Unlike traditional management methods, Financial Planning and Analysis solutions are a new way to manage your business rationally. With the FP&A systems in place, business processes become more accurate and agile, preparing your company for the challenges and uncertainties of today's economic climate.
The benefits of measuring seasonality of accuracy are that users can plan high/low scenarios for each prediction based on the season-specific range of possibilities. Departments can adjust how much capacity, safety stock, or cash reserves are needed based on their own worst case. And it's easier to determine missing factors for model improvement when you focus on adding predictors to the high noise areas of the model.
The main criticism of the traditional budget is that it does not react to what is actually happening in the business during the year. But a Rolling Forecast solves that problem, helping companies to continuously plan (forecast) over a set time horizon.
Michael gives an insightful presentation on FP&A Scenario Planning: Forecasting in the Uncertainty.
The New Normal means that planning is no longer an extrapolation of the past. Similarly, business drivers that worked last year may no longer be relevant for the future. The reality is that organizations face multiple possible futures. Each one can be triggered by a crisis or an unforeseen event that will require the company to adjust or even change course.
So how should FP&A adapt to this New Normal?
There has never been greater uncertainty and a faster pace of change than over the past months.
And yet, at a time that requires speed and agility, and in a function that needs these qualities more than others, we cleave to our traditional management accounting methods and adhere to our longstanding processes.