Workday Adaptive Planning

FP&A Done Right: The Role of KPIs in Driver-Based Budgets

February 12, 2021 by Revelwood Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning, on why finance teams should focus on KPIs and business drivers.

Gone are the days when business leaders were narrowly focused on just the net cash flow or balance sheet. Modern finance pros are asked to track not only a lengthy list of metrics, but also KPIs beyond the traditional finance arena. The old adage is, “You get what you measure.” When managers are held accountable for attaining or exceeding KPI targets defined by the executive team, their actions and decisions become aligned to the executives’ strategy.

Why the focus on KPIs and business drivers? Well, more leaders are realizing that to stay competitive and agile, their formulated strategies need to be managed and executed and that traditional budgets are no longer cutting it. Creating detailed, upfront financial projections for the next year and allocating budgets and planning inventory to cost centers no longer makes sense in today’s rapidly changing business environment. Instead, staying nimble and strategically savvy means embracing active planning and driver-based budgets. These driver-based budgets are categorized by:

Budgeting and planning in smaller batches with horizon-adjusted precision
Allocating resources in a fast and flexible manner
Tying budgets and planning inventory to outcomes rather than cost centers

Identify the KPIs that drive your financial results

Most organizations have a company-wide set of standardized and consistent metrics they track. But what are the KPIs that truly impact the company’s financial performance?

The answer will vary from industry to industry and company to company, but identifying the right drivers means considering the entire operational arc of the business. For instance, you might have drivers from:

Pipeline or funnel: prospective customer leads, first meetings, opportunities, sales generated pipeline, add-on revenue, channel sourced pipeline
Sales: total customers, ramped representatives, average revenue per deal, current quarter pipeline, new logos, future quarter pipeline
Customer success: customer satisfaction score, at-risk customer retention, cancellations, billable hours, time to value, average hold time
Finance: manufacturing costs, freight and distribution, free net cash flow, revenue per headcount, cost per headcount
Marketing: website visits, event attendees, new vs. returning leads, social followers, database size, earned media

Shift the conversation

“Did you hit your numbers?” That’s a question anyone who’s worked in a static planning environment has probably encountered. But with a driver-based budget and active planning, the psychology around targets actually shifts. Instead of thinking in operational silos and individual or department wins, the conversation becomes more integrated thinking about end-to-end business processes across the silos. Rather than hitting a static target, people are working to make sure certain drivers are meeting or exceeding expectations, to help fuel future success and growth at the organization.

Sometimes, that subtle but powerful shift can be hard for executives to wrap their heads around. But once the C-suite is sold on driver-based budgeting, the results usually speak for themselves. And many execs find that the forward-looking approach of driver-based budgets and KPIs actually aligns better with how they operate: with an eye toward the future, rather than toward the past.

Stop forecasting to the end of year

With an annual plan or budget, fiscal year end Dec. 31 is the end line. But business doesn’t actually come screeching to a halt at the end of the fiscal calendar year, and all of the effort required to put together an annual budget can be so onerous and complicated that it might take months in advance to assemble. That means some teams are racing toward an artificial deadline with little to no visibility into what the budget will bring even a few months into the future. Sounds like a nightmare, right?

We’re not arguing to do away with the annual plan. But with a driver-based approach, it’s easier to also create a rolling financial forecast—a roadmap for the next quarter or six months or 12 months, no matter what point you’re at in the fiscal calendar. Creating a rolling financial forecast isn’t nearly as time-intensive or intimidating as you might think when you have the input variables and parameter supported by an automated system. Because this forecasting happens more frequently and because it’s based on drivers and KPIs—rather than every single granular data point at the finance team’s fingertips—a rolling financial forecast can be both quick and sophisticated.

Are you ready to dramatically increase the agility, alignment, and accuracy of your company’s budget? It starts with shaking free of the status quo—static planning, traditional budgets, myriad metrics—and focusing on the business drivers and KPIs that will actually shape the future financial performance.

This blog post was originally published on the Workday Adaptive Planning blog and appeared here.

Check out more FP&A Done Right posts here:

FP&A Done Right: Predictions of “Extraordinary” Growth This Year

FP&A Done Right: Collaborate More When Planning

FP&A Done Right: Achieve More Reliable Financial Forecasting

FP&A Done Right: xP&A and Modern Finance Planning

January 15, 2021 by Revelwood Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning, written by Matt Shore. Shore, vice president and product strategist, explains xP&A and why it matters.

xP&A stands for extended planning and analysis—taking the best of modern finance planning and extending it across the enterprise. But it’s not new. For years, it has been known as company-wide planning.

Finance leaders whose organizations have been made more agile and strategic with modern planning and analysis have known for years that their approach to planning can transform other parts of the business. Now, as they work to recover from the global COVID-19 pandemic, that awareness is more valuable than ever.

Growing recognition around expanding the use of FP&A best practices beyond finance recently earned an industry imprimatur from Gartner, whose 2020 Strategic Roadmap for Cloud Financial Planning and Analysis Solutions report said, “By 2024, 70% of new financial planning and analysis projects will become extended planning and analysis (xP&A) projects, extending their scope beyond the finance domain into other areas of enterprise planning and analysis.”*

We agree that bringing continuous, comprehensive, and collaborative planning to every part of an enterprise has not only arrived, it’s ascendant.

We’ve been advocating the concept since back when we began working with customers to harness the platform and processes of modern planning from financial planning to sales, workforce, and operational planning. Our solutions for enterprise planning are defined by powerful automation, enterprise-class scalability, intelligent planning assisted by machine learning, always-on cloud availability, and award-winning ease of use.

These requirements have essentially served as design standards for planning solutions from Workday, where we’ve always believed that the promise of enterprise planning can only be realized by linking finance and operations in a holistic and seamless way.

Extended planning, orchestrated by finance

Finance is the natural steward of enterprise data, so it makes sense that finance should orchestrate company-wide planning. According to Gartner, “The office of finance is uniquely positioned to drive continuous company-wide financial planning and analysis (FP&A) initiatives. Finance’s connection to all other business domains means that these initiatives will be capable of driving higher-quality decisions and outcomes.”*

In fact, Gartner says, “By 2024, 50% of new financial planning and analysis implementations, upgrades and replacements will be sourced from core financials vendors, due to superior integration and product bundling.”*

This capability has never been more critical. For operations, where plans are generally refreshed more frequently and based on greater volumes of data, understanding the financial impact of every decision can ultimately mitigate the risk of executing those decisions. And seamless access to current operational data and actuals can also improve the confidence of the C-suite in the firm’s business projections. And these days, who doesn’t need a bit more confidence?

Company-wide planning done right: Meeting the needs of xP&A

Developing a solution for planning across the enterprise isn’t a small undertaking. It requires three fundamental capabilities.

A flexible and scalable modeling platform

Those who’ve built models with traditional planning software are accustomed to limits on dimensions, or they know too well the experience of waiting (and waiting) on results. To solve this, and to enable modeling at enterprise scale, we developed Elastic Hypercube Technology—our groundbreaking, patent-pending modeling engine that doesn’t force organizations to make compromises that slow insight or limit the number of scenarios a team can evaluate. For company-wide planning, this means creating models for virtually any kind of functional use. You can model and plan at the work-group level and then combine those plans into a comprehensive, holistic model of the business. It’s modeling for an xP&A world.

The ability to seamlessly plan-execute-analyze business processes

Planning isn’t done in a vacuum, particularly in an xP&A context. For true company-wide planning, plans must be integrated to gain a comprehensive view of the business. Our federated planning architecture enables each function or business unit to have its own planning instance while preserving the ability to bring all the pieces together into a holistic plan. With federated planning, a change to one plan automatically updates all related plans. This architecture also makes it easy to dovetail planning with the applications organizations use to execute those plans (such as financial management or human capital management solutions), and then analyze data and results to support faster, smarter decision-making. Company-wide planning also requires a single source for truth, with plans and applications sharing the same data across planning and execution, just as Workday applications do today. As Gartner notes, “Suite-based applications consume data from a single source and share the same metadata and master data. This means that overall company-wide financial reporting and governance is substantially enhanced.”*

Easy adoption and use

Traditional planning platforms are notoriously difficult to implement and use. This has kept them locked away in the office of finance, their complex environments all but dooming them to be used by just a handful of highly trained analysts. For xP&A to take root in the form of company-wide planning, it was necessary to recognize that in business, everybody plans. So planning has to be easy. Here’s just one way we’ve improved ease of use: Active dashboards, announced at Adaptive Live earlier this year, blend driver-based planning with interactive analytics to help users assess the impact of their changes in real time. And rich data access rules ensure administrators can be very specific about what data users can view or edit, making it that much easier to safely enable more stakeholders to be active participants in company-wide planning.

The journey to company-wide planning: xP&A in action

For most companies, the journey to company-wide planning begins in finance. Many companies, after seeing the success they’ve had there, expand planning to other departments like HR for workforce planning and sales for sales planning, with both plans linked back to the corporate model. This federated planning environment allows each entity and function to plan the way it needs to, but all plans are seamlessly connected to a holistic corporate plan. This helps create a more agile, competitive organization where decisions are made based on insight rather than instinct.

Customer surveys show that Workday Adaptive Planning customers are prime examples that company-wide planning is indeed the future. Demonstrating classic use cases for xP&A, they’ve extended their modern planning environment into areas as varied as inventory and shop floor space planning, sales rep ramp modeling, and product pricing planning. Many others are using our workforce planning solution to model their optimal workforce, and still more are relying on their planning environment to design a return-to-work strategy at a time of unprecedented disruption.

Take Rubrik, a rapidly growing global provider of cloud-based data management and protection solutions. Rubrik initially deployed Workday Adaptive Planning in finance to streamline budgeting and accelerate quarterly close. Building on that success and to achieve a more accurate and timely top-line plan, the company extended its use of Workday Adaptive Planning to sales finance and sales operations to automate bookings, improve seller capacity and productivity, and plan and manage territories and quotas.

Ajay Sabhlok, vice president of IT business applications at Rubrik, describes the company’s xP&A pivot to company-wide planning as a significant step forward.

“To automate planning in a comprehensive manner across the company,” says Sabhlok, “is setting the foundation for growth.”

In the end, that’s what company-wide planning is all about. In a world where the future is harder and harder to predict, agility is everything. As thousands of Workday customers already know and as many more throughout the industry are coming to realize, finance is showing the entire enterprise how to plan for what’s next. No matter what you call it—xP&A, company-wide planning, or something else—one thing is certain. This is the future of planning.

*Gartner, 2020 Strategic Roadmap for Cloud Financial Planning and Analysis Solutions, Robert Anderson, John Van Decker, 21 February 2020.

This blog post was originally published on the Workday Adaptive Planning blog.

FP&A Done Right: Rolling Forecasts for More Strategic FP&A

December 4, 2020 by Revelwood Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning, written by Bob Hansen. Hansen makes the case for dynamic planning, which is better suited for complexity.

When it comes to FP&A forecasting, most companies base their long-range forecasts on static planning processes, rather than more relevant, dynamic plans that reflect the complexities of the business.

Relying on a forecast that doesn’t enable continuous monitoring of company performance, instead of implementing a modern, rolling forecast approach, is like using an old-school road map to guide you on a cross-country trip: Why use a paper map when you can get to your destination worry-free with a car GPS system?

Rolling forecasts—forecasts that are updated typically on a quarterly or monthly basis—can be a game changer. Especially today, amid a global pandemic. They allow organizations to better align with their strategy, perform more-effective business analysis, and derive greater ongoing value from their budgeting and planning processes. Rolling forecasts make organizations nimbler, able to seize potential opportunities, or better prepared for upcoming roadblocks.

Rolling toward a more strategic focus for FP&A

There is an increasing expectation that strategic guidance—which can be generated through rolling forecasts—emanates from the FP&A team. A CFO Indicator report affirmed that need. The survey found that CFOs expect that time spent by the FP&A team on strategic tasks will double by 2020—growing from 11-25% today to 25-50%.

Furthermore, CFOs are looking for their teams to develop the technical and strategic capabilities that support executing approaches such as rolling forecasts. According to the CFO Indicator survey, if the FP&A team could improve only one skill, 29% of CFOs want that skill to be dashboard design and report building, 25% want it to be predictive analytics capabilities, and 19% want strategic modeling of what-if scenarios.

Fortunately, with the increasingly user-friendly experience of dashboard technology, the skills gap is narrowing, which allows more FP&A teams to start instituting rolling forecasts.

FP&A … so little time

So rolling forecasts are a no-brainer? In theory, yes. Yet the near-universal challenge lies in freeing up finance teams to move toward this new approach. There is a significant gap between what CFOs want their teams to be doing and how they actually spend their days. Often-cited research by APQC shows that only 40% of 130 finance executives from very large organizations rated their FP&A capabilities as effective.

Further, our research shows that 75% of CFOs want their teams to have a significant and strong impact on their organization, yet only 46% expect that their team will have that kind of impact this year. The chief reason continues to be a lack of time for strategic planning.

The clear benefits of rolling forecasts

Despite these time-crunch challenges, the benefits of getting to rolling forecasts are clear. The APQC survey showed that organizations that use rolling forecasts are better aligned with unfolding business strategy, are more effective at business analysis, derive greater value from their budgeting and planning processes, and have more reliable forecasts than those that do not use them. The survey revealed that 94% of businesses that use rolling forecasts described their business analysis as effective. Only 50% of those that do not use rolling forecasts described their analysis that way.

Finance leaders need to clearly promote the many benefits of rolling forecasts and how they can directly impact business results. For example, you can produce a cash flow forecast at the end of a rolling financial forecast process—resulting in a consolidated balance sheet and an accurate view of cash flow for the entire enterprise. Getting C-suite buy-in helps pave the way to get the resources and time needed to develop relevant and robust rolling forecasts.

Moving to rolling forecasts is possible at organizations that have executive support and invest in new, cloud-based finance software. These solutions offer easy-to-navigate dashboards and scores of time-saving hacks that can free finance pros from transactional busywork and allow them to focus on more strategic activities that improve business performance.

Like a state-of-the-art GPS, rolling forecasts can go a long way toward helping you get where you want to go—and position FP&A to be a driver of the business, not stuck in the back seat.

This blog post was originally published on the Workday Adaptive Planning blog and appeared here.

FP&A Done Right: Five Tips for Budgeting in the Age of COVID

November 13, 2020 by Revelwood Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning, written by Gary Cokins. Cokins explains why traditional budgeting is not a fit for the volatility, complexity and uncertain times businesses face today.

The pandemic is causing boards of directors and C-suite executives to take a new look at net cash flow. Traditional budgeting is simply too slow and too rigid to keep up with the rapidly changing business environment caused by COVID-19. There is too much volatility, complexity, and uncertainty right now.

Gone are the days when budgets could be one-and-done—tied to a fixed point in time and too inflexible to adjust to quickly changing business opportunities and challenges. In today’s world, a startup can be up and running and profitable in three months and disrupt its competitors. Consider Uber and Airbnb as examples. If your company takes nearly as long to create an annual budget, which is typically out-of-date a few months later, it will be extremely difficult to fight off the upstarts or keep up with your established competitors.

The solution? A flexible and continuous budgeting and forecasting process, often referred to as a rolling financial forecast, that helps you anticipate change and focus on outcomes rather than outputs and that is derived from the drivers to determine planned spending.

Here are five tips to modernize your budget process:

1. Just say no to one-and-done

Now more than ever, December’s fiscal year-end numbers often bear little resemblance to July’s realities—meaning budgets and forecasts must become more streamlined, accurate, and responsive. Annual budgeting won’t go away, but spending weeks and months processing data and reconciling spreadsheets that are out of date soon after the consolidated master budget is published doesn’t cut it anymore.

Modern budget solution:

Increase the frequency of budgets and forecasts to reflect shifting business conditions
Make decisions and plans based on data-backed insights rather than old and stale information
Change how resources, employees, and assets are allocated throughout the year and how the budget incorporates real-time opportunities and challenges

2. Focus on business drivers, not cost centers

Traditional budgeting focuses on allocating resources to cost centers, but business objectives (projects, products, and service lines) result from end-to-end cross-functional processes across the org chart. So if you determine the level of resources and spend based on forecast demand, then budgets and rolling forecasts can reflect performance that is company-wide rather than specific to a cost-center department.

Modern budget solution:

Enable organization-wide access to reports and data, allowing everyone to have visibility into the enterprise’s performance, including into individual departments
Review forecasts against budgets to eliminate confusion among competing departments
Provide real-time information for the needed insights to support better decision-making at all levels of the organization
Use drivers to determine the level of needed capacity (i.e., types and numbers of employees) to match your supply of capacity with demand

3. Create rolling financial forecasts

More than ever, fluctuating market conditions make accurate forecasts of future demand load (e.g., customer orders and sales) extremely challenging. Rolling financial forecasts help manage investments or financing determined by cash flow. They provide visibility into business performance using time horizons that reflect the speed of your business.

Modern budget solution:

Generate rolling financial forecasts that accommodate real-time shifts in market conditions
Enable self-service reporting so everyone in the organization can measure their performance against company-wide KPIs
Help everyone in the organization understand the downstream effects of their resource allocation decisions

4. Look forward, not back

Most budgets and forecasts are outdated before you push “publish” or soon after. And some factors are impossible to take into account (natural disasters, pandemics, broken supply chains, work stoppages). The rearview-mirror orientation of traditional budgeting (e.g., last year’s actuals create this year’s budgets) often results in increased “actuals” as managers exhibit “use-it-or-lose-it” behavior by spending needlessly to attain their prior fiscal year budget. Traditional budgets can’t keep up with the speed of modern business. One needs to look forward through the windshield.

Modern budget solution:

Respond faster to shifts in market conditions with real-time access to financials
Adjust outdated budgets and forecasts as change occurs
Move leadership discussions toward insight, planning, and action, rather than using the budget as a cost control mechanism to punish those with unfavorable cost variances

5. Use the right tools for the job

Creating a budget process that keeps up with the pace of today’s business requires a comprehensive, collaborative, and continuous planning platform—one that gives you robust, accessible reporting and modeling capabilities; dashboards with indicators and their targets that provide visibility into overall company performance; and automated tools that streamline budgeting and forecasting processes.

Modern budget solution:

Enable comprehensive planning that aligns the actions and priorities of everyone across the organization around common KPIs
Create opportunities for collaboration by giving everyone access to the data they need and deserve
Adjust and update budgets and forecasts on a continuous basis so you can navigate volatile market conditions in real time

Don’t let traditional budgeting lock you into outdated assumptions and fixed targets. Those outdated targets handcuff managers when the organization changes directions. Some managers view the fiscal year budget as a “contract” that they will not deviate from to minimize unfavorable variances from their allotted cost center budget expenses. This short-term focus jeopardizes the longer-term view. The modern FP&A professional knows the truth: Aligning budgets and rolling financial forecasts with comprehensive plans lays the groundwork for proactive rather than reactive planning—a significant strategic advantage in today’s highly competitive environment.

This blog post was originally published by Workday Adaptive Planning and appeared here.

Workday Adaptive Planning Tips & Tricks: CAPEX Planning – Your Tool for Growth

November 11, 2020 by Mary Luchs Leave a Comment

CAPEX (capital expenditures) planning is a key feature in Workday Adaptive Planning and gives the Office of Finance and senior executives greater visibility into the company’s financial risk, while also providing a tool for measuring corporate growth. Before we go into the specifics of CAPEX in Adaptive Planning, let’s take a step back and get an understanding of CAPEX.

Capital Expenditures: Overview

Capital expenditures are expenditures within a company that are not expensed on the income statement. They are considered to be investments into the company. Companies with higher capital expenditures are said to be investing more heavily into the future of their organizations.

CAPEX to Operating Cash Ratio

The CAPEX to operating cash ratio analyzes a company’s ability to acquire long term assets using cash flows. In other words, it indicates how much of a company’s cash flows is going towards capital expenditures. It is a great tool for measuring a company’s emphasis on growth. A higher CAPEX to operating cash ratio is an indicator of high growth in a company. A company whose ratio is too high could be taking on too much financial risk. While it is beneficial to invest in CAPEX, overspending in this area can compromise a company’s ability to pay off debts or cover other operating expenses. It is vital for the Office of Finance to have accurate, up to date visibility into CAPEX data in order to assess the company’s level of risk and make appropriate adjustments.

CAPEX and Depreciation

Depreciation is important to consider for asset management, especially for companies who are putting a lot of money towards their assets in the form of capital expenditures. A company must consider how their CAPEX depreciates when looking at their assets. This is a helpful tool to consider:

CAPEX > Depreciation → Growing assets

CAPEX < Depreciation → Shrinking assets

Accumulated depreciation of capital expenditures is indicated on the Balance Sheet, so it is important to consider how this impacts the net income of the company. Depreciation reduces the taxable income of a company, which is impactful especially for companies in a high growth phase who are investing heavily in capital. In addition to the CAPEX to operating cash ratio, depreciation can also be considered when analyzing a company’s growth.

Capex Planning in Workday Adaptive Planning

In addition to having a basic balance sheet and a P&L sheet, you should create a CAPEX sheet in Adaptive Planning. The CAPEX sheet offers a more specific look at capital expenditures than the balance sheet and the P&L sheet, allowing for more targeted analysis. Generating a CAPEX sheet also allows you to drill into expenses and depreciation for budgeting and forecasting purposes on a more granular level.

In conjunction with the balance sheet, the CAPEX sheet is important for budgeting cash and analyzing capital investments. In Adaptive Planning, the CAPEX model consists of calculated accounts in a modeled sheet. These calculated accounts include capital values and their coinciding depreciation accounts. Each modeled account is performing the same calculation based on the asset class selected by the user. Asset class is a text selector column based on the categories of capital expenditures that are specific to your business. Companies vary greatly in the ways that they calculate capital value and depreciation, but all businesses can benefit from CAPEX planning.

How to do CAPEX planning in Workday Adaptive Planning

Adding a CAPEX sheet to your Adaptive Planning implementation gives you a powerful tool for understanding the investments in your company. When you can analyze this data at a granular level, you can better assess if your company has too much financial risk, or if you are invested at an appropriate level.

The team at Revelwood has been recognized by Workday Adaptive Planning for our thought leadership in the space, commitment to our Workday Adaptive Planning practice, and our rapid achievements of milestones. Visit Revelwood’s Knowledge Center for our Workday Adaptive Planning Tips & Tricks or sign up here to get our Workday Adaptive Planning Tips & Tricks delivered directly to your inbox. Not sure where to start with Workday Adaptive Planning? Our team here at Revelwood can help! Contact us info@revelwood.com for more information.

Workday Adaptive Planning Tips & Tricks: Override Formulas in Sheets

November 4, 2020 by Michelle Song Leave a Comment

If you want to write a formula in an account in Workday Adaptive Planning, but still want to give your team the ability to override the formula and enter different data, you can use Shared Formulas to achieve that.

The Shared Formulas function of Adaptive Planning allows users to write level-specific and version-specific formulas for GL and custom accounts. Below is a screenshot of the Shared Formula page in Adaptive.

Workday Adaptive Planning: Override Formula

First, you will select the version, account, and levels that you want to write the formula. Then, you will write the formula in the “Set formula” box. Before you save the formula, you can choose to reserve/remove the user edits in the account if any. If you reserve the user edits, the formula will not override cells that already have data and only perform the formula in the cells that are blank on sheets.

Workday Adaptive Planning: How to override formulas in sheets

You can use the “Import Shared Formulas” function to import/update the formulas in multiple accounts and levels at a time.

Overrding formulas in Workday Adaptive Planning

Unlike Master Formulas, shared formula values are not locked in sheets. You can override the formula with different data directly in a sheet cell. In the example below, I overridden the formula for account 1110 Petty Cash in Mar 2019 with a different number.

Workday Adaptive Planning Tips: Override Formulas in Sheets

Workday Adaptive Planning Tricks: Override formulas in sheets

FP&A Done Right: To Recover from Economic Shock, Are CFOs Envisioning Enough Scenarios?

October 16, 2020 by Revelwood Leave a Comment

This is a guest blog post from our partner Adaptive Insights, written by Bob Hansen. Hansen explains the why scenario modeling is imperative when facing disruption.

Three out of four finance executives recently acknowledged that the planning processes their companies have in place do not equip them to respond quickly to major economic and geopolitical disruption.

Published in November of last year, the survey results could hardly have been more timely. Just a few weeks later, a virus would emerge in Wuhan, China, that would touch off a global pandemic, sending shocks through virtually every business.

Few could possibly have predicted how this event could have sent recently minted plans and forecasts for 2020 into trash bins everywhere. But even before the SARS-CoV-2 outbreak, CFOs and other execs were keenly aware that business conditions were unpredictable. They were equally aware of the hurdles keeping them from the adaptability and agility needed to outmaneuver and pivot around unforeseen obstacles. The same 75% of survey respondents who said their planning processes left them vulnerable also reported that outdated legacy planning systems, siloed planning processes with limited collaboration, and a lack of relevant workforce skills were keeping them from embracing the one thing their business needed to weather the storms of disruption: agility.

If ever there was a time to marshal all the tools and technology available to help organizations meet the needs of persistent, significant change, that time is now. And as businesses figure out how to recover from the initial shocks brought by the pandemic, gaining a clearer picture of what the future could hold may well be priceless.

CFOs have known this all along

A look back shows that finance executives have long recognized the importance of agility—and the need to plan for the unexpected. A 2016 global survey found that 67% of CFOs respondents said they were concerned about economic uncertainty in their region. Those worries turned out to be prescient. Soon would come tumultuous trade wars and other global impacts, culminating eventually in an unprecedented global pandemic impacting public health, transportation, critical supply chains, and more.

Indeed, forces like digital transformation, automation, and globalization have made agility a business imperative. Though change is a constant, it continues to accelerate.

Now, with so much uncertainty in front of us, agility is more important than ever.

Scenario planning: The reality check every business needs

Back in 2016, CFOs were asked how they could add the most strategic value when managing through an economic or business contraction. Nearly half (48%) said planning for multiple scenarios could help reduce risk by allowing their organizations to respond and course-correct when conditions change.

Since then, scenario planning has become an even more critical capability for finance and beyond. For businesses, it’s helpful to understand that scenario planning isn’t about modeling the likely effects of a specific disruption, such as a pandemic. Why? Because a disrupted supply chain could result from any number of causes: a natural disaster, a fuel crisis, a regional currency crash, political unrest, a pandemic—the list is virtually endless. So it’s important to instead build scenarios based on the likely impacts and model around those. Running what-if scenarios involving possibilities like cost cutting or changes in demand helps to prepare a series of contingency plans to address the financial, operational, and cash flow impacts that could result from specific disruptions.

And companies are doing this now more than ever before. For example, one higher education institution is running scenarios around the loss of room and board revenue, the possibility of fewer returning students, and the expenses associated with remote online learning. Another example is a healthcare organization that has used multidimensional, driver-based modeling capabilities to make course corrections while managing changes in patient volumes, increased government regulations, and a decline in insurance reimbursement.

Regardless of the industry or use case, multiple scenario planning empowers organizations to isolate their drivers, model according to how those drivers might be impacted, and sharpen their foresight to know what their future selves might need to do. It’s a reality check for a reality that hasn’t yet happened.

Scenario planning beyond the bottom line

How are these companies able to conjure up a crystal ball and peer into a mix of their possible futures? They do it through active planning.

Unlike its manual, siloed, episodic, static predecessor, active planning is comprehensive, continuous, and collaborative. Active planning processes are fueled by real-time data, powerful automation, and advanced technologies like machine learning to help planners throughout the business model what-if scenarios with virtually no limits—while iterating multiple scenarios rapidly to identify the most likely outcomes and most effective actions. The most advanced platforms even help you identify erroneous predictions, so you can have more confidence in the scenarios you model. Meanwhile, monitoring results helps you to identify trends and patterns that could further refine your scenario model.

By incorporating financial and nonfinancial inputs that might be impacted by economic disruptions into your active planning model, you can draw more parallels between drivers and better understand how one affects the other. Your responding game plan will also be more comprehensive, encompassing multiple departments for swifter execution and more precise pivots. This includes financial, workforce, and salesplanning.

Are you exploring enough what-ifs?

The right platform will allow CFOs and their teams to model any number of scenarios—and modeling enough of them could mean the difference between success and failure. Just be sure these scenarios are anchored around your key business drivers so that you avoid wandering off into low-value explorations that tie up valuable resources to game out extremely unlikely events.

But do assess a wide range of outcomes, including best case, worst case, and most likely. Generating a 360-degree view of potential outcomes helps you and your organizational leaders make better decisions. And developing strong internal communications to distribute and disseminate scenarios quickly and with the right people allows you to stay on top of changing conditions and quickly shift gears.

To jump-start the what-if scenario modeling process, ask questions that will help you fully explore the possibilities of a business interruption, price war, revenue slide, or any other scenario worth planning for:

What do financial hits like deferred revenue or default payments do to revenue forecasts? How will they affect demand planning for things like potential location closures or inventory imbalances?
How will you balance your short-term workforce needs against the long-term needs of the business?
Is there a shortage of a certain skill set that’s currently high in demand and lacking in your area? How can you source people with those skills?
What if you forgo hiring until the next quarter or even the quarter after that?
What happens if you need to reduce employee pay or staff levels?
How will you adjust your goals or quotes, and what does the ripple effect of that look like throughout the sales department?
What if your sales pipeline freezes or shrinks?
How can you adjust for potential reduction of sales resources, and how will that impact bookings, productivity, and costs?
How will seasonality affect already disrupted cash flow?

You’re not a fortuneteller, but you can be better prepared

You may not be able to predict the next pandemic, the next recession, or the latest technological advancement that sends shockwaves through your industry. But if you model enough of the most critical what-if scenarios, you can meet disruption with agility. And that may be the most valuable outcome of all.

This blog post was originally published by Adaptive Insights.

FP&A Done Right: How CFOs Can Lead in Today’s Challenging Environment

September 11, 2020 by Revelwood Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning, written by Steve Dunne. It is the second in a series looking at macro trends in the economy. This post explains how the CFO can play a strategic role in today’s uncertain business environment.

Even before the COVID-19 pandemic, businesses were facing a plethora of social, economic, and technological challenges, as discussed in the first article of this series. Yet change and uncertainty—while sometimes painful—can create new opportunities, as long as people and organizations have the agility to leverage change for the better.

This is particularly true for the finance function. CFOs must be prepared for both short-term and long-term uncertainty to fully understand and mitigate risk for their organization. This requires a fundamental shift: To become the strategic guide the business needs, finance leaders and their teams must embrace and accept continuous change as part of the new normal.

But how? Below are five key areas for finance leaders to explore in order to guide their businesses through persistent change.

Planning, Liquidity, and Risk Management Are Key to Finance Agility

During uncertain times, it’s difficult to forecast specific revenue and expense targets with any degree of accuracy. Businesses must be able to model rapidly changing conditions, and this demands organizational agility. Uncertainty heightens the need for more dynamic business planning based on a range of scenarios rather than traditional quarterly or annual planning cycles.

Having the ability to conduct more dynamic business planning means organizations can respond to changes and course correct to better understand the impact on top-line revenue and bottom-line expenses. For example, are customers paying on time? What are the implications of a percentage of those customers not settling invoices? Which supplier contracts need to be renegotiated based on changes in demand?

Discussing her own experience of business planning during COVID-19, Workday Senior Director of Corporate Finance Kinnari Desai says, “We were able to leverage actuals data from Workday Financial Management into our forecasts. This enabled us to see the resulting impact on the P&L and cash flow right away. All in all, we were able to speed up the process and operate 50% faster versus using spreadsheets.”

Similarly, during tough times finance functions are also well placed to help business leaders forecast cash and liquidity and identify risks with greater speed and accuracy. Many organizations have multiple sources of cash and creating a complete picture of their overall cash position and liquidity can be challenging without the right tools.

Keep Stakeholders Informed and Aligned with Key Insights

The need to make insights more accessible across an organization is heightened during times of uncertainty, and it doesn’t help when data is trapped in departmental silos or locked away in different tools and requiring time-consuming integrations. Workday research shows that over half of respondents we surveyed believe access to data within their organization is somewhat accessible but remains outdated and siloed within functional teams.

Businesses should have access to financial, workforce, and operational data together, as a single source, to answer fundamental stakeholder questions. Other C-suite leaders are increasingly looking for deeper insights from a wider range of data sources to help them make better decisions. For finance, this means having the ability to share credible insights with the wider business and, more importantly, encouraging these stakeholders to take action based on this data.

For example, finance needs to provide the business with better insights into working capital to better understand minimum cash and liquidity requirements. While the primary focus for most companies is on growing the top line while carefully managing the bottom line, this can lead businesses to take for granted routine but critical back-office activities, such as paying bills and turning receivables into cash.

Thomas Willman, principal, finance advisory global practice leader at The Hackett Group, told me, “Finance organizations must take advantage of opportunities to extend payables while still taking care of their most strategic suppliers. They must also share these insights with the wider business. It will be imperative for CFOs to put a sound plan in place to preserve cash and liberate cash that is tied up in working capital.”

Similarly, executives are looking for insights from finance on how they should manage investor expectations during periods of persistent change. This includes thoughtful and proactive communication and risk mitigation planning in advance of regularly scheduled earnings reports.

CFO Efficacy: Report from Any Location

The COVID-19 outbreak changed the rules completely in terms of how and where businesses operate. With employees now working from home, many finance functions had to consider new ways to keep delivering critical services, such as closing the books. This raised questions for finance leaders around the processes and controls required to support a remote close and the risks associated with performing “finance-as-usual” tasks outside the walls of the business.

The need for finance to embrace more efficient, dynamic ways of working pre-dates the global pandemic, yet it is now proving to be a significant catalyst for transformation. For finance, that means embracing automation and emerging technologies, such as machine learning, that can be applied to key processes. CFOs have long since been looking to reduce the time spent on processes such as closes, consolidations, reporting, and payroll—what’s happened in 2020 has now made this an imperative.

The Hackett Group’s Willman explains, “Finance has had to transform in so many ways in 2020. What hasn’t changed is that all of this work still has to be done; what has changed is that it has to be done away from the office. Finance professionals are exploring things such as machine learning and how it can identify patterns and make recommendations that previously would have required manual intervention.”

In addition, compliance and audit don’t suddenly stop during times of crises. Finance is still required to provide effective controls to enable auditing—even if it has to be done remotely. When discussing the company’s remote close, Philippa Lawrence, chief accounting officer at Workday, says, “We asked our internal audit team to review some of the more important and impactful controls to confirm they were operating as they should. Financial controls need to operate the same remotely as they would during any quarter-end close.”

Understand Skills and Opportunity for the Future of Finance

More than half of respondents to a global Workday survey said they planned to reskill at least 50% of their workforce by 2024 to contend with the changing world of work. Today, how will the plethora of macro-challenges to global business further intensify this conversation? How will the emergence of machine learning and other data-driven technologies influence how business leaders—including the CFO—reskill or upskill talent for their organization?

We are at the crossroads of a technology and people transformation. Finance has traditionally been stuck in the role of gatekeeper, intrinsically bound to manual transaction processing and tied to systems that prevent it from becoming a strategic guide to the business. Now, with the global appetite for automation and the technological capability in place, finance should seek to transform.

And this should be viewed as an opportunity for finance, rather than a threat from the rise of the robots, as long as AI is used in a way that continues to put people first. A poll of 375 executives by MIT Technology Review Insights revealed that “pandemic preparedness will speed up AI deployment and accelerate the pace of AI innovation in high-risk job categories, causing both ‘job-positive’ and ‘job-negative’ effects.”

Finance is well-placed to cast aside legacy technology challenges and develop the skills of its existing workforce to benefit from emerging technologies. Now may be the optimal time to drive this transformation.

Collaborate and Communicate to Build Trust and Integrity

According to Deloitte, in the article “COVID-19: Maintaining Customer Loyalty and Trust During Times of Uncertainty,” consumers—whether purchasing for themselves or for their organization—increasingly want to buy from companies that demonstrate integrity in how they treat their employees, their customers, and the environment. These consumers seek trust, honesty, transparency, equality, and a better overall experience.

Blake Morgan, author and customer experience futurist, wrote in Forbes, “An amazing customer experience is one of the biggest competitive advantages a company can have. Instead of competing on price, more than two-thirds of companies now compete mostly on the basis of customer experience.” And, based on Edelman’s analysis of stock prices in 2018, high-trust companies beat the rest of their sector by 5% on average.

For businesses, this is often about making bold internal changes and committing to operating differently. It’s about being open and transparent, as well as being able to pivot and adapt to meet customers’ changing needs. Finance has its own part in this journey toward trust and transparency by delivering real-time data from a variety of sources and delivering these insights to the rest of the organization to drive collaboration and better decision-making.

Large businesses are being asked by stakeholders to stop merely promising to put purpose over profit, and instead make trust an organic value ingrained within their organization. This requires the right technology and processes to enable these businesses to track and analyze the data, then deliver it — whether financial, legal, or compliance—to key constituents in order to be held accountable.

Focusing on the right areas will be absolutely key for finance leaders as the world starts to spin again. Making agility a priority, while arming the organization with the right insights to make better decisions and understanding how finance will deliver what the business needs — potentially from any location — will also be paramount. All of these factors exist alongside a heightened need for brand trust and transparency — something which the finance function will play a key role in delivering.

This blog post was originally published by Workday Adaptive Planning and appeared here.

FP&A Done Right: 3 Steps to Help you Plan for What’s Coming

August 21, 2020 by Revelwood Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning, written by Bob Hansen. Read it to learn why static planning no longer works and how to make your business agile.

Throughout the world, businesses of every size are feeling firsthand the impacts of instability. In a time of uncertainty, surviving and thriving comes down to how promptly your business can identify disruptive changes and proactively respond to them.

That’s not so easy when your business is mired in static planning—characterized by long planning cycles, immediately obsolete plans, siloed efforts, and hard-to-find errors. Manual, spreadsheet-based planning, budgeting, and forecasting may have worked well enough in a more predictable age. But as we’re discovering that age is long gone.

Even traditional market forces have proven challenging. Technological advances, ever-increasing customer expectations, and smarter, data-driven decision-making put pressure on finance teams to find new ways to operate with agility.

But how do you plan in a way that allows you to respond to such events, from the predictable to the unlikely?

The answer begins — and ends — with active planning.

Why static planning is a disadvantage

The static, traditional planning models finance teams relied on for decades aren’t just a questionable choice in times of disruption—they can leave your business at a grave disadvantage. Businesses hampered by outdated planning processes are often left scrambling to react to changes while more agile competitors outpace, outperform, and outmaneuver them. Look around you: The companies that are performing well at this minute have pivoted—sometimes substantially—in a matter of weeks, sometimes days. Their business agility has become their defining attribute for success.

It’s safe to conclude that many of these agile businesses aren’t weighed down by manual, episodic, and siloed planning. Rather, they’ve likely embraced a more modern approach to planning—planning that’s collaborative, comprehensive, and continuous. These businesses consistently minimize risk, maximize performance, and create competitive advantages because their planning empowers greater business agility.

The difference between static and modern—or active—planning can be stark. Legacy planning tools are typically bogged down by versioning headaches and siloed, instantly perishable data. In contrast, active planning models allow teams to broaden planning data beyond finance, pulling in real-time operational and transactional data from ERP, HCM, and other slices of the enterprise stack—all to make better, data-driven decisions quickly.

Laying the groundwork for business agility

As many companies recognized even before the current crisis, agility is a business imperative—and this more modern approach to planning is the key to achieving it. These three milestones will get you started on your journey to achieving an active planning model.

I. Assess the status quo

Before you map out where you’re going, you need to understand where you are. Take inventory of the current state of your company, more specifically the business planning obstacles keeping you from implementing a more modern and streamlined planning environment. More than likely, these obstacles will pertain to people, processes, or technology, or some combination thereof.

Assessing where you are means getting granular.

What do your current business planning processes look like?
How long does it take you to create a budget? A forecast? An annual plan?
Where are opportunities for improvement?
Who are your planning stakeholders?
What technology do you have in place, and how well is it serving you?
What data challenges need attention?
What are the bottlenecks?
What could be automated that isn’t?
Are there any opportunities for automated data integration?
What are you lacking in workforce planning?

Answering questions like these will help you get a clear sense of what you’re working with and where you can improve.

II. Get organizational alignment

Being a change agent is no easy task. That’s why you’ll need to recruit a savvy senior-level advocate to help champion active planning as a worthy and necessary cause. Along with your senior advisor, you’ll need a task force representative of other departments outside of finance, including operations, sales, and HR. Don’t forget to include IT to help you navigate technology needs and coordinate various data sources.

The next move is to align these key people with the business agility cause you’re championing.

How? Build a business case.

You can do this by quantifying the impact that the organization’s current status quo has on the company. What are manual processes and bottlenecks costing your business in time and money? What opportunities are passing you by? Conversely, what would those measurement strategies and KPI models look like if you implemented an active planning model? Try to unearth more nuanced ROI measures—for instance, how cutting budget time in half could give your people more time to run critical what-if scenarios—to really drive home the meaningful change that a modern agility planning model would bring.

Once your team is in place and your pain points recognized and quantified, you can map out a plan for your initial project. Consider focusing your initial effort on a function within finance so you’ll have control over the rollout. Develop a multi-phased plan that clearly communicates goals (both for implementing active planning and for this inaugural project), a concise and actionable plan, and the key metrics for your KPI model. The ability to effectively communicate the why behind this initiative will help secure any executive buy-in you need for the how. A comprehensive and well-thought out plan will go a long way toward achieving that.

III. Expand across the business

As noted above, there’s a strong case for beginning the rollout of your active planning model in finance and focusing on low-hanging fruit to bring early and easy wins. You’re motoring along, mapping projects, tracking and communicating progress, analyzing KPI reports, and making necessary tweaks. Once a rhythm and familiarity are in place, broaden your scope beyond finance. Initiate planning projects that engage HR, sales, or marketing. This is where you begin to extend the use and impact of active planning company wide.

The key in this phase is to strengthen cross-departmental communication and collaboration. Don’t fall into the trap of relying on your technology or tools to do the heavy lifting. It will be easier to realize and maintain success with regular stakeholder one-on-ones, identifying lessons learned along the way, uncovering opportunities for more ingenuity and improvement, and communicating success and congratulations when they’re warranted.

Doing this will help elevate the role of finance to a strategic force within your organization by orchestrating planning throughout the business. Finance will no longer be known primarily for gathering budget numbers and issuing reports. Instead, your business will look to finance to drive the change and innovation needed to not only weather times of uncertainty, but to thrive in them.

Map your way forward

These three pillars lay the groundwork for creating a more agile planning environment—one that will help you plan for what’s coming, whatever that may be. But since it’s merely a foundation, you’ll want to build on it. Stay tuned for additional insights that can help you derive even greater value from your modern planning environment.

Because the only thing certain about the future is that it will reward business agility. With this foundation and the insights we’ll share in subsequent blogs, you’ll be much better equipped to map your way forward into that tomorrow.

This blog post was originally published by Adaptive Insights and appeared on the Adaptive Insights blog.

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