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Three Steps to Smarter Planning

Posted by Danielle Cisler

steps to smarter strategic plannning

Annual budgeting is the roadmap for strategic planning, and analyzing results is how you track progress toward these goals. When results differ from plan, you find yourself asking why. Month after month you may equate these discrepancies to the hearsay you get from the field — or as market-based — and move on, never truly knowing the why. Then the cycle starts again: new year, new plan, new expectations.

But for every business there is a concrete reason for the gap, and there is a way to remove it: companies need more detailed plans they can accurately measure against.

So, how do you get there?

Here are a few steps to plan smarter and minimize variations in actual versus plan numbers:

1. Plan at the transaction level to match what you’re measuring against

For most companies, sales history is very detailed. Businesses dive deep into the specifics of the transaction. They monitor sales by customer channels, product lines, and sales personnel. They track prices, volume, costs, and timing for each sale. However, when it comes to planning, the same level of granularity isn’t happening. When your actuals are very specific but your plans are very aggregate, it’s hard to understand why variances occur and take action: close the gap, maintain, or adjust goals.

Starting top-down and stopping at the customer channel or product line for a budget is a shortfall in the strategic planning process. You also need individual customer-product sales specifics. Getting this level of detail for actuals is often second nature. Ask for it at the planning level, and you may hear objections: “That’s too much minutia…there’s too much data to work with…it’s a spreadsheet nightmare…we don’t have time.” There is a massive strategic benefit to budgeting at a more detailed level, but companies assume they can’t get there because of time, processes, or prioritization. It’s an assumption worth challenging, shifting the paradigm of what it means to budget.

2. Use technology, not spreadsheets, to get to the details

When it comes to financial planning, it’s critical to get out of the spreadsheet business and into the technology business. When you have the technology to budget at the level of the transaction, you budget smarter. You have actionable intelligence. An application, like DRIVE, removes the objections by applying advanced business logic and an accessible, easy-to-use interface to the planning process. A technology-enabled approach to numbers gets you unbiased, accurate, and actionable insight. While the first time through your planning cycle you may need to use kid gloves, but once the systems and processes are in place it’s like doing laundry: wash, rinse, repeat. Low effort, high reward.

3. Get the detail you need from your team, when you need it

You know what you need (transaction detail) and how to digest it (technology), but who will get you the detail in the first place?

You go to the source.

Orchestrated by finance with input from procurement (costs), product management (prices), and sales (volume) will create buy-in across the organization and enable you to budget at the level the transaction occurs. It’s important to provide enough time and set intermediate milestones. One of the reasons people fail at effective budgeting isn’t that they don’t put in time and effort, but that the progress ebbs and flows without check-ins.

The Bottom Line

Well-run businesses have a strategy, and the budget is the roadmap to execute it. Planning at the same level of granularity as your sales allows for a healthier understanding of what’s happening within your business, why, and how to act. By having a detailed budget, you are creating a source of accountability for your people and a path for success for your business.

Accurate planning and measurement is tough to do, but it’s one of our specialties. To learn more about how your company can improve the odds of meeting your strategic financial goals, schedule a time to talk to one of our profit experts today.

 

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Topics: Technology , For Pricing Managers , Pricing Strategy , DRIVE