Why business planning simulation is the new reality

Organizations frequently put their business plans together for the next year, which is followed by forecasting of those plans every month or quarter based on the business landscape.

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The process of forecasting gives visibility into the year-end projections and possible deviations from corporate objectives. The following post will compare and contrast the process of traditional business planning with what is now possible using real-time cloud-based technology. ​

Traditional business planning for companies
Typically organizations spend eight to 16 weeks to complete their business plans or set budgets for the next year based on one or more of the following assumptions:

  • Forex, interest, GDP, or borrowing rates
  • Employment rates and per capita income changes
  • Competitive action, market volatility, and technology changes
  • In specific cases it could be crude prices or commodity price changes

Once these assumptions are formulated it takes a few weeks to months to complete the business plan for the next year. After internal review these business plans are then presented to the board and/or senior management team for approval.

Snapshot: Travel and expenses (T&E) planning
Let us review this process by taking a simple and easy to understand example of travel and expenses planning:

  • T & E drivers formulated at the corporate level as indicated in below screenshot
  • Every department or cost center will submit its plan (wish list) for approval

​Let’s look at an example of how a corp and admin department, using various drivers, plans its domestic and international trips, client dinners, etc. to arrive at Final T & E spend of  $697,320

This plan is presented to the management team for approval. After its review and analysis,management decides to perform a cut on T & E by a certain percentage. Therefore, the original plan of $697,320 needs to be reduced to $500,000.

Revising the business plan
Traditionally with these revised guidelines, the department owner would manually revisit its trips and client dinners, and manipulate those in a way to arrive at the T & E spend approved by the ,management team. This process often becomes the bottleneck to perform the real-time changes to the plan.

The future of business planning is here
What if we had capability to do following:

  • Review the approved T & E budget and automatically perform updates to all the lines which roll up to T & E
  • Automatically update the various trips (domestic and international)
  • Automatically update the planned client dinners
  • Perform all of the above, keeping the T & E budget intact as per the management approval, in real time, and allowing management to evaluate the business impact of their decisions to classify the good spend vs. nice to have

Real-time business planning is possible with Anaplan
Let us now look at how the above could be achieved using today’s in-memory, cloud-based solution powered by Anaplan.

Based on the revisions, Anaplan has automatically calculated the number of domestic and international trips, and client dinners along with all the lines that roll up to T & E, allowing the management team to easily evaluate the impact of their decisions.

 

Forward and backward calculations are common within the planning processes, but they must be maintained and managed by Business Team. This will empower businesses to perform business simulations (“what-if” or sensitivity analysis) in real time, which had traditionally been managed in standalone spreadsheets or using rigid on premise solutions. Here is an example screenshot of bringing all the aspects together in a single screen using an Anaplan dashboard: ​
A quick disclaimer: the above T & E process described is a hypothetical one and has no resemblance to any organization or a specific Industry.

Let me know your thoughts on the above business simulation process (Forward/Backward computations) in real time by leaving a comment below. For more information, contact us or request a demo to learn more about such capabilities using today’s modern cloud-based platform powered by Anaplan.

About the Author(s):

Umesh Biyani

Umesh Biyani has 15 years of work experience in Enterprise Performance Management and Analytics. He holds a Masters degree from IIT Roorkee, and prior to Anaplan worked as Partner and Client Director for EPM Consulting Organization based out of Singapore. He specialized in working with CFOs and finance organization to define their EPM vision. Besides work, Umesh enjoys the gym and meditation.

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