The Principles of Enterprise Planning - Finance Silos

The Principles of Enterprise Planning

Enterprise planning is becoming more popular, thanks to powerful yet affordable software technology that allows small and midsize businesses to establish highly collaborative, cross-functional approaches to strategic planning, governance, budgeting, and operational planning, among other things.

Enterprise planning is transformational; it is more than just a new and improved way of business planning; it is a seed for cultural change that aligns organizational resources around a single set of goals, objectives, and metrics.

1. Begin With the (Strategic) End in Mind

Stephen Covey, the author of “The 7 Habits of Highly Effective People” and productivity guru, has said that highly efficient people should “begin with the end in mind.” This is wise advice for executives embarking on an enterprise planning initiative.

It can be enticing to approach planning from a business-as-usual perspective – to engage in planning as a question of how best to perpetuate the status quo (but in a slightly new and improved way, of course). This approach completely misses the point. Enterprise planning has the potential to be transformative; it should be considered as an opportunity to realign day-to-day business operations and tactical decisions with long-term business strategy.

Strategic planning is the initial phase in any thorough enterprise planning process since it establishes the top-level goals and objectives from which all other decisions should be made. It brings together the highest levels of executive management with board oversight, which includes the company’s owners and other key stakeholders. Strategic planning, in the end, provides clear priorities, a consistent language, and a set of definitions from which everyone can work, and then drives those priorities through the enterprise planning process at every level.

The strategic planning phase should also build a clear governance structure, ensuring that all of the process’s subsequent actions are coordinated and monitored, with clear accountability.

2. Plan for Agility and Adaptability

Business agility has become a new necessity in the last two years. It all started with the entrance of a pandemic but has since been followed by supply chain uncertainty, price volatility, and worker disruption. Business leaders are increasingly concerned about their decision-makers ability to detect changing conditions quickly, appropriately analyze the options available to them, and pivot fast and decisively.

Many have turned to innovative budgeting approaches like driver-based budgeting (DBB), which assumes that key business factors will change. Change is unavoidable, and budgeting approaches that can easily accommodate variability can be beneficial in uncertain times.

Although budgeting and planning are not synonymous, the budgeting process serves as a critical basis for enterprise planning. Allowing sometime early in your business planning implementation to explore whether budgeting approaches would be the greatest long-term match for your organization might be beneficial in this regard.

3. Follow-Through on Reporting and Analytics

The key to a successful swing, as every golfer knows, is follow-through. In enterprise planning, follow-through is equally critical. In this context, however, it resembles the form of monitoring performance against the plan, particularly concerning key metrics specified during the strategic planning process. Companies must develop strong proficiency in reporting and analytics to be successful with enterprise planning.

Your reporting strategy should incorporate an integrated financial planning and analytics approach to support the end-to-end enterprise planning process. You should construct your reporting systems to assess and monitor those same objectives, drawing real data from your company’s ERP software and other transactional systems, based on the planning and budgeting inputs. To make the entire process controllable and accurate, a seamless connection between the plan, the reporting platform, and core transactional data is required.

4. Make Organizational Change Management a Priority

In almost every organization, transformational change will be met with some resistance. Enterprise planning is a shift in company culture away from steady-state, business-as-usual thinking and toward a more flexible and adaptable approach. This is uncomfortable for many people.

Company leadership must acknowledge that organizational change management is a critical component of a successful business planning exercise. Consider enlisting the cooperation of company supporters to help spread the word about the initiative and give it the momentum it needs to succeed.

In many circumstances, it may be preferable to take a step-by-step approach to enterprise planning. As a first step, executives may decide to implement a new budgeting approach or roll out the necessary technologies, with an initial concentration on reporting and analytics. A successful rollout can serve as a crucial proof point for hesitant employees and other stakeholders within the organization.

Another option is to implement some aspects of enterprise planning inside a single division or business line. Although this will delay the benefits that a comprehensive enterprise planning strategy will provide to the organization, it may make sense as a stepping stone on the way to that objective.

5. Automation

Enterprise planning is no exception when it comes to using technology to automate operations. Indeed, corporate planning would most likely continue to be limited to very large corporations without software innovation. Despite this, far too many businesses continue to rely on time-consuming manual processes for planning and budgeting, as well as collecting, collating, and analyzing transactional data.

Manual processes are inefficient and time-consuming. When finance teams rely on time-consuming copy/paste practices, they not only waste time but also limit the business’s agility and responsiveness. The reports and analyses generated by manual methods are out of date the moment they are published by a user. If executives require an updated version of the report, the user must repeat many of the same processes all over again.

Errors are common in manual operations as well. The reports generated if the user fails to double-check formulas may be erroneous. The repercussions of such inaccuracies can be considerable when company executives rely on that information.

Gaining a holistic, integrated view of the organization is the goal of enterprise planning. It follows, therefore, that the information systems used for planning and budgeting, and reporting and analytics, should also be integrated. Direct access to transactional systems, such as ERP, is part of this.

It takes a lot of effort to roll out enterprise planning software successfully. It will take a strong commitment from the CFO’s office, as well as a desire to create the type of culture change that will have long-term strategic implications. The right technological basis creates a solid platform for success.

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