The end of the year, the next one is coming. And you? Have you made ajvar?

The preparation of a budget or financial plan is a process that follows a precisely defined sequence of activities that everyone must adhere to. Therefore, the most important outcome of implementing a planning system is not the application of the tool, but the creation of a planning model. Namely, if all the ingredients are not included and perfect, bad ajvar will be eaten next year.

My good friend, a long-time finance and controlling director at a well-known, medium-sized Croatian company, has an unusual habit of comparing planning and budgeting to making winter preserves, regularly calling the annual plan – ajvar. She says this is due to a trauma from her youth when, as a young intern in controlling, she first participated in budgeting and during those few weeks, when the supply of red peppers at markets was at its peak, she spent whole days, even weekends, merging and refreshing documents in Excel and checking formulas and numbers.

There simply was no time for her praised homemade ajvar that season.

In my friend’s company, Excel was long the only tool used in the planning and budgeting process, and IT support existed in that it had, as she says, one ‘kid who enjoys writing incomprehensible macros in Excel.’ One year, the ‘kid’ was away at just the wrong time, and their manual ‘flayer’ got stuck, taking them three days to find out why the final numbers, no matter what they changed in the templates, were persistently nonsensical. That year, a planning system finally entered the ‘ajvar.’ And then came her question: ‘What do you advise me, dear?’

Technology is less important

Of all the advice and related anecdotes I have accumulated or realized over the years in various implementations, this is the first and most important. Although projects for implementing planning systems begin with the introduction of a specialized tool intended to facilitate and accelerate planning, the nature of these projects should be primarily business-oriented and remain so.

I do not mean to say that the choice of tool is unimportant. On the contrary, it is essential to fit it into the technology and infrastructure, and its cost is usually a significant part of the total project cost. The capabilities of the tool are also important, but the market state is such that they are more or less uniform: web access, functions for easier input, ‘break-back’ functionality, clear and easy rights assignment, process monitoring and status tracking, version creation, connectivity with Excel, and so on.

Part of the technological work that also needs sufficient attention is the preparation of all transactional and master data important for planning, which often must be defined in advance or differ from current ones, meaning the introduction of new procedures for their maintenance and/or extraction and later linking to track the achievement of plans. The existence of a data warehouse will greatly facilitate this work, and in every other case, the creation of a data warehouse should certainly be included in the project.
It is often overlooked that such projects provide an opportunity for (re)definition and improvement of planning processes. Unfortunately, not everyone notices this opportunity or utilizes it equally well for some other reason. The preparation of a budget or financial plan is a process in which individual parts of the plan are interdependent, and there is a precisely defined sequence of activities that everyone must adhere to for the process to be effective.

What is more important – the forest or the tree

Therefore, the most important outcome of implementing a planning system is not the application of the tool, but the creation of a planning model that incorporates all business rules and the process nature of planning. A common dilemma in implementing such systems is the breadth and depth of the future planning model, where breadth refers to the set of all areas that will be covered by the implementation project and the future model, and depth refers to the level of details and templates included.

Finding the ideal measure is not always easy, and there is no universal rule. If a company already has numerous, detailed documents and formulas that it uses to calculate various plans or parts of plans that ultimately end up in, for example, the planned RDG, then it is not surprising that it expects the same from the future system. It is quite another question whether it is necessary to include everything in the system.

Well-designed planning models include precisely defined details and relevant ‘drivers’ exactly at the level where they are important. Everything else is excess and slows down both the preparation process and the analysis of the final result. Not to mention how negatively it can affect the accuracy of plans.

Imagine a manufacturing company and ask yourself: Is it really necessary to plan every expense account in production with the same level of detail? The raw material account just as much as the office supplies expense account? Or, will there be exactly the same template and logic for entering the expense plan in production for those two accounts? And finally, are you sure that the way you think is good for planning those expenses is the only and best one?

How deep and wide

The comparative advantage of a particular planning tool is certainly its modularity, which then brings the possibility of choosing how wide and deep you want to go. Furthermore, planning models, due to their aforementioned process nature, are not immutable. Examples of good practice include implementing the project in phases or multiple projects – in the first, fewer details can be covered, and later they can be elaborated and added as needed. Or, in the first step, create a model only for a specific area, and later upgrade it with other modules. After all, introducing a planning tool does not mean that Excel will disappear from the company. Some specific and, let’s say, less important parts of the plan that you developed before the planning system implementation project can still remain where they are – in Excel or other tools.

It is certainly important in designing the model and determining the level of detail to pay attention to whether there are parameters that affect some parts of the plan and to incorporate them as much as possible into the model, as this will make changes or simulations simpler and more effective.

People are planning after all

All sales presentations, just like all case studies after the successful implementation of a planning system, prominently feature three words – faster, easier, more accurate. And almost all forget to mention that planning is a cognitive process that is handled by – people.
With the exception of perhaps two or three truly different individuals I have had the opportunity to meet, I think that no one I know perceives budget preparation differently than as a not-so-pleasant and easy obligation, not to mention a burden. Some even feel that planning is a job for a crystal ball, but fortunately, such individuals are exceptions.

Determining the people who actively participate in planning means determining rights and responsibilities for achieving individual results, and the introduction of a planning system usually assumes that planning is widespread in the company and involves multiple people. Choosing who among the planning participants will also be a team member in the planning system implementation project is not always straightforward.

Discover different opinions

Actively involving (too) many people in any project is costly and counterproductive, which also applies to planning system implementation projects. On the other hand, when you create a model and apply a tool that should help a larger number of people perform a task more effectively (and believe me, when it comes to planning, regardless of templates and embedded formulas, everyone does that job in their own way), then it is good to at least give the majority, if not everyone, a chance to express their opinion for a brief moment.

One way to involve people is to organize workshops with multiple participants. Such workshops are also an opportunity to hear how each person truly plans. For example, it is completely normal and expected in such a workshop to hear how a key account manager starts planning the sales plan by first targeting the financial result according to customers, while a regional manager approaches the same task by planning volume according to the assortment. Workshops can be used not only for exchanging experiences and opinions but also for determining the truly necessary level of detail in some parts of the plan and checking the planning process timeline that may seem perfect on paper but does not function as it should in practice.

This year’s ajvar is good

My good friend from the beginning of the story did not implement a planning system in her company because that year, somehow right after the ajvar season, she received an offer she simply could not refuse and moved to another company for a different job. Currently, she is not as involved in budgeting, although she is a good candidate for entering that very small group that somehow enjoys that job. Regardless, her ajvar is good this year too – with peppers roasted on the grill, creamy and just spicy enough. Almost like mine.