CFOs who lead transformation efforts need to build resilient, long-term strategies, and EBP unites different functions to help make better decisions, according to Deloitte.
Business planning was undoubtedly disrupted due to the pandemic, and this has put significant pressure on CFOs’ ability to make savvy financial decisions for their organizations. They should be eyeing enterprise business planning, an integrated planning model that unites the finance, operation, commercial and marketing functions to help make better decisions that create tangible business value, according to Deloitte.
Many don’t know where to start, or how to build a robust plan that accounts for the disruptive global marketplace, the firm said. In today’s world, traditional planning models are too slow, too opaque and too error-prone, the firm said, and CFOs who often lead transformation efforts have a crucial role to play in fixing these deficiencies.
The elements of EBP
EBP offers five benefits that increase agility and, ultimately, profitability, according to Deloitte:
Speed: Integrated people, processes and data – available instantly – allow for real-time planning cycles.
Transparency: By breaking down silos, planning activities can better enable accountability and foster better decisions.
Accuracy: EBP ensures all planners work off the same data source, supplemented by digital technologies to reduce human bias.
Alignment: CFOs and others responsible for operational performance can better anticipate market changes and align their decisions to business objectives.
Efficiency: EBP’s ability to automate or eliminate many manual planning activities saves time and resources.
EBP is not an entirely new concept, but the key idea now is the ability to connect disparate systems and gain insight from real-time data, according to Tadd Morganti, business finance and analytics practice leader at Deloitte.
“Companies have always–from the beginning of time–tried to best line up what they plan on selling and how to market it and the expense they’ll spend with inventory they need to build and thus, raw materials and factory capacity with their end-to-end financial plan,” he said.
But the challenge is data is often stale and provides views that are days old and not reflective of changes as they happen, he said. This would better ensure manufacturers have the right inventory levels throughout the year.
“By nature, the supply chain is working off stale data, then by default, the whole thing is pulled together into a stale financial plan,” Morganti said.
Now, with the advent of some very familiar technologies and real-time data available in the cloud, organizations can link data from one system to another to connect everything, which is EBP in a nutshell, he said. This gives them the entire connected planning process from sales to manufacturing and to product, marketing and finance, Morganti said.
“What we’re finding is companies for the first time are saying, ‘I want to change my processes and use cloud-based technologies that are cheaper for memory and processing … because if I do I can have very significant financial results.’ ”
If even minor changes to a product mix, bundling or pricing are made, with EBP those changes can trickle into the supply chain and the people who deal with manufacturing can look at inventory levels to ensure they have what is needed for production changes.
“One of the big costs for companies is having a lot of inventory on hand, which sucks up a lot of capital,” Morganti said. “Now, companies can better predict final sales and lower their working capital by allowing supply chains and manufacturers to have the latest sales and promotion plan and what they need to produce.”
When plans are adjusted in real time, there is a single source of truth so the various planning functions are using the same data sets, he said.
A shift in tooling
It is important to have a homogenous tool that provides real-time data, Morganti said. Historically, groups worked in silos and when they had to share data they’d share summarized data from a point in time, he said.
There are now a variety of planning tools like Anaplan, for example, which cuts across horizontally, instead of vertically, for individual systems. Bigger vendors, including SAP and Oracle, have replatformed tools developed for finance organizations that they are marketing as horizontally focused, he said.
This enables forecasts to be much more accurate so inventory levels can be adjusted, which lowers working capital.
Little changes add up, Morganti said. While the technology has been architected to work horizontally, organizations also need in-memory real-time data that disparate groups can use, he said. “Horizontal alone doesn’t solve the problem.”
Deloitte’s finance practice is spending half of its time working with clients on EBP, Morganti said. “For us, it’s a seismic shift. It’s one of the biggest topics of discussion with clients in the finance space.”