The global climate of geopolitical instability and unstable supply chains, added to ensuing consequences such as inflation, volatility in currency relations or the rise of resource prices make financial planning in current times especially challenging. Hence, knowing how to plan in uncertain times is no longer a need, but a must for companies to minimize risk and be prepared to make well-informed decisions to prevent unwanted surprises.
So, why is financial planning important, and where should you begin?
1. Financial scenario planning
One of the lessons learned by companies after the disruptions caused by the COVID-19 pandemic is the importance of scenario planning as a strategic financial planning tool. Hence, its aim is to ensure the best outcome while preparing alternative action plans that can be set in motion by financial leaders depending on how a situation unfolds. In short, it is about creating alternative scenarios to plan for the unknown, minimizing risk and seizing opportunities.
2. Create financial projections
Planning ahead with business plan financial projections involves using a company’s financial statements to forecast upcoming expenses and revenue and, accordingly, establish accurate targets for a profitable future. So, how should you approach financial projection?
- Use your financial statements and gather information on outside factors such as resource prices or demand peaks, also integrating currency analysis into your projections.
- Base it on realistic figures and analyses taking the global situation, sector, competition, clients, etc. into account.
- Invest in financial planning software to improve data quality and accuracy.
3. Upgrade your accounting software
Seek a software solution with improved forecasting capabilities so that you always have a clear idea of what lies ahead. The following are just some of the advantages of using the best financial planning software:
- Finance is updated at any time and from any place to adapt to the current and future needs of your company.
- Data are always current and accessible across the organization.
- Results can be compared with forecasted figures to know what needs to be addressed in each area.
- You can get a clear picture of finance trends and factors that could affect a company’s position.
- Strategies are guided by data-driven insights rather than guesswork for more informed decision-making.
4. Repeat the cycle
However, even if you have worked on your financial scenario planning and projections, and made sure that you have the latest software solutions and tools for strategic financial planning, your company cannot rest on its laurels, since new threats keep surfacing in the ever-changing business landscape. Therefore, it is crucial to review your plans on a regular basis to assess their relevance and identify and manage potential risks.
In a few words, looking ahead and periodically checking that your financial plan remains effective, and being ready to re-forecast and update it fast, if necessary, have become key issues for companies that wish to tread safely in today’s unpredictable world.