These Five Efficient Annual Planning Processes  Support The Eight Annual Planning Foundation Stones

1. Hold a Focus Group Workshop to get the go ahead

A focus group needs to be formed. The workshop is important for a number of reasons:

  • moving from 4 months to 2 weeks will have many doubters, we need to ensure all likely objections are covered in the Annual Planning workshop
  • a “green light” from the focus team will help sell this concept to the SMT
  • the focus group will give valuable input in how the implementation should best be done to maximize its impact

The proposed agenda for the focus group is set out in Exhibit 1. The suggested attendees would include: Budget committee, selection of business unit heads, all management accountants, and a selection of budget holders. You will need an event secretary to document agreements, two laptops, a data show projector and two white boards.

Exhibit 1 Focus group workshop agenda

Location: _________________

 Date and Time: ______________

Pre work: Attendees to document forecasting procedures on post-it stickers. One procedure per post-it. Each team to have a different colour Post-it.

 

8.30 A.M. Welcome by CFO, a summary of progress to date at _______, an outline of the issues and establishing the outcome for the workshop.
8.40 Setting The Scene– topics covered include:

  • The default future,, the cost and the major flaws
  • The alternative – the proposed foundation stones, how a two process can work
  • The proposed new rules
9.40 Workshop 1: Analyzing the New Rules. Separate teams look at the proposed new rules, and comment on changes required.
10.15 Morning break.
10.30 Workshop 2: Workshop on “Post-it” Reengineering of the Annual Planning Process. During the workshop we analyze the bottlenecks of the forecasting process. In this workshop we use “post-its” to schedule the steps (e.g., yellow-budget holder activities, red-forecasting team activities, blue-Budget Committee activities).
12.00 P.M. Feedback from work groups on both workshops and action plan agreed (document deadline date and who is responsible). Individuals will be encouraged to take responsibility for implementing the steps.
12.30 Lunch at venue.
1.30 Delivery the proposed “selling “presentation.
2.00 Workshop 3: Feedback on the presentation. Separate work groups look at different parts of the presentation.
3.00 The team presents reports to an invited audience on what changes they would like to implement and when. They can also raise any issues they still have.

Suggested audience all those who attended the setting the scene morning session.

4.00 Wrap up of workshop.

2. Forecasting Demand by Major Customers by Major Products

If you have over 200 products and 2,000 customers how do you reasonably accurate forecast?   The answer lies with applying Pareto’s 80/20 rule to the sales forecasting process.    Sales need to be forecast by major customer and major products.  The rest of the customers and rest of the products should be put into meaningful groups and modelled based on the historic relationship to the major customers buying patterns. See Exhibit 3.4 for a suggested format.

Many organizations liaise with customers to get demand forecasts only to find them as error prone as the forecasts done in-house.  The reason is that you have asked the wrong people.  You need to get permission to meet with the staff who are responsible for ordering your products and services.

For example, one financial team decided to contact their major customers to help with demand forecasting. Naturally, they were holding discussions with the major customers’ HQ staff. On reflection they found it better but still error prone so they went back “how come these forecasts you supplied are so error prone”. “If you want accurate numbers you needed to speak to the procurement managers for our projects” was the reply. “Can we speak to them?”  “Of course, here are the contact details of the people you need to meet around the country”.  A series of meetings were then held around the country.  They found that these managers could provide very accurate information and were even prepared to provide it in an electronic format.  The sales forecast accuracy increase seven fold due to focusing on getting the demand right for the main customers.

The lesson to learn is when you want to forecast revenue more accurately by delving into your main customer’s business, ask them “Whom should we speak to in order to get a better understanding of your likely demand for our products in the next three months and the next five quarters.”

3. Pre-Work: On the Annual Planning Model

There is much pre-work that can be performed to reduce the effort in the five day window.  You can:

  • Automate expense categories where trend analysis is as good or better than a budget holder’s estimate
  • Complete payroll details and pre-populated all budget holders schedules
  • Obtain up to date demand forecasts from key customers where possible
  • Organise additional support to the forecasting team so that one-to one support can be provided to all BHs (using local accounting firms – their staff would have to attend the workshop)
  • Establish schedule of who is to provide who with one-to-one support during the forecast.

4. Expand Your AP Team As Budget Holders Will Need One-To-One Support

Many budget holders will need one-to-one support.  Yet I have shown in Exhibit 3.5 that we are to do this all in three working days.  We thus need to expand the support team.  Some suggestions to expand your team are:

  • get all qualified accountants involved, even those not working in the finance team. g. this involves the CFO as well
  • ask the auditors to loan some auditor seniors from their local offices to cover those remote locations—the audit seniors will be grateful for being involved in an interesting task (those who have been auditor will know what I mean)
  • bring in some temp staff with budget experience
  • for smaller budget holders the senior accounts payable staff would be ideal

Thus all budget holders, wherever they are located, who need help can be supported during the three day window for data entry.

5. Hold a Briefing Workshop for all Budget Holders

Never, I mean never, issue budget instructions for as you already know instructions are never read.  Follow the lesson of a leading accounting team who always hold a briefing workshop that is compulsory to attend.  With technology today you can also hold the workshop simultaneously as a webcast so budget holders in remote locations can attend albeit electronically.  See Exhibit 3.8 for a suggested workshop agenda.

Hold a ‘budget preparation’ workshop covering the way to complete the input form, explaining why BHs do not need to forecast monthly numbers, only quarterly, the three day window, the daily update to the CEO; the fact that late returns will be career limiting; stressing that the bigger items should have much more detail; and why you have automated some of the categories, the help they will receive and so forth.

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