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Aligning strategy and execution with rolling forecasts

For finance teams, these unprecedented times prove that static budgets, such as the Annual Operating Plan (AOP), do little to guide an organisation through the fog of uncertainty. How are finance leaders adapting? Many are finally moving beyond the AOP to adopt rolling forecasts to continually plan and ensure strategy and execution are moving in harmony across the organisation.

Rolling forecasts defined

Why does rolling forecasting matter? When you’re a finance leader and business partner, it matters because it’s your responsibility to keep a pulse on all aspects of your organisation – both strategy and execution plans.

And if the recent pandemic proves anything, it settles the debate once and for all that that every organisation can benefit from a rolling forecast process. For almost all industries, there’s no simply escaping the volatility of global markets, oil prices, supply chain changes and consumer preferences.

Here are a few considerations for implementing a rolling forecast:

Ditch your static budgets

While annual operating plans (AOPs) are the norm for most organisations to level-set expectations or anchor compensation targets, such plans do little to help with resource allocations in a dynamic business. In fact, in today’s market, the AOP is wrong within seconds of the submission.

A rolling forecast (see figure 1) is designed to allow management to continuously plan the business. Here’s a few stats from The Dresner Advisory 2020 Wisdom of Crowds EPM Market Study, which details how frequent organisations run their forecasts:

  • 64 percent of organisations are using a rolling forecast.
  • 16 percent use a rolling forecast instead of an annual plan

Best practice is to ensure rolling forecasts can extend (eg, roll) beyond the current calendar or fiscal year. The forecasts can extend anywhere from 12 months at a time to 18 months or even up to 24 months.

Create focus on business drivers and KPIs

It’s also important to focus on what the organisation actually plans for. Did you know that 50 percent of finance leaders report that they get little value out of their financial planning processes? Why do you think this is?

It’s because static financial plans add little value to managers and don’t drive the business. Remember, budgeting, planning and forecasting is not only about finance. It’s also about driving measurable business performance. And to do that, the organisation must focus on what actually impacts the business. Part of your job as a finance leader is to create processes to help translate how changes in the business impact the P&L, balance sheet and cash flow. If your budgeting, planning & forecasting processes don’t yet focus on business drivers or include your business partners, it may be time to consider integrated business planning (see figure 2).

Figure 2: Considerations for Integrated Business Planning

Align rolling forecasts with financial results

Let’s not forget that organisations have to close the books and report monthly and quarterly financial results as well.

Unfortunately, many organisations still rely on legacy corporate performance management (CPM 1.0) tools like SAP for planning, financial consolidation and reporting. Often consisting of fragmented applications and different technologies, the burden is on the finance team to maintain and reconciling data between fragmented systems.  What’s than mean?  It means that it’s your finance team who are building reports to join actual, budget and forecast data from different applications just to do the basics.

But what if there’s a better way to seamlessly close the books, report, plan and manage a rolling forecast? What if there was a way to do all of this with a truly unified, Intelligent Finance Platform that delivers multiple solutions.

Figure 3: OneStream’s Intelligent Finance Platform Platform

With over 600 customers around the globe, OneStream is quickly becoming the proven alternative to SAP EPM and other legacy solutions.

Designed to address the same budgeting planning, & forecasting, financial consolidation and financial reporting needs as legacy tools, OneStream (see figure 3) addresses these requirements and more with a unified architecture and modern technical approach.  This means that finance teams will have access to a broader range of capabilities such as predictive analytics, that improve finance productivity and allow them to spend more time working with the line of business partners and to help guide decision-making and align strategy and execution across the enterprise.

Aligning strategy & execution at Damen Shipyards

Damen Shipyards is a multinational shipbuilding group, with more than 12,000 employees and a presence in over 100 countries. With a global focus, Damen delivers more than 175 vessels annually to customers worldwide. A unique differentiator about Damen is that the company produces and keeps ships in stock. But as a result, they have strict agreements regarding the quantity of ships they can build and keep at any given time. Therefore, it’s essential that Damen has insights into each location to stay compliant with these standards.

Damen was in the process of rolling-out a global IFS ERP system when the finance team realised they needed a better way to oversee the organisation. “We recognised that we needed another system on top of our global ERP system to bring all data together and gives the flexibility to oversee data from recently acquired companies,” said Jurriaan Koekebacker, Group Controller at Damen. “We were using SAP BPC for financial consolidation, but the system was ultimately being held together by Excel® spreadsheets.”

Damen’s first focus in replacing SAP BPC was streamlining the consolidation process by automating processes between operating companies and the holding company. In the second phase, Damen went live with project management and a 24-month rolling forecast.  OneStream manages actuals reporting with equity pickup, as well as comparisons of weekly vs. monthly cashflow.  Plus, project-level performance management reporting and forecasting helps Damen aligned which entities are working on a ship at any given time throughout the intercompany supply chain – which also drives balance sheet and profit and loss data. This unified model enables Damen to extend the platform further for layered scenario planning for M&A and investments and a group-wide KPI framework.

“OneStream helps us to not only make projections towards the future, but also oversee the field of investments, acquisitions and working capital spending,” said Koekebacker. A great benefit is the all-in-one concept, where various apps are integrated into a single model. Traditional consolidation and planning systems are far less integrated—with different modules that had to be purchased and linked separately.”

To learn more about Damen’s finance transformation, download the case study here.

Scott Stern is director of product marketing, OneStream

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