Planning Categories

Financial planning is a key activity for organizations of all sizes to accurately manage profitability and establish the company's direction for the upcoming year and beyond.

A strong business planning process consists of sales and operations planning (S&OP), demand planning, financial planning, budgeting, and forecasting. All three of these planning elements depends on one another to achieve accurate integrated business planning.

Planning, budgeting, and forecasting involves activities at a number of levels, from high-level summarized strategic plans to detailed financial budgets and forecasts. Let's take a look at each and v I at they mean for a company.

Strategic Planning

Strategic planning focuses on realizing a 3-5 year vision that addresses most critical market and organizational challenges.

An effective strategic plan translates your business strategy into a simple story about your organization’s future . You know that story is clear when people around you understand what leadership has chosen to do and not do.

Some key questions to ask during the strategic planning process include:

  • What business are we in and how do we continue to compete?
  • Which choices will make us more money ?
  • How will we align resources with our strategy?
  • How will we measure our progress?

FOCUS - Next 10 years


Budgeting

Budgeting is the annual operating plan that occurs once during the year and is not revised. A budget is completed for all quarters of the upcoming fiscal year.

Generally, budgeting refer s to the process undertaken prior to the start of a year to set expectations regarding anticipated results for the upcoming fiscal year. The budget creation process will provide accountability to revenue, operating expense, and cash flow targets by oftentimes linking certain elements of employee compensation to performance against targets set during the budget.

FOCUS - Next year

Some key questions to ask during the budgeting process include:

  • How will we ensure accountability and encourage behaviors needed to execute the strategy?
  • Should we leverage prior year actuals as a starting point for this year's budget or should we leverage a zero-based budgeting method ? In other words, should we create a bottom-up budget without using prior year actuals as a baseline ?

Forecasting

Forecasting is a monthly or sometimes quarterly view of how business is performing against expectations. Closed quarters are generally populated with actual data as depicted in this figure.

FOCUS - Current year


While budgeting refers to the process undertaken prior to the start of a fiscal year to set expected results. the forecast updates that baseline budget throughout the year by taking actual performance into account. Adjustments to the baseline budget will occur each forecast cycle to accommodate actual results and shifting business conditions as the year progresses.

Some key questions to ask during the forecast process include:

  • How can we adjust to reflect changing conditions in order to meet or exceed our budgeted expectations ?
  • How often should we re-forecast in order to drive business decisions effectively (i.e.: monthly versus quarterly forecast)

How Does Planning, Forecasting, and Budgeting in SAP Address Key Challenges?

With the introduction of SAP Business Planning and Consolidation (BPC), version for SAP S/4HANA and SAP Analytics Cloud, companies are now able to address several of their key challenges through the implementation of the latest SAP technology supported by the appropriate business process changes.

SAP BPC, version far SAP S/4HANA resides within the SAP S/4HANA server, which streamlines the data integration process by serving as an extension to the core ERP, without requiring a separate database or instance.
 
SAP Analytics Cloud is a cloud-based planning, reporting and analytics solution, which provides native integration to SAP S/4HANA and can source data from various source systems.


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