Financial Planning for the New Normal

Michael Vizard

As the current economic crisis begins to let up, now might be a good time for companies to revisit how well their financial controls were able to respond to dramatically changing business conditions.

According to Doug Barton, IBM worldwide product marketing for financial planning management and analytic applications, the new normal in finance is going to be rolling budgets that are updated on a weekly, if not daily, basis. Unfortunately, most existing financial applications were designed around a batch process under which annual budgets were first created and then reviewed on a quarterly basis. That approach to steering the business, however, invariably results in two sets of books with one set centrally managed by the finance department, while individual line managers kept track of their own daily wins and losses using spreadsheets and databases.

To help create a framework that actually integrates financial planning with the business on a daily basis, IBM is rolling out extensions to its Cognos business intelligence software specifically designed for the evolving needs of finance departments. The new extensions makes it easier to build hierarchies around various scenarios, expanded tools for consolidating reports and creating associated workflow and blueprints for tracking key performance indicators in various vertical industries.

According to Barton, the volatility of the economy is going to require more dynamic cooperation between the finance department that is in charge of scarce budget resources and the business units that consume those resources. In this day and age, however, the size of the available resource pool can dynamically change. For example, this past Super Bowl weekend should have created significant revenue opportunities for restaurants and other similar types of establishments in the Washington area. But a blizzard that dropped almost two feet of snow means that those revenue assumptions will need to be scaled downward. In today's economic climate, financial planners want to know the impact of that change in revenue outlook immediately.

The divide between the finance department and the lines of business also contributes to having multiple truths about the state of the business that are often in conflict with each other. But rather than just using tools such as Cognos to centrally manage the business more, Barton says the best thing to do is to create a more bi-directional workflow between the finance department and the business units.

For that happen, everyone has to take a step back from business as usual to concentrate on how to spend less time arguing over the accuracy of numbers so they can spend more time running the business.

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