Place your bets!
The financial planning process comes around every year. It’s often a handy copy-and-paste exercise from the previous plan, fine-tuned to reflect the times. And no-one is fazed that it’s so useless! What can you do so that it turns out exactly how it should be? In other words, a genuine decision-making tool.
Unpredictable events make your financial planning look like a game of Russian roulette and of only limited interest. But it’s also because of the rigid nature of the exercise. This is at least one factor you can influence, drawing on Agile methods in particular:
- Design your plan according to the needs of your customers: you will then avoid falling into the trap of looking for too much detail when allocating resources.
- Review your plan as the year progresses: three times annually seems to be about the right frequency. Adjust it and re-allocate resources so they dovetail with new requirements and trends.
- Instead of starting from the previous year’s objectives and internal data, base your plan on market data. This will also help you keep the lid on internal political games where each department does its utmost to secure the best possible budget.
- Press artificial intelligence into service: you will speed up and increase your precision.
Some companies have completely given up their annual financial planning process, and prefer to rely on rolling forecasts!
To go further
“Dynamic financial planning for a volatile world”
by Michael Heric, Steve Beam and Anup Juneja ; Bain & Company (July 7 2022).
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