In addition, this revenue plan should factor in a number of key questions, including ‘What do we want to achieve?’ and ‘What do we think we can realistically achieve?’ The answers to these two questions are rarely the same. It is also very common for financial planning/budgeting to be run as a major enterprise activity on an annual cycle. This demands that finance teams develop a detailed understanding of business performance and combine this with good insight on upcoming risks and opportunities in order to provide sound guidance and challenge to business leaders in addition to their more traditional regulatory/reporting responsibilities. However, IBP builds a number of enterprise capabilities which drive competitive advantage. With respect to the Finance function in particular, IBP represents a valuable enabler. #IBP #crossfunctional #collaboration #Finance #businesspartnering. Most of the gaps should have been resolved prior to this meeting. IBP is too often thought of as just an operational process. This means that where there is any misalignment between the commercial plan and the required capacity, working capital and expense levels in the supply chain this quickly becomes visible. Most companies are attempting some form of IBP today, but few have truly mastered the process. This means that in addition to developing and updating an integrated cross-functional plan, IBP also provides the discipline to reconcile the evolving plan back to corporate goals and any deviation from the existing plan is clearly highlighted and discussed as part of the process. IBP addresses this problem by creating a company-wide standard for financial planning. Generation of a consolidated financial plan. The criticality of cross-functional collaboration in S&OP/IBP is also often overlooked. Input into the unconstrained demand plan. The answer is two-fold. There is no shortage of potential issues that could be causing your process to falter or sub-optimise. The finance organisation’s participation in the IBP process is critical to the realisation of desired benefits and results. Following this meeting, the finance organisation is responsible for the development of a final 18 to 24 month financial plan. The unconstrained demand planning meeting is followed by a constrained demand planning meeting. If your organisation can get this part right, they are well on their way to improved performance and greater realisation of the benefits IBP can bring. The next step in the process is a series of final reconciliation meetings between demand, supply and finance. Following this meeting, the aligned set of financial and operational forecasts will be presented at the second and final reconciliation meeting of the planning cycle. Integrated business planning (IBP) continues to be a hot item on the 2015 key initiative lists of organisations across every industry. However, the best place to start this inquisition is the spot where organisations have most commonly stumbled in the past. So why does it continue to be a highly prioritised initiative? Integrated Business Planning (IBP) - and its forerunner Sales and Operations Planning or S&OP) - have traditionally been perceived and managed as tactical, supply-chain centred processes. Secondly, as the IBP process runs on a monthly cadence this allows the cross-functional team (supply chain, commercial, finance) to continuously build their mutual understanding of both current business performance and medium-term outlook through the ongoing monthly IBP cycles. This plan should take into account a series of different variables including previous actuals for volume and sales, previous forecasts, pricing changes, the statistical unit demand forecast, and known organisational initiatives. The role of finance in this step is to work with sales and marketing to reconcile their gross and net revenue plan with the unconstrained demand plan. This meeting incorporates the supply planning team and is utilised in order to provide a rigorous process for understanding capacity, raw materials needs, and how to optimally utilise resources and assets given the agreed upon consensus unconstrained demand plan. Generation of a gross and net revenue plan. An important part of this role is to model alternative solutions in order to illustrate their impact on a balanced set of enterprise-level KPIs (eg market share, revenue, margin, working capital, supply chain flow etc). IBP supports increased transparency in two ways that enable the finance function to more rapidly and efficiently create reliable, integrated financial plans based on sound analysis; Firstly, the regular IBP process reviews both volume and value forecasts with value figures being derived directly from volume forecasts. For example, a commercial decision to shift promotion from one brand to another may have positive benefits on revenue and margin but may create negative consequences for inventory or operating expense. This meeting, the executive IBP meeting, is a forum to present the aligned forecasts to the organisational leadership team, receive recommended top down adjustments, and provides an opportunity to resolve any high level gaps that could not be resolved in the pre-IBP meeting. February 2015 | EXPERT BRIEFING | BOARDROOM INTELLIGENCE. The early involvement of Finance in key business challenges provides the opportunity not only to advocate optimal enterprise approaches, but also facilitate cross-functional discussion involving commercial and supply chain partners. An effective Finance business partner also builds strong cross-functional partnerships to allow them to leverage the insights they develop on business performance and positively influence enterprise outcomes. He can be contacted on +1 (312) 325 2932 or by email: firstname.lastname@example.org. The cross-functional forums of IBP raises the level of discussion of these cases to an enterprise level. Therefore, companies are continuing to triage and refine their IBP programs in hope of greater adoption, improved performance and increased financial returns. A sound IBP process is a key enabler for this business partner role. For the finance team, this meeting is about working with the supply planning team to fully understand how supply constraints will affect the overall demand and revenue plans. Josh Peacher is a manager at The Hackett Group. The Benefits for the Finance Team – Business Partner Impact. This is important as it provides ongoing reliability and consistency of forecasts and avoids surprises materialising in an isolated annual planning process. An important point to note is that these two forecasts do not have to match perfectly. My previous post highlighted the key outcomes for Commercial leaders and here I extend these observations to the Finance function based on my experience as a commercial leader deploying S&OP/IBP in a global pharmaceutical company. It has … The IBP process aligns the commercial and supply chain plans on an ongoing basis with volume forecasts (and the underlying business assumptions) being shared across the functions as part of the rolling monthly planning process used in IBP. This meeting, the executive IBP meeting, is a forum to present the aligned forecasts to the organisational leadership team, receive recommended top down adjustments, and provides an opportunity to resolve any high level gaps that could not be resolved in the pre-IBP meeting. Corporate financial planning processes typically share common templates, milestones, high-level assumptions and top-down targets. The more perplexing question many organisations still struggle with is how the finance organisation should be integrated into the process and what their key responsibilities should be? You may hear a lot about a ‘one number organisational forecast’; however, getting everyone to agree to a single number is often more trouble than it is worth. The gross and net revenue plan described above should be shared with the sales and marketing teams through a formal meeting. However, a clear understanding of how to identify and implement the correct process improvements to truly harness this power is much more elusive.