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Leading practice #1: Financial Plan alignment

CIMA and ais have conducted a joint survey which aimed to establish the maturity of planning, forecasting and reporting processes within large enterprises in the UK. Further to the collection of survey results a number of interviews were carried out across a sample of companies to explore common themes and issues.

105 companies responded. 35 companies were operating only in the UK and the rest were global organisations with either UK Head offices or decision making units based in the UK.

What does financial plan alignment mean?

It is the alignment and interconnectivity of strategic, finance and operational plans.

Organisations utilize many individual plans to direct and manage the supply chain…strategic plans, sales plans, marketing plans, HR plans …and the list goes on. All of these plans feed into the finance plan as a barometer of company performance.

By using strategic KPIs to set targets and track performance and operational drivers to build the financial position, this sets a common parlance across strategy, operations and finance and inextricably links these areas together.

Benefits of closely aligned planning processes are that plans are more accurate and more explainable – with instant visibility of the business drivers that inform the financials. Plans are linked…so changes in one element are reflected in another keeping the whole view honest and consistent.

How did the UK score?

On average the UK scored 6 out of 10 for financial plan alignment. The best performers housed the various plans in connected or unified systems and operated driver based planning in strategic, Sales and HR. Leading organisations also kept an eye on consistency checks – with common definitions and plan consistency validation checks in built into systems to keep the integrity of the whole.

Lower performers tended to have inconsistent planning processes driven primarily through disparate local models and multiple business models – this was seen as a barrier to a common planning model which supports financial plan alignment. A common theme across low performers was functional planning being done in isolation and pulled together by finance – in 80% of cases the planning tool used was excel which often leads to consistency issues across markets and functional units.

Summary

There are many practical ways to achieve greater plan alignment:

  • Use enterprise planning systems designed to provide connectivity and control across different organisational plans. The main vendors have all developed their software to support leading practice adoption.
  • Common definitions for performance measures – e.g. FTE in your workforce plan means the same as FTE in the finance plan.
  • Where appropriate use business drivers to underpin the financials. This provides numerous benefits including: more explainable plans, better depth of variance analysis down to comparing volumes, rates, prices, FTE’s etc.
  • Automate the checking of consistency across plans – where a change takes place in one plan, processes should highlight inconsistencies in other plans.

To find out how your finance processes compare against leading practice and to gain insight on how to improve, log on to access the Finance Improvement Toolkit – the EPM maturity benchmark tool.

If you are interested then click here to request access to the EPM process analyser and one of our finance principals will be in contact with you to explain how it works and provide username and password.