Who should be responsible for your company’s financial planning?Emma
The cornerstone of any successful business is a well-executed, thoughtful financial strategy. And all financial practitioners will agree that a financial strategy begins with financial planning. Indeed, financial planning is the very first principle of financial leadership in any organization.
According to smallbusiness.chron.com, planning “helps an organization chart a course for the achievement of its goals.”
The process “begins with reviewing the current operations of the [business] and identifying what needs to be improved operationally in the upcoming year.”
From a financial perspective, that means looking back on your accounting practices throughout the last period. How did your financial forecasts measure up against your actual results? Did you come in over or under budget on special projects throughout the year? Did your company make more or less profit than expected?
“From there, planning involves envisioning the results the organization wants to achieve, and determining the steps necessary to arrive at the intended destination.”
This stage of financial planning involves looking forward at the bigger picture for the year ahead. Where does the company hope to find itself in a year’s time? Do you want to grow the business? Does the company want to increase its market share? Do you have plans to introduce a new product to the market, or to open up the business on new shores?
Once you have determined the greater goals of the business for the year, contemplate what steps will help to achieve them. Will you plan to increase your margins, and if so, on what products? Will profits grow, and to what extent? Will revenue increase? Once answers to these questions have been determined, they need to be whittled down to basic steps. How will greater margin be achieved? What exactly needs to happen in order to boost sales volumes? and so forth. The basic steps are then translated into operational to-dos: things that will affect the way the business is run on a day-to-day basis.
It’s clear, then, that the financial planning process affects the business at several levels. It requires being looked at from a birds-eye view as well as a detailed one. So who should be responsible for its inception?
From the first perspective, it involves strategic insight. The plan is derived from a strategic position: a vision of where the business is going, based on its opportunities and strengths. This insight is required from senior management – someone who has a handle on the “bigger picture” intentions of the business. From the second perspective, it involves operational insight – how to translate big picture ideas into workable steps. This means input from middle management, to understand how decisions will affect the oversight of operations in the business. Lastly, it requires perspective from general workers in the company. The ideal financial planning scenario involves feedback from grass roots level as to how proposed operational changes will affect their day to day duties.
With this in mind, the person responsible for overseeing financial planning in your organization needs to have insight at all levels. You need someone with strategic vision, operational insight and experience from the ground.
Companies that don’t have the internal resources to meet all of these levels of insight for the purposes of financial planning are turning to external assistance to get the job done. Specialized financial executives have the know-how and experience to view the business at all of these levels. They help companies derive meaningful plans for the short term by setting goals both strategically and operationally.
If your company needs assistance in creating a solid foundation for the business through financial planning, The Finance Team can provide it. Our network of highly qualified, experienced finance professionals are well situated to provide your company with planning insight at all the levels that it is needed.
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