What is Active Planning (And How Can CFOs Implement it?)

But even in this ever-changing world, there’s always one thing that remains consistently crucial to finance teams, and that’s the need for accurate, agile planning and forecasting.

Despite this, most finance teams are still using static planning processes. This strategy doesn’t allow them to quickly and efficiently adapt to change, especially on short notice. This is why finance teams (and businesses as a whole) need to embrace active planning strategies this year.

But what is active planning, and how can you adopt it in your organization?

What is active planning?

Active planning is promotes collaboration, accuracy, agility, and continuous planning. This is the opposite of static planning, which involves long planning cycles and limited analysis, and usually results in short-lived plans.

What’s more, active planning allows organizations to more effectively manage their finances by analyzing and understanding historical performance. This is important for being able to predict the future and for more accurate modeling and forecasting.

Most importantly, this process helps to drive business growth and lets you plan and adapt to change quickly and without compromise.

There are several important areas that make active planning possible, but leveraging the right technology is certainly a crucial part of getting this right.

This is because active planning uses automation to collect data and then refresh and update this regularly to ensure teams are always working with the newest data. This makes effective analysis and deeper insights possible.

The key benefits of active planning

Some of the most significant benefits of active planning include:

• By using a single source of shared data that’s accessible to the entire finance team, everyone can engage with the information for enhanced collaboration
• Active planning helps to achieve new and detailed insights that lead to better budgeting, analysis, modeling, and forecasting
• These insights make it easier to create reports and pull data without effort
• Active planning provides the transparency necessary for collaborative budgeting and agile forecasting
• This process allows for improved responsiveness through continuous budget planning and rolling forecasts - no matter how much data you add
• With a single source of comprehensive, fresh data, you’ll get fewer discrepancies. This helps finance teams to feel more confident in their predictions and forecasting

How CFOs can make the move from static to active planning

Adopting active planning within your organization isn’t something that just happens overnight – here’s how to go about making the move from static planning:

1. Encourage collaboration across departments

An important way to implement active planning is to encourage collaboration across the various different departments within the business. This is because departmental collaboration helps finance teams to identify business opportunities in almost real-time. This way, they can respond faster to a changing marketplace and make better finical decisions and forecasts.

So if this isn’t something that you already actively encourage and if your finance team works in a silo, this needs to change.

2. Move away from quarterly forecasting

If you want active planning to be a success, you need to move away from the outdated notion of quarterly and annual forecasting and instead do this all the time.

This means evaluating your model and reviewing projections as frequently as every week. Then you can go into further detail on a quarterly basis and create more in-depth reports or long-term predictions.

Using rolling forecasts allows your team to provide real-time financial insights - something which is going to make C-Suite executives very happy. This also prevents the guessing game and often inaccuracy that results from only planning once or twice a year.

3. Work backward

One of the best ways to stay on top of active planning and manage your time effectively is to use the ‘work backward’ strategy. Although it sounds counterproductive, working backward can actually help you to move forwards.

If you start by identifying important dates and working backward from there, you can avoid last-minute dramas. In terms of active planning, this means working out when you want to meet each week and getting meetings booked in with plenty of time to spare.

It also means working out when you need budgets, reports, and forecasts to be prepared and getting all the right steps in place to make sure this happens and you meet your deadlines.

4. Choose the right technology

When you’re constantly updating your forecasts, reports, and budgets, a basic spreadsheet isn’t going to be enough. In fact, having to manually input information each day could actually slow you down.

Because of this, active planning relies heavily on the right planning tools. These must be easy to use, powerful, and fast, and they must encourage and support collaboration. These will also act as the single source of data we mentioned earlier.

So, when the time comes to embrace and implement active planning in your business, spend some time doing your research and choose tools like Workday Adaptive Planning to help you achieve the best results.

5. Focus on the bigger goals rather than finer details

Finally, active planning is great for helping you make informed financial decisions and for producing the most up-to-date forecasts. However, you don’t want to bombard business partners and those running the company with constant updates and new data.

As such, to get the most from your active planning strategy, it’s a good idea to focus on the bigger goals rather than finer details when dealing with other departments and C-Suite executives.

Interestingly, 76% of CFOs said their teams are already tracking lots of non-financial KPIs, rather than merely relying on balance sheets and income statements. So clearly, this approach is beneficial for the overall planning and success of the business as a whole.

Further reading

• Is Continuous Planning the Key for Finance in Times of Disruption?
• Enterprise Agility in the Age of Urgency
• Plan to Win: Achieving Business Agility in the Age of Urgency