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5 Essential Must Have Tools for Planning in Today’s Turbulent Times

Apr. 3 2020 by Jared Begun, Vice President of Professional Services - CCH Tagetik North America

Performance Management Budgeting & Planning

During turbulent times, CFOs must captain fronts that deviate from their usual concerns. Today these fronts range from quickly establishing working from home protocols without IT intervention, to projecting performance and decisions on a daily, even hourly, basis. To be able to manage these demands, the office of the CFO requires functions that enable Finance to be flexible. Key to flexibility is data mastery, and the only way to attain that is through a system that processes data quickly, without duplication, and integrates financial and operational information.

If there is one saving grace for CFOs global businesses today, it’s that CPM technology is advancing in a way that promotes agility, and thus, adaptability. In these modern tools, we have the power to explore our performance data, evaluate business decisions, and develop more precise action plans. 

Here are 5 essential financial management software functions that Finance must have to help navigate through turbulent times, including COVID-19. 

Cash Flow Planning 

The old saying, “Cash is King” is more appropriate today than ever, just like the WSJ confirmed in a recent article. During turbulent times, it's crucial to keep an eye on cash projections by properly planning key drivers like billing terms, DSO/DPO, lines of credits, and investment financing.  

We have found that by estimating cash expectations from your top revenue-generating customers and determining the cash absorbed by your main cost drivers, you'll dramatically improve your organization's ability to adapt — even without a full liquidity-planning exercise. 

You can take cash flow planning a step further by projecting balance sheet items, paying special attention to your projected working capital. Planning for your expected receivables and payables is as vital as projecting cash. Your AR and AP will soon translate into cash-in or cash-out anyways. 

Profitability Optimization 

Just like cash, expenses must be kept under control during uncertain times. By relying on allocation capabilities that allow you to distribute indirect costs to services, products, or customers accurately, you can understand the real profitability of individual segments and decide which ones to maximize or temporarily pause. 

We also found that organizations with extensive Activity Based Costing (ABC) models in place are in a better position to optimize activities and resources in a way that increases company profitability and guarantees value creation for all stakeholders.  

Workflow & Collaboration

We have come to learn just how essential communication and collaboration are in today's turbulent times. Workflow capabilities are necessary for corporations, especially when teams are decentralized. In such a scenario, process monitoring allows your core finance team to assess where your expanded team stands in terms of tasks completed. Specifically, CCH Tagetik's detailed business and approval workflow guide your colleagues to take action on assigned activities through a simple, guided, collaborative interface. 

Scenario Modeling

As we all know, scenario planning is a standard practice during any budgeting process. When dealing with unprecedented requests, scenario planning becomes an exercise of initiative planning. We must come up with multiple initiatives and then mix and match them together to evaluate the best possible combination and output. In this case, two functions become vital for rapid assessment of new scenarios: 1. the flexibility to add new driver-based initiatives and 2. the ability to immediately see the impact of those initiatives through goal-seeking and target setting methodologies. 

Continuous Re-forecasting 

When a black swan event hits, organizations of any size or industry must continuously update their projections. To do this, organizations must account for the impact of actual performance-to-date and estimate the best performance for the days to come. It is fundamental to rely on easy-to-use forecasting engines and models that allow you to quickly combine actuals and budgets into a brand-new scenario — potentially even multiple times a week. This way, you can assess how your company's well-being is evolving. Organizations that rely on the annual budget to drive yearly performance will soon find their plans outdated and anachronistic. These companies will quickly have to have to embark on forecasting logic to — at the very least — re-plan the remainder of the year. Organizations that have already embraced 12- or 18-month rolling logic will have to increase the frequency of projections to assess expected outcomes every week — at a minimum. 

If there is anything we’ve learned over the last two months, it’s that adaptability is the most critical operational business goal an organization can aspire to. The ability to quickly adapt requires trusted insight into performance. Only with an in-depth understanding of financial and operational performance can Finance direct corporate decisions towards best opportunities in the face of a crisis.

To learn more about how CCH Tagetik can help you understand the full financial and operational impacts of crisis related decision making, watch this video series: "Must Have Tools for Planning in Today’s Turbulent Times".

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