The criticality of cross-functional collaboration in S&OP/IBP is also often overlooked. An effective Finance business partner also builds strong cross-functional partnerships to allow them to leverage the insights they develop on business performance and positively influence enterprise outcomes. The sales and marketing team will have considered key variables such as statistical unit forecasts, promotional plans, customer plans and forecasts, seasonality, new product introductions and competitive activity to generate a unit and revenue forecast. In our experience, one question continuously surfaces as a pain point: what is the role of the finance organisation in the IBP process? Integrated business planning (IBP) continues to be a hot item on the 2015 key initiative lists of organisations across every industry. Registered Address: Radius House 51 Clarendon Road 4th Floor Watford WD17 1HP, 3 Reasons why Finance Embrace Integrated Business Planning (IBP). This annual planning exercise also often takes place under significant time pressure, with reviews taking place at various levels (eg local, regional, global) and with considerable effort required to achieve a common and aligned view on the business outlook across these levels before a final plan can be agreed. This combination of what-if analysis backed by an illustration of the outcomes for agreed company-level KPIs is a powerful tool for moving towards enterprise thinking vs siloed approaches. The next step in the process is a series of final reconciliation meetings between demand, supply and finance. This means that in addition to developing and updating an integrated cross-functional plan, IBP also provides the discipline to reconcile the evolving plan back to corporate goals and any deviation from the existing plan is clearly highlighted and discussed as part of the process. An increasingly important role for the Finance function is that of business partner. However, a clear understanding of how to identify and implement the correct process improvements to truly harness this power is much more elusive. The role of finance in this step is to work with sales and marketing to reconcile their gross and net revenue plan with the unconstrained demand plan. The gross and net revenue plan described above should be shared with the sales and marketing teams through a formal meeting. If your organisation can get this part right, they are well on their way to improved performance and greater realisation of the benefits IBP can bring. The answer is two-fold. A recent study at The Hackett Group found that 90 percent of organisations reported that they have some form of IBP present today. Overall, the efficiency of the IBP approach as a monthly rolling planning process means that the Finance function can spend less time on the mechanics of a major annual planning process and manually reconciling diverse functional inputs to create a corporate plan and instead focus on value-adding advice and input to optimise the enterprise response to the risks and opportunities it faces. You may hear a lot about a ‘one number organisational forecast’; however, getting everyone to agree to a single number is often more trouble than it is worth. The benefits of IBP are widely accepted by CFOs and COOs alike. This is a view of projected unit demand over the next 18 to 24 months that does not factor in supply constraints. Generation of a consolidated financial plan. The criticality of cross-functional collaboration in S&OP/IBP is also often overlooked. How robust are those trends? Registered in England & Wales no.10490740. You may hear a lot about a ‘one number organisational forecast’; however, getting everyone to agree to a single number is often more trouble than it is worth. Furthermore, IBP can be a difficult process to effectively adopt and implement. However, in the absence of a disciplined process such as IBP they can often effectively default to silo-based planning where the finance function is then tasked with reconciling the various functional inputs with significant manual effort to achieve a balanced corporate plan in line with stated targets. However, bringing together all process stakeholders is essential to addressing any remaining discrepancies and aligning the organisation on a set of financial and operational forecasts. There is no shortage of potential issues that could be causing your process to falter or sub-optimise. Most companies are attempting some form of IBP today, but few have truly mastered the process. February 2015 | EXPERT BRIEFING | BOARDROOM INTELLIGENCE. Therefore, companies are continuing to triage and refine their IBP programs in hope of greater adoption, improved performance and increased financial returns. The unconstrained demand planning meeting is followed by a constrained demand planning meeting. This plan should take into account a series of different variables including previous actuals for volume and sales, previous forecasts, pricing changes, the statistical unit demand forecast, and known organisational initiatives. The finance organisation’s participation in the IBP process is critical to the realisation of desired benefits and results. The combination of these features mean that as financial plans are reviewed at progressively higher levels in the business, it is very time-consuming for the finance function to develop a joined-up and comprehensive understanding of the financial plans being presented by local commercial and supply chain teams and also to ensure that there is good alignment from local through to global level, especially in the context of a time-pressured annual planning cycle. Input into the constrained demand plan. 3. How realistic are the pricing assumptions being made to create the value forecast? The first reconciliation meeting, the pre-IBP meeting, is designed to bring together demand planning, sales and marketing, supply planning and finance representatives in order to discuss gaps and issues between projected future demand, available supply and the consolidated financial plans. #IBP #crossfunctional #collaboration #Finance #businesspartnering. In this way, IBP enables the Finance function to deliver an enhanced and proactive business partner role and in doing so, ensure that key decisions are made in line with corporate objectives and metrics and are therefore optimised at enterprise level. So why does it continue to be a highly prioritised initiative? Firstly, an effective IBP process can drive substantial financial benefits for an organisation, including increased revenue, reduced COGS, and lower overall inventory levels. The Benefits for the Finance Team – Business Partner Impact. The unconstrained demand planning meeting is followed by a constrained demand planning meeting. Josh Peacher is a manager at The Hackett Group. Prior to meeting with the demand planning group each month, the finance organisation is responsible for the creation of a first cut gross and net revenue plan looking out around 18 to 24 months. This demands that finance teams develop a detailed understanding of business performance and combine this with good insight on upcoming risks and opportunities in order to provide sound guidance and challenge to business leaders in addition to their more traditional regulatory/reporting responsibilities. IBP addresses this problem by creating a company-wide standard for financial planning. The outcomes of these IBP discussions are also visible at the various aggregate levels so that emerging views on the business outlook are continuously visible and explored up to global level in the finance function without the need for a compressed planning period. Instead, the goal of this meeting should be to create an aligned set of numbers that are close. In particular, there are 3 key outcomes of a strong IBP process which are very significant for the Finance function and which enable not only improved planning outcomes but also empower Finance teams to add incremental value in this increasingly important role as business partners; Traditional planning processes often do not create integrated volume and value plans.