Nothing is “business as usual” anymore – scenario planning included. But that critical task has never been more important.
Grant Halloran, CEO of Planful, recently spoke with Resourceful Finance Pro about how scenario planning has changed during these uncertain economic times.
Here’s how you can set up your company for success going forward.
An uphill battle for scenario planning
You and your finance team will have an even tougher go of it when scenario planning now for three reasons:
- Cadences have accelerated. Quarters are now months, months are weeks, and weeks are days, reminds Halloran – things change so rapidly.
- Management wants more scenarios. Because there are so many unknowns, there are so many ways things can go – and you need plans for all of them.
- Faster turnaround is expected. No time to lose – CEOs and other execs want plans yesterday.
How many scenarios to plan?
Gone are the days when you could have three different scenarios running. Now to stay responsive to these ever-changing conditions, your company will want to have at least five different scenarios going simultaneously that reflect:
- worst-case
- medium-case, and
- best-case.
Who (to involve)?
Yes, Finance drives the train on this one, but the entire business should be involved, asserts Halloran.
Financial planning and decision-making can’t happen in a silo. Collaboration is key and the finance team plays a pivotal role in a situation like this, as you serve as the cross-functional strategic advisor to the entire organization.
A continuous scenario planning framework helps Finance in this role as you connect data and plans across every corner of the business, providing the collaboration tools to break down the silos between Finance and business teams. That way, everyone in the business is engaged in the planning effort.
If you foster a culture like that you’ll elevate the financial IQ of your whole organization, leading to better plans and more impactful decisions even long after the pandemic is over.
What (to include)?
You’ll also need more information feeding into them.
You want your information as granular as possible so your scenarios calculate easily from changes to variable drivers.
Often, those drivers are operational in nature. A few examples Halloran offers: pipeline metrics, number of reps, margins, trips, etc.
CFOs should shift their expectations around expected future growth and margins, and plan for scenarios you’ve seen during previous recessions.
So you’re generating more of everything from the scenarios themselves to the info that goes into them. Even more important than that? Your ability to course-correct and course-correct quickly.
No company can afford to revisit forecasts and budgets quarterly at this point in time. You need to be able to readjust and take another direction as soon as new information comes out.
How often?
Of course, you can no longer take weeks to do that.
Your CEO might call you and want this information later that day, says Halloran. Or you’ll need to deliver daily updates to the board that include multiple forward-looking scenarios on the spot.
Some of your peers are running scenarios daily – or even hourly – to keep pace.
That’s tough to do when you’re bogged down in spreadsheet-heavy FP&A processes.
Moving away from static planning and error-prone spreadsheets to, say, a cloud-based, continuous planning framework would set you up for greater success now and going forward.
With the right technology and processes in place, your company will become more agile, make better decisions and re-allocate resources more intelligently.
