Planning, Budgeting and Forecasting

Profitability and optimized performance pressure from top management are driving CFOs and Finance executives to develop and maintain effective financial planning and analysis skills. It also means going beyond the numbers by bringing the voice of the customer into the spectrum.

To deliver exemplary financial planning and analysis results, you must have clear understanding of the current business financial and conduct (customer and employee perceptions) standing, compare critical KPI metrics to competitors, analyze the industry to identify value factors and trends that can yield profitability and differentiate your company from competitors coupled with the optimization of client satisfaction, and utilizing the most effective budget model for your business.

For example, your business may use a historical budget model coupled with variance analysis, trends analysis and CRM deals tracking (revenue forecasting). However, for more efficient results, you should also analyze risks (create and maintain an annual risk management plan), make savings as an expense (automate savings for your business), collaborate with HR to assess and properly plan for hires, include an emergency reserve budget for unexpected expenses in your budget, and ensure you have a strong inventory management process.

The 3 most important KPIs in finance are: costs, staff productivity and process efficiency. These should be compared to industry and competitors to realize opportunities for improvement. It is also important to be aware of the costs associated with the staff that handles financial planning, budgeting and forecasting. Some measures of performance that should be tracked to assess costs should be cost per invoice, process cycle time, average receivable days (DSO), lead time, percentage cost to perform the function process as a percentage of total finance process cost, et cetera. These measures of performance should also be benchmarked.

Top management must lead the change in the finance department if they seek to yield optimized productivity and profitability. Effective leaders “walk the talk.” They communicate the changes in strategy and company mission daily to employees and encourage critical KPIs to be visual and periodically reported.

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