WHITE PAPER
Professional xP&A-solutions
Fully Integrated Planning
in 4 steps - the xP&A-approach
Plan, budget, report, analyse, forecast, consolidate.
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Content
Leverage professional skills – strengthened by controlling technology ... 3 Everything on one platform. Automation. Process optimization. ... 4
The xP&A-approach – fully integraded business planning in 4 steps ... 5 Steps 1 & 2: Developing and planning strategies - where can
controlling technology help here? ... 6 Step 3: Implementation of the strategy / plan: Analyze & monitor
with suitable controlling tools ... 9 Step 4: Act and Change: decision support through reliable, comprehensive information . 12
Summary and recommendations ... 14
smartPM.solutions in a nutshell ... 16
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Leverage professional skills – strengthened by controlling technology
Controllers must be able to quickly answer all decision-relevant questions from management - both for the past and future. Example questions on this would be:
• What effect would a change in demand of x percent have on the result?
• How quickly can you work out a forecast with new framework conditions?
• Can we optimally adapt our supply chains and capacities to the changed demand?
• Which skills & resources (HR) will we need in the future in order to remain competitive?
Management assumes that relevant (company) data from a variety of sources are consistently available in a company-wide uniform reporting and planning format. They must be comparable according to the general definition of key figures in the company and be made available promptly after the end of the month or even upon request.
This is a challenge for many controllers, especially for those who work with spreadsheet programs (e.g. MS Excel). A large amount of relevant data has to be exported from various systems, such as CRM or ERP source systems, to ensure data quality and consistency. Often enough, the data also has to be prepared for internal reporting. The files created contain hundreds of sheets and pivot tables. These are then sent from department to department. The high expenditure of time, as well as the susceptibility to errors, are at the expense of in- depth analyzes and decision-making.
Current studies that identify new competence requirements and roles for controllers in the future show that controllers don't just have to be data providers - and not even “just” business partners. These include, for example, the decision scientist, the functional lead, the data scientist and the change agent. In any case, the specialist skills of the controller should be used and strengthened by modern controlling technology and not wasted on data processing.
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Everything on one platform. Automation. Process optimization.
The majority of controllers are often not even aware of how easily, quickly and reliably the performance can be monitored and controlled with professional controlling technology, including methods of artificial intelligence. Controlling systems must be able to provide fast simulations of reliable quality without great effort.
If you also want to perform BI ("Business Intelligence") & CPM ("Corporate Performance Management") functions, such as rolling pipeline analyzes, scenario analyzes or meaningful procedures for sales forecasting, professional tools are necessary as this is usually not possible with existing CRM & ERP Systems.
So why not make greater use of the advantages of automation and digitization? The use of standardized reports and forecast content via pre-built and tested applications means that the relationship between preparation effort and decision time is reversed. This reduces the time required for data preparation to just one day and leaves four days a week for high-quality analyzes and recommendations for decision support.
Simulations, value driver-based scenario planning and flexible ad-hoc analyzes help in the preparation of measures. With communication and collaboration tools, such as MS Teams, which are seamlessly integrated into the controlling solution. Further, tasks are easily assigned and tracked and chats and video conferences on budgeted figures are made possible.
This article highlights several aspects for optimizing the company's success. In addition to technical challenges in controlling, it addresses how to concentrate on highly relevant tasks. In addition, typical requirements of management and the organization are dealt with.
As a result, an innovative performance management approach is proposed that covers both BI and CPM requirements and leads to faster and more comprehensive control in the finance departments. Consideration of the four phases of the model for integrated corporate planning - the xP&A approach - is recommended in order to improve the reporting, analysis and forecasting quality of the company and thus create the basis for well-founded, reliable and agile decisions (see Fig. 1 )1.
1see Sharda, R., Delen, D., Turban, E. (2017), Business Intelligence, Analytics, and Data Science: A Managerial Perspective, 4th edition, Pearson.
What is xP&A ?
The short term xP&A (Gartner 2020) stands for extended planning
& analysis and is synonymous with fully integrated corporate planning.
What is meant here is the linking of departmental information beyond the pure finance / controlling department, for example the link to S&OP (Sales and Operations), HR, project controlling, marketing, sales, etc.
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The xP&A-approach – fully integrated business planning in 4 steps
Based on proven scientific models (including Sharda et al. 2015) and a lot of practical project experience, a controlling system for fully integrated corporate planning is now presented. This takes both strategic and operational considerations into account and offers instructions in 4 steps for implementing this approach.
The four steps: 1) implement strategy 2) plan 3) monitor / analyze, 4) act / adapt form a closed loop from business strategy to business operation. On the basis of 100% reliable, networked data, a comprehensive, real- time analysis, control and initiative planning and tracking on levels of the company is enabled.
For each of the 4 steps, the implementation in professional controlling technology is shown using numerous examples. Based on a combination of technologically advanced CPM technology (CPM = Corporate Performance Management) and Microsoft AI technology, the shown modules of the smartPM product family cover both BI (dashboarding, reporting) and CPM (what- if analysis) requirements, Planning, forecast) of all departments within a company or a group of legal entities. Each module can be used on its own or in a network. A step-by-step approach up to fully integrated company planning - xP&A has proven itself.
Figure 1: the xP&A approach: fully integrated business planning2
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Steps 1 & 2: Developing and planning strategies - where can controlling technology help here?
A good plan always follows the right strategy. In this phase, a business strategy, key value drivers and an action program must be identified. The concept of a "balanced scorecard" according to Kaplan / Norton is very helpful for business strategy in order to define and measure overarching goals. The strategy module of the smartPM product family completes this approach with an initiative tracker, powerful scorecards and top-down objectives and supports you during the planning phase as follows:
• Definition of monetary and non-monetary goals for as many business perspectives as necessary
• Linking initiatives to goals and tracking their activities/progress
• Linking budget and forecasts with medium-term planning
• Working with a top-down objective (see Figure 2) including status monitoring and combined planning approaches. If only bottom-up planning is used, the sales forecasts are regularly perceived as too "defensive", while the expenses often exceed the planned sales / income, which makes many more planning cycles necessary.
Figure 2: smartPM - Top-Down-target setting and bottom up gap analysis per region/product inkl. MS Teams
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Planning calendar
In the planning phase, it makes sense to use a planning calendar that can be integrated with MS Outlook (see Figure 3). This means that everyone involved in this process knows which tasks are relevant at what point in time.
The plans linked in this calendar can be opened from anywhere via the Internet and only allow the plan to be submitted after certain requirements have been met.
Figure 3: smartPM – planning calendar incl. mail integration
In addition, there is the option of coordinating decentralized planning and forecasting processes by combining a planning calendar with centrally defined planning forms, including the function for submission, blocking, and commenting. Professional controlling technology offers maximum flexibility and planning security at all levels, back calculations, value driver-related planning, bandwidth planning, seasonal distribution of values, etc. In addition, multiple languages and currencies are supported.
Planning templates enable the following in a single format:
• Support in the selection of target markets (comprehensive go-to-market support) for internationally active, sales-oriented companies
• Planning (top-down / bottom up) and deviation control
• simulations, including scenario comparisons; Editing is possible anywhere and anytime, even via mobile devices, without installing additional software (also offline).
• Integrated corporate planning with the connection of all sub-plans and departments (marketing, sales, finance, management, consolidation), including taxes, loans, investments
• Project (portfolio) controlling >> with project budget monitoring and project prioritization
• Logging of changes and recording of the "buy-in" of important stakeholders such as local managers or sales team leaders using collaborative planning - fewer discussions about numbers that you have planned yourself!
• Planning and forecasting, including explanations for additional calculations (quick calculations directly in the cell with simultaneous generation of dynamic comments, see Figure 2).
• (Group) reporting & consolidation on the same technological platform, no interfaces
• Sales & Operations (S&OP), with convenient support for balancing supply (capacity, production optimization on a weekly basis, safety stock etc.) and demand (e.g. promotions).
• More on this on the S&OP Knowledge Base >>
8 Figure 4: balancing of supply & demand, product optimization
For the "Power" S&OP users: Identify important "value drivers", e.g. bundle prices, profit / loss rates and use them for a quick forecast. Quickly adapt available capacities in the personnel or supply chain area to changing demand situations.
The smartPM model also provides support with regard to budgeting, planning and forecasting. Flexibility is the key to any planning system: no company is like another, and the approaches to sales planning in particular differ greatly, also between different departments or segments of a company. The smartPM Forecast module enables various methods of forecasting sales data: at product level, by region, at sales employee level, etc.
Figure 5 shows an example of a forecast based on several processes, including AI / machine learning. A recommendation system suggests the most accurate prognosis based on the error values and automatically adopts the values. Knowledge of statistics is not absolutely necessary.
Figure 5: smartPM Forecasting-module
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Step 3: Implementation of the strategy / plan: Analyze &
monitor with suitable controlling tools
A good plan is nice, but useless if decisions are not implemented or if you cannot draw the right conclusions from the actual figures ("Business Intelligence"). In this phase, the influence and benefits of a controlling technology are particularly evident. All relevant data sources are aggregated in real time or promptly and the constant monitoring of performance - compared with benchmarks for meaningful ad-hoc decisions - enables forward-looking corporate management. A balanced mix of strategic and operational reporting helps evaluate the performance of business units and individuals. Tools for analysis and monitoring in the smartPM controlling solution are presented below. The technology used is similar to Excel. However, users from specialist departments can work with the software without any problems even without MS Excel or programming knowledge.
Successful companies are mostly successful in sales and marketing first. "Fingerpointing" can be avoided through precise monitoring of marketing success (e.g. campaign results that lead to leads and opportunities) and careful coordination of marketing and sales efforts. End-to-end (lead to contract) marketing and sales analyzes based on a seamless integration with any CRM system serve as a basis for decision-making for activities. Figure 6 shows how many MQLs (“Marketing Qualified Leads”) develop into opportunities and how this development affects the planned operating result. Various scenarios can be considered, and promising marketing and sales activities are initiated.
Figure 6: smartPM - Campaign & Lead Analysis (MPA Modul)
10 The functions of the "Sales Intelligence" modules are particularly informative and convenient: The sales analysis, reporting and sales forecast modules enable quick reactions to deviations and reliable sales forecasts.
By carefully monitoring the development of the profit / loss rate across all sales opportunities over time for each product / region, information is generated that, in combination with the skills of the sales staff, can be used to create forecasts.
The rolling pipeline overview allows the funnel status and its development to be monitored and optimized, e.g. through a weekly pipeline comparison and a forecast comparison (see Figure 7).
Figure 7: smartPM – rolling pipeline development week over week
With the help of meaningful dashboards, the sales status (and thus also the typical internal project to improve sales performance) can be better communicated in the company. The use of ad-hoc analyzes such as pivot tables, which can also be displayed in visual form, is also indispensable.
A breakdown of the sales opportunities down to the CRM level for analysis purposes is urgently recommended ("drill down to opportunity level") - this improves the credibility of the people involved in the analysis and planning in any discussions with the sales staff. Interactive dashboards with drill-down options can be managed centrally and saved as personal dashboards to be more convenient for all end users. MS Excel or analysis skills are no longer required. This ensures a "global analysis standard" and enables maximum flexibility and ease of use for users all over the world. This contributes to a high level of acceptance of the system among all those involved.
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Automated, standardized reporting and report distribution
Significant time savings are achieved if reporting can be done automatically and time-controlled using the report distribution functionality. The relevant reports and evaluations (e.g. business units, cost centers, product groups, etc.) are made available to all recipients in PDF format or as MS Excel file (s). A comprehensive standard reporting system, numerous KPIs and summaries for management offer everything from a single source of truth to be able to support decision making processes.
Scenario calculations, ad-hoc simulations
A live preview of planned changes and their effects on company key figures complete the "what if" simulation options. The quick simulation shown in Figure 8 shows the impact of changes in value drivers on ROCE (“Return on Capital Employed”) in a scenario comparison.
Figure 8: smartPM – value driver simulations based on a ROCE example
It makes sense to connect all source systems to your central planning and reporting system. The time expended for the validation of the data loading processes ("ETL") is certainly well invested - incorrect data would in any case affect the credibility of the new CPM system.
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Step 4: Act and Change: decision support through reliable, comprehensive information
Corrective Action is the fourth core process of the 4-step model discussed in this paper. In addition to notifying users of potentially serious problems, they are provided with suggestions and guidelines for dealing with such challenges. This avoids possible escalations of major problems. In this phase you must keep track of all initiatives that have been started to achieve the goals - it is important for you to know who has been entrusted with which task and what the current status is. Scenario comparisons show immediately the impact of all initiatives on P&L, balance sheet and cash flow (see Figure 9).
Examples of helpful recommendation systems can be suggestions for customer segmentation and targeted strategies for the various customer clusters. A use case from marketing / sales: Expensive marketing leads must be processed in a timely manner, "reporting on exceptions" also helps here.
As with all "change" projects, the early integration of relevant stakeholders is also a critical success factor in digitalization in controlling: digital transformation is usually easier if it is supported or even requested by management and those involved.
Figure 9: P&L, Balance Sheet and Cashflow in scenario comparison
13 The following Figure 10 shows the overview of integrated corporate planning and the ideal-typical planning process. The smartPM workflow has proven itself in numerous practical projects. A distinction is also made between roles and their responsibilities. From strategy development to operational planning and reporting to consolidation, all phases of corporate planning are covered and the relevant planning steps and priorities are shown for each stage. A special focus is the integrated S&OP content (center right).
Figure 10: smartPM Workflow incl. Roles and responsibilities – truly integrated business planning
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Summary and recommendations
This whitepaper offers a structure and a series of processes from which CFOs, CEOs and controllers can benefit as a reference framework for optimizing their controlling system. The focus is on optimizing decision support and prioritizing tasks with the highest priority (e.g. increasing the margin, focusing on the most promising products / markets / channels, etc.) instead of wasting time on the organization and the technical challenges of spreadsheet software.
Often companies struggle to increase transparency in order to achieve their strategic vision. Key business goals need to be operationalized in plans, while monitoring success and providing critical insights to improve financial and operational performance. Powerful data-driven processes enable a higher level of analysis and use more sophisticated approaches to analyze data and make better decisions. The assumption that professional control in branched structures (e.g. if more than 10 people are involved in a forecast / budgeting process) can only be guaranteed with MS Excel should in any case be rejected. Although experienced MS Excel users can find impressively clever solutions, the test effort required, the dependency on individual know-how and the system-related repeated cloning of workbooks clearly speak against this approach.
The decision for the "right" controlling software (= "Corporate Performance Management Tool") is certainly a challenge. Predefined solutions based on flexible CPM software offer the best mix of proven standard controlling functions and the decisive flexibility that most companies need to adapt a system to their requirements. The software solution should cover all performance-relevant control requirements from the areas of sales, marketing, product management and HR as well as capacity and requirements planning, production, project performance and risk management. Fragmented, departmental data must be consolidated in an "xP & A" (Extended Planning & Analysis) approach.
When introducing new systems, it is particularly important for the customer that planning, reporting and analysis work in a single, fully integrated technical framework. Companies that replace MS Excel with CPM software are freeing up valuable resources in their S&OP and finance departments. This gives employees the time they need to prepare important decisions. The workload is reduced for all stakeholders of the xP&A and the advantage of direct management control (e.g. scenario comparison, what-if analysis, standard reporting, etc.) can be used.
15 The market for controlling software is large. Below are some tips that can make the decision for the "right"
controlling technology easier:
(1) The careful, weighted requirements analysis with foresight, i.e. expandable for future requirements.
Functional, technical, and organizational requirements must be taken into account. All relevant departments and IT are involved.
(2) Choice of provider: Many software solutions are possible choices. The selection should not only focus on "large", well-known companies, but on specialized providers for certain industries, company sizes, niches, etc. - bigger is not always better. Being one of many customers can come at the expense of the quality of advice and implementation. The choice of software is 50% responsible for the success of the project, the implementation partner is responsible for the other half.
(3) Another aspect of the software selection is the degree of standardization or flexibility. On the one hand, software solutions are offered that are modular and partially standardized; on the other hand, there are software products that are reprogrammed for each application. Predefined, tried and tested, partially standardized solutions offer the advantage of quick implementation and usability with a low error rate. A sufficiently large amount of flexibility must still be maintained, since every company has specifics that have to be individually adapted. Some controlling tools do not allow such adjustments / flexibility.
(4) Finally, the proof of concept is carried out with your own company data. Here you can find out what specific benefits the tool has for your application and whether the requirements can actually be implemented in the software. Discussions with reference customers and customer feedback are also helpful sources of information. The consultant assigned later should be known with regard to future cooperation so that no "nasty" surprises can arise (e.g. from inexperienced junior consultants who provide insufficient support for the implementation).
We wish you every success with your planning!
Are you interested in implementation examples at customers, a reference discussion with users or would you like to see the possibilities of integrated corporate planning for your specific application? Please contact us at [email protected]
1:1 – Simply get in touch with Alexander Hein via Linkedin
You want to see the smart xP&A solution in a free demo? Let’s go >>
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IN A NUTSHELL
Integrated Planning. Ad-hoc Analysis. Precise Forecasts. Perfect Reports.
Our fully integrated CPM (Corporate Performance Management) applications are designed as a one-stop shop approach for better decision making. smartPM.solutions are based on market leading CPM technology and work with multi-dimensional Data Cubes, connecting financial data of many different sources (e.g. ERP- System, CRM-System etc.) for agile decision taking. Starting with Finance-connected Go-to-Market Top-Down target setting, smartPM.solutions cover Marketing, Sales, S&OP PM, Project/Program PM and Integrated Financial Planning in an integrated business planning approach. AI-based Sales Performance Forecasts allow for a precise, integrated and most efficient prediction of the corporate performance. Compared to other Software vendors we stand out with our best-practice, pre-defined but still flexible modules, easily configurable with standard Excel knowledge.
Another key differentiator from smartPM.solutions? The experience as well as economical and technical background of our consulting-team. More than 500 successfully completed projects with very happy clients, and a short implementation-time of 3 month tell a lot about our approach. We support the complete control cycle on the strategic, tactical, and operational level with an excellent price performance ratio - because we love what we do.
smartPM.solutions GmbH www.smartpm.solutions [email protected]
Copyright © smartPM.solutions GmbH All rights reserved. The information contained in this document is intended for general information only, as it is summary in nature and subject to change. Any third-party brand names and/or trademarks referenced are either registered or unregistered trademarks of their respective owners.
