Ineffective financial planning hits profitability, new research shows

Finance function professionals are placing a renewed focus on scenario planning in response to a volatile business landscape, according to new data Board International. 

The intelligent planning technology provider’s 2024 Global Planning Survey shows that 71% of finance decision-makers feeding into the CFO are taking planning more seriously, with the war in Ukraine, cost-of-living crisis, and ongoing supply chain disruptions acting as key catalysts.  

Cyberattacks (36%), labour shortages (34%), blocking of key supply chain channels (28%) and fluctuating oil prices (32%) top the list of key business threats that decision makers are currently making plans for. 

Despite an emphasis on planning to help navigate this disruption, many financial planning professionals continue to face challenges planning effectively.

The survey reveals signs of planning fatigue within many companies, highlighting a 14% decrease in how seriously companies are taking planning compared to last year.  

“Industry leaders face immense pressure to navigate a complex and unpredictable business environment. The need to shift from conversation to action around scenario planning has never been more important,” said Jeff Casale, Board’s CEO.

“But in far too many cases, organizations remain limited by legacy tools that are prone to errors and siloed data – leaving them vulnerable to costly mistakes and outdated insights. To better compete, they need to be proactive about anticipating disruptive events, modelling calculated scenarios and aligning strategic, financial and operational plans.”  

 Just over three quarters (78%) of finance decision makers admit their organization makes planning decisions based on assumptions. Together, these findings suggest that many financial planning professionals are struggling to implement data-driven decision-making.

A third (31%) of respondents report that ineffective planning has impacted profitability, productivity and the ability to drive innovations, new products or services. 

From scaling to planning for future threats 

The survey reveals that too many financial planners are simply scanning for potential crises rather than actively preparing for them. For example, Board found that 43% of respondents are discussing rising tensions between China and Taiwan but only 29% are actively scenario planning for an escalation in the region.  

 The lesson from Gray Rhino and Black Swan events like the conflict in Gaza or the war in Ukraine is how important it is for organizations to anticipate and mitigate the risk of geopolitical, economic and social disruptions, however unlikely they may seem.

The survey also found that 72% of organisations usually disregard the most extreme scenarios when planning, suggesting most companies are leaving themselves open to risk should the unexpected happen. 

The agile planning gap

Adopting an agile and integrated approach to planning is critical for companies to drive increased flexibility, meet regulatory requirements, streamline operations, faster time-to-market and improved collaboration and resource allocation in a rapidly evolving market landscape.

However, the survey identifies a concerning agile planning gap that highlights a significant disconnect between aspirations and reality. The survey found that 79% of respondents globally believe their organizations are equipped for agile planning, but only 12% have the right processes and technologies in place to make this a reality. 

For companies looking to close this gap, the survey found three key barriers: poor data quality and governance 46% ineffective processes based on largely manual activities 48% and a lack of modern tools and technologies 41%

 Underpinning each of these barriers is an overreliance on static spreadsheets. The survey found 52% of businesses globally use spreadsheets, like Excel, for at least half of their business planning – a source of potential risk due to limitations caused by manual data entry and lack of real-time data integration.

The survey also found that 75% of companies fail to consider enough potential future scenarios when planning, which can also leave them unprepared for unexpected events.  

The survey highlighted that 19% of respondents do not think their organization is on track to meet the EU’s Corporate Sustainability Reporting Directive (CSRD). The law is in place to ensure all large and listed European companies disclose information on the risk and opportunities they identify on ESG issues.   

Bridging the gap to successful agile planning 

Organisations are looking to AI to overhaul their approach as they shift towards data-driven, agile planning. 47% of respondents are exploring machine learning to improve decision-making, while 41% are looking to AI-powered business intelligence tools.

A third  (38%) of respondents also plan to adopt generative AI tools to enhance their decision-making process.  

“By embracing intelligent planning tools and agile planning processes, companies can analyse internal and external data to plan for a range of eventualities, to drive more informed, proactive decision-making and improved business outcomes,” added Casale.

“Over the next decade, companies that don’t shift to running their business on a fully integrated planning system will be facing an uphill battle.” 

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