One of the many lessons that the COVID pandemic has taught organizations is just how quickly business conditions can change. The financial planning that organizations prepared at the beginning of 2020 had to be adapted just a few months later. As a result, many organizations had to increase the frequency of their planning, as well as touch base with leadership more often than in the years before. Now, organizations are embracing continuous financial planning as a best practice for the future.
Continuous Financial Planning vs. Annual Planning
While annual planning traditionally means meeting once per year to establish a budget, devise a financial strategy and forecast goals for the year, continuous planning is the act of meeting multiple times per year to evaluate the effectiveness of these initiatives. This type of financial planning was crucial during 2020 due to how quickly business and economic conditions changed throughout the year. And though it might have been a big adjustment at first, many organizations have indicated that they intend to implement the continuous planning style going forward. With this approach, an organization has greater flexibility, leadership is more actively engaged throughout the year, and it allows for a more long-term growth focus. Engaging in short planning cycles throughout the year (versus once per year to cover a longer time period) allows for a more holistic mindset and adaptive approach. While departments might have been focusing primarily one year ahead and looking at long-term three and five-year goals without anticipating a lot of changes year over year, they now think more tactically quarter-to-quarter and anticipate various scenarios when looking forward a year or more to make better investments to reach that future.
Steps to Enable Continuous Financial Planning
As organizations go forward this year, rather than taking the same forced approach to continuous planning experienced in 2020, they must focus on a more beneficial way to support this planning style with a few key elements.
Accurate, real-time data
If leadership is reviewing organizational performance and making decisions more frequently, it is crucial that the data they’re working with is clean, timely and accurate. When accounting works primarily with spreadsheets, data can become siloed and manual mistakes lead to erroneous data. Additionally, if the data comes from multiple systems— especially when working with non-financial data as well as financial data— it needs to be reviewed and cleaned up. Executive review that happens more often becomes nullified if the organization is working with disjointed, inaccurate and dated information. Without the complete visibility that accurate reporting and real-time data offers, leadership might be making decisions based on outdated information or even worse, inaccurate data. The need for standardized controls across the organization and complete visibility for the leadership team has never been more important than it is today.
Alignment of strategic initiatives
It is important that when meeting, the whole organization starts to align on their vision for the future, especially when planning where the company should be years in advance. And when meeting monthly or quarterly, instead of annually, mindsets begin to shift from “where do we want to be next year” to “where do we want to be three years from now and how do we get there considering our current challenges?”. Note the key initiatives for each department and use those to holistically evaluate the entire organization’s goals for the future.
In order for the finance and accounting department to have time to think more strategically throughout the year and support new initiatives, assistance from proven technology will be required to free up time being spent on manual processes that could be automated.
Finance process improvement with technology
Focusing on producing cleaner data and carving out time for strategy development is dependent on the solutions accountants use for the entire Record to Report process. Manual spreadsheets have many shortcomings— most of which are recognized by finance, but not fixed with a longer-term view in mind. In fact, a study from Forrester found that most accountants recognize the risk spreadsheets pose for their organizations, but over a third of the study respondents also said that management chooses to overlook these risks.
Inevitably, this means that today many C-level executives are making decisions based on data that is assumed to be accurate, but could be outdated and erroneous.
The pandemic has only added to the growing importance of embracing process improvement with technology for the Office of Finance by forcing organizations of all sizes to accelerate their adoption of tools that facilitate virtual commerce and by creating new risks related to compliance, underwriting, and a host of financial operations. In order to properly enable continuous financial planning, organizations must invest in technology for finance process improvement and start to embrace Robotic Process Automation and Artificial Intelligence; or better yet Risk Intelligent RPA and Financial Controls AI as tools designed specifically for finance and accounting teams. These types of integrated solutions not only enforce standardized finance processes, they also improve the data integrity from the Office of Finance, highlight areas that pose a significant risk, and automate previously manual tasks so accountants can shift their focus to more strategic initiatives.
Widespread Shift to Automation in Accounting
Reports from PwC show that CEOs recognize the need to support their departments with updated technology. 76% of CEOs from the study said that the shift towards automation will have a lasting impact on the organization.
“CEOs feel they’ve passed a critical test and are now armed with important knowledge about their organisation — and are prepared to capitalise on the enduring trends brought about by COVID-19… Organizational culture, business specifics and investments in technology have played and will play a very important role in this process, with some activities becoming even more efficient.” — Ionuț Simion, Country Managing Partner PwC Romania
The pandemic has taught CEOs, CFOs and finance leaders around the globe that their organization has the ability to withstand extreme pressure and make adaptations to their planning in a much more agile way than before. However, they have also learned where the gaps in their processes and data access and visibility are, too. The companies that have withstood the challenges of the past year have recognized the importance of investing in technology and workflow transformation initiatives to propel them forward.
Learn more from Accenture and Trintech about how your Office of Finance can proactively strategize instead of reacting to business conditions.
Written by: Ashton Mathai