By Darrell Cox
Finance teams, especially those at the top of their game, are always looking for ways to improve and shape the future of their business. Whether it be standard business planning or shifting due to sudden market changes that are, unfortunately inevitable, like the current pandemic, strategic leaders should utilize agile business planning methods to prepare for uncertainty today and tomorrow.
The business landscape is always changing. We never know what’s coming next and the current pandemic is an example of that fact. So while we as strategic finance leaders of growth-minded businesses can’t plan ahead for every shift in the market, we can plan on it changing and be ready to act with confidence and agility in mind to ensure the long-term health of our organizations.
Successful planning comes down to the ability to pivot finance and operational plans quickly. In my experience, certain areas come easier than others, but I have three tips to help you plan with confidence and reach optimal business agility throughout these particularly difficult times and in the future.
Keep forecasting flexible and agile
The first step in reaching optimum business agility is to identify critical performance trends on-demand. This helps leaders quickly adjust plans based on a comprehensive analysis of the effect market conditions will have on the bottom line. Rather than relying on static annual budgets that become obsolete the moment a change occurs, agile forecasting updates the plan on an ongoing real-time basis. New data provides an accurate prediction to enable long-term business results.
A few tips to keep in mind include:
- Reforecast often and based on the situation at hand. A quarterly cadence is suitable for large, operational expense items, but for others like cash flow and headcount, use a weekly cadence
- Guide the process with historical data
- Use scenario modeling to outline the potential impacts today’s decisions will make tomorrow
Agile forecasting allows strategic finance teams to bring new growth opportunities to the table, even during normal market conditions. In particularly challenging times, this is one of the most efficient ways to refocus your business and plan on unexpected changes.
Utilize scenario modeling
Rather than thinking of uncertainty as a burden, use it as an opportunity to dive into your numbers and think forward using scenario modeling. Scenario modeling is important during tumultuous times and growth-minded organizations use this tool regularly to maintain their business’s ongoing health.
Scenario modeling tests business implications and plans against assumptions around existing and future possibilities. It creates agile models that assess the impact of decisions on various areas of business, like cash flow, revenue and costs. When times are uncertain, this process can involve operational steps to deal with tight cash, such as headcount planning.
If that’s the case, then scenario modeling should answer key questions like:
- If we continue our existing hiring plans, how sustainable is the business’s cash flow?
- What are the long-term implications of a hiring freeze?
- What key positions can we keep without negatively affecting our cash flow situation?
- How can we change compensation plans fairly to lengthen our financial runway?
- Are there any other hiring plan …read more
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