Pillars of Planning: Plan to the Right Level

Financial planning should focus on planning, rather than budgeting. There are five pillars of planning when building a great forecasting and planning environment:

1. Plan to the level that matters
2. The horizon that matters to your organisation
3. Frequency that’s relevant to organisation
4. Plan using the drivers that matter inside organisation
5. Plan using the right tool for the job

Over the next few weeks we’ll be sharing a post on each pillar. To start, let’s look at planning to the level that matters.

Imagine you’re responsible for a planning environment with 150 general ledger (GL) accounts in an Excel document. Imagine the document being sent to 50 people to be updated monthly with their plans. Imagine the anger directed towards you and frustration at having to work on a clunky Excel doc every month. And imagine the nightmare of having to manage 50 versions of an Excel document!

Many organisations budget or plan at the same level that they record information. When people plan at this level of detail however, there’s an urge to simply put a number against each line and then adjust to get the right bottom line. Planning at this level is a huge waste of time for each person involved. And there’s a loss of focus from the real task: helping the organisation achieve its strategic and operational goals.

Using the accounting principle of materiality, planning to the level that matters is about using only what’s relevant to a plan, rather than forcing unnecessary detail.

At Infocube, we challenge our clients to have 15 to 20 planning accounts within a cost centre that requires people to plan for. Those 150 GL accounts are aggregated into this select group of planning accounts. We don’t take away all that detail, but give people an environment where they can plan and give contributions to in a practical way.

With this approach, your planning will:

• be more accurate
• take significantly less time
• frustrate fewer people with mindless attention to irrelevant detail
• increase accuracy
• allow you and your contributors to focus on what matters

If financial planning is the process of determining a company’s financial needs or goals for the future and how to achieve them, is it really necessary to get that granular when a top-level overview provides the details necessary to plan effectively? To those that want it, they can still get all that granular detail by looking at the actuals of the GL information behind those planning accounts. We can then start to be smart, rather than dominated by irrelevant detail.

Our team at Infocube can help you be smart with your corporate planning, rather than dominated by irrelevant detail. Get in touch by email or give us a ring on 1300 136 755.

Photo by Samson Creative. on Unsplash