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Financial Pulse: A Newer, Nimbler Five Year Financial Planning Process

Adaptive Planning Five Year Financial Plan New Breed of CFOs Russ Banham Steve PlayerIf you believe that a new breed of CFOs are taking the financial lead at today’s fastest growing, most innovative companies, the next logical step would be to figure out how this new breed will change traditional corporate finance processes.

Russ Banham may have given us one answer. In his article in late August – New Strategies Around Strategy – the contributing editor and prolific author detailed the elements of a “five-year plan 2.0,” if you will. It’s a new way of creating the traditional five-year financial plan that has been become a staple of business. Here’s a portion of what Banham had to say:

“Most every company performs the ritual, consuming count­less hours of management time in the process, as if predicting the tortuous turns of markets, tech­nologies, political machi­nations and consumer preferences were a simple affair. The financial crisis and subsequent recession turned these efforts on their head, rendering almost every five-year plan into worthless scraps of paper.”

Banham interviewed financial planning and forecasting experts Ken Esch, a partner in PricewaterhouseCooper’s (PwC) private company service practice, and Steve Player, North America program director for the Beyond Budget­ing Round Table, both of whom explained that the key to the modern five-year planning is keeping those plans flexible and nimble.

“You plan for what you think will happen, but then constantly subject the plan to scenario tests based on your changing assumptions,” Player said.

“Companies that have been around for a while already have a repository of historical data indicat­ing what happened to the business the last time the economic cycle shifted or some unforeseen event occurred,” Esch added. “Perhaps one part of the business suffered, but another part performed even better. That tells you something about where to allocate resources.”

Considering the massive amounts of data that businesses accumulate today, deriving key insight out of historical data is easier said than done. The challenges organizations face in efficiently mining through historical data give credence to the type of end-user revolt and need for agile BI that Paul Turner discussed last month.

Tech industry expert and author Brian Sommer has already declared that cloud financial software has crossed the chasm and gained mainstream acceptance among today’s businesses. And as TDWI reported earlier this year, many companies are already turning to cloud-based visual analytics solutions in order to share newfound corporate insight across departments in an easy-to-understand, visual format.

Now cloud CPM & BI software is turning the five-year plan on its head. See what thousands of companies and organizations are doing to be more agile and nimble in today’s dynamic market.

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