveys show CFOs generally see the need to incorporate technology to help them improve their finance and accounting functions. But knowing which technology is right for their operations and which isn’t — and also when the time is right — is the “opportunity and the curse,” says Bryan Lapidus, FP&A, director of the FP&A practice at the Association for Financial Professionals. “Until you look at your needs and take an honest look at where your team is culturally, he suggested, the CFO might be better served resisting the addition of new tech for its own sake.”

Read more at CFO Dive >

AFPs Eight Steps to Rolling Forecasts

With more organizations shifting from traditional budgeting to rolling forecasts, The Association for Financial Professionals has shared their list of 8 steps to help finance teams avoid missteps at every stage from goal setting to tracking performance.

Read the 8 Steps for Creating a Rolling Forecast >