The key to recovery lies in agile financial planning

It’s hard to be certain how long the economic impact of the Covid-19 pandemic will last. In SA, a weak economic climate before the impact of the virus has worsened growth concerns, with the IMF projecting that SA’s economic activity will contract by 7.2% in 2020.

As we heed President Cyril Ramaphosa’s call to work together to help SA’s economy recover, one thing remains clear: Covid will have a lasting impact on how businesses make plans worldwide. As users of one of the largest providers of cloud-based finance and human capital management software globally, Workday’s customers represent more than 46-million workers. This has given me an excellent platform to talk to many customers, including our growing customer base in SA, to understand how they are weathering the storm.

What they’ve valued the most is having the agility to respond quickly to changes.

Agility to gain business resilience

Being agile when faced with change has always been a defining characteristic of companies that respond well to competitive threats. A recent Workday study on organisational agility showed the top-performing companies were 10 times more likely to react quickly to market shifts, proving that agility is often synonymous with performance. The pandemic has emphasised this. Moving forward, agility will be the essential tool to chart a course for resilient growth.

To build agility into an organisation, processes need to be transformed. Finance sits at the heart of this transformation, simply because it touches every aspect of a business. Finance departments have found the key to respond better to this and any future crises is in adopting three agile processes: scenario planning, continuous planning and rolling forecasts.

Scenario planning to anticipate impact

From the moment lockdowns started, the uncertainty increased and organisations were forced to ask themselves “what if?”. What if we have to work from home for the rest of the year? What if our supply chain is interrupted for 60 days? With Workday tools that provide the ability to buildout scenarios, businesses can understand what different versions of their future might look like. With road maps laid out, they’re able to identify future risk and look for new opportunities.

During the first months of the pandemic, we’ve seen organisations create up to 30 times more buildout scenarios than usual in our platform. The value of this strategy has been proven beyond financial planning: Oxford University, for instance, uses an approach to scenario planning when facing situations of global impact.

As we move towards recovery, the future is just as unclear. A recent survey conducted by Deloitte showed that 89% of CFOs now feel there is a high or very high level of uncertainty facing their business. The more finance teams apply technology to model different future scenarios, the better prepared they will be to quickly adapt their strategy. Planning based on assumptions is better than not planning enough, and technology can make this process seamless and efficient.

Continuous planning to avoid obsolete budgets

A survey conducted by the Association for Financial Professionals in 2019 revealed that the average annual budget takes 77 days to be prepared. Think back to where the world was 77 days ago to understand that this is not sustainable.

By deploying a continuously active approach to planning, leaders are able to quickly adjust budgets to adapt to shifting markets or changes in the organisation — something fundamental in the current scenario. We have found that companies that implement continuous planning are 1.5 times more likely to be able to reforecast within just one week, a level of agility that helps businesses avoid budget freezes.

Rolling forecasts to roll with the punches

Rolling forecasts are just as important in the toolkit of agile finance planning. They are a strategic way to approach forecasts because they are guided by key business drivers. We’ve found from our customers that they can help accurately predict changes from four to eight quarters in advance. By being able to visualise a consistent horizon, finance leaders gain the confidence to make critical decisions.

To survive escalating uncertainty, agility is a safe harbour for any organisation. By deploying continuous planning based on buildout scenarios and rolling forecasts throughout the recovery, leaders can make better forward-looking decisions. Ultimately, the changes in planning implemented during this crisis will prepare businesses for any future storms.

This article was paid for by Workday.