What’s All the Buzz About Continuous Planning?

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There’s been an increasing amount of buzz in the market around the concept of “continuous planning.”  While the concept has been around for a while, why is this getting so much attention now?  What does it mean?  And how continuous is continuous?

Let’s start with the definition of continuous planning.  My friend Rob Kugel at Ventana Research offers up a very simple definition: “Continuous planning uses technology to enable rapid planning and review cycles to support a more agile organization.”

What’s the alternative to continuous planning?  The answer, per Mr. Kugel and other experts in the industry, is “static budgets.”  In today’s volatile global economy, managing based on static, annual budgets no longer works.  The best practice in the market is to shorten the annual budgeting process, make it less granular and use it to set initial targets, then revisit and update the budget assumptions on a regular basis through rolling forecasts.

How Continuous Is Continuous?

This notion of updating the budget assumptions on a regular basis begs the question – how continuous is continuous?  Should organizations be constantly planning?  Based on BPM Partner’s 2016 BPM Pulse Survey, the answer is that most companies update their forecasts monthly (34%) or quarterly (24%).  Per BPM Partners, another 13% of companies update their forecasts weekly.  Retail is a good example of an industry where this approach makes sense. 

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And there’s a small segment of the market (9%) claiming to update their forecasts “continuously.”  If we assume that means daily, then I could see this approach making sense in “fast-changing” industries such as financial services or transportation.

 The Link to Rolling Forecasts

Rolling forecasts are clearly a key component of continuous planning.  We’ve covered this in webinars and other blog posts, but here’s a quick overview of the concept. 

In their purest form, rolling forecasts allow organizations to project future results based on a combination of actual YTD financial results and the original budget, or updated revenue and expense forecasts for future periods.  The future forecast period can extend to the end of the fiscal year, but in its purest form, the rolling forecast period typically extends out 4 to 6 quarters into the future.  

rolling_budget.jpgThis approach provides the organization with a head-start on budgeting for the next fiscal year since the work is done in advance and considers the latest results and assumptions about the business going forward.  In some cases, organizations that have adopted and executed a rolling forecast process have eliminated the need for an annual budget.  This concept is promoted by the Beyond Budgeting Roundtable, which is led by industry guru Steve Player, another friend of mine.

How the Cloud Supports Continuous Planning

So you may be wondering, what type of budgeting and planning system does an organization need to support rolling forecasts and the concept of “continuous planning”?  The consensus from industry experts such as Rob Kugel and Steve Player is that reliance on spreadsheets severely limits an organization’s ability to execute rapid, agile planning and forecasting cycles. 

Leading companies are adopting packaged planning applications found in enterprise performance management (EPM) software packages to streamline the planning process.  Moreover, cloud-based EPM applications are becoming the preferred approach in today’s market due to the speed of deployment and low cost of ownership they offer, as well as the ability for users to collaborate and update or create their forecasts – anytime, anywhere.

Customer Examples

Thousands of organizations are now adopting cloud-based planning applications and are adopting the rolling forecast technique as a result.  A number of Host Analytics customers have testified to their ability to reduce planning cycles and adopt more dynamic planning techniques as a result of moving from spreadsheet-based budgeting to cloud-based planning.

To learn more, check out this recently published customer case study on Welch Allyn.

Download the Case Study

 

Posted by on May 11, 2017
John O'Rourke

John O’Rourke is Vice President of Strategic Marketing at Host Analytics. With a background in accounting and finance, John has over 30 years of experience in the software industry and 20 years of experience in EPM product marketing at Hyperion Solutions, Oracle and Host Analytics. He has worked with many customers and partners on financial reporting and planning initiatives and has spoken and written on many topics in EPM. John has also held positions in strategic marketing and product marketing at Dun & Bradstreet Software, Kenan Systems, and Decisyon. John has a BS degree in accounting from Bentley University and an MBA from Boston College.

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