by Michael Coveney, co-author of "Budgeting, Planning, and Forecasting in Uncertain Times"
In this article, I want to make the case for data driven planning to describe the 7 key FP&A models that every organisation needs to plan, resource and monitor business performance.
From a planning and review perspective, there are 7 key things that management needs to know about its business processes, each of which can be assessed in a range of analytical models:
- How efficient and effective are the organisation’s business processes? (Operational Activity Model)
- What trends are ‘hidden’ in the detail? (Detailed History Model)
- What long-range targets should be set given where the market is heading? (Target Setting Model)
- Where is the organisation heading if it continues with its current business model? (Detailed Forecast Model)
- What could be done differently to better meet long-range targets and how much would it cost? (Strategy Improvement Model)
- What choices/risks do management face and what would be the impact on corporate goals? (Scenario / Optimization Model)
- How much funding is required to implement the plan and where will it come from? (Cash / Funding Model)
The models that answer each of these questions have different content, structures and are used by different people at different times. However none can be omitted or ignored, and all need to operate as a single, data-driven management system.