When it comes to costing and planning assessments, balancing each enterprise player's role is crucial. This can prove difficult, even for seasoned FP&A professionals, since taking the broader view of all the different elements at play can be difficult.
Even when putting together a seemingly comprehensive financial plan, mitigating against the risk features of one department may not be sufficient. The enterprise faces risk from many different perspectives, therefore the daily risk concerns of CFOs may not always be obvious to those in the manufacturing department, and visa versa.
Input From Boots on the Ground
"Top-down risk mitigation can only take you so far."
Top-down risk mitigation can only take you so far. For the most comprehensive and resilient approach to planning, one must include risk data input from all aspects of enterprise operation, creating an integrated planning approach that facilitates a beginning to end operational lifecycle.
Doing this requires the building of mechanisms that allow for this data to be easily - and regularly - collected, parsed and delivered to FP&A leadership in a user friendly interface for maximum insight. The ability to routinely revise forecasts with the input of new data has been discussed at length, though this approach does add the wrinkle of requiring data input from multiple sources. However, automation and analytics deliberately deployed can aid in the centralized execution of financial planning.
See 'What Is Needed' - Not Just 'What Is Coming'
By gathering insight from all departments, planning can not just mitigate against risk, but also determine what is needed to fully leverage the power of trends. Achieving certain benchmarks is more than just being open for business: It requires understanding what each department needs to operate at maximum efficiency for overall profitability.
Take for example the CFO for a major manufacturer of musical instruments. Her current forecast shows that, historically, sales surge just before the start of the back to school season and that this year is on track to be a record-setting year.
Great, right? But before she starts celebrating and bragging to shareholders, consider the other implications: Is every department braced for the demand? Will we need to hire additional staff in your warehouses and manufacturing? If so, what skills and training are needed for these new workers - and how long will it take to see them ramped up? Has the cost of materials been in flux? Are existing contracts with our suppliers capped at a certain volume? Will we need to renegotiate shipping rates to process increased sales?
Input from every department means that FP&A leadership has a better understanding of what costs will be at all levels. By transitioning from top-down imperatives (what is asked of each department to help meet benchmarks) to an integrated planning solution (what each department needs to meet benchmarks), an enterprise can more effectively leverage data into profitability.