Integrated Planning Part 1: Synching Financial and Operational Views

Sep 29, 2016


Nilly Essaides, Director & Practice Lead, Financial Planning & Analysis, AFP 

This is the first of a two-part post on integrated planning. Part 1 focuses on how companies use integrated planning to make smarter business decisions; part 2 delves deeper into the technology implications.

Integrated planning is becoming the new buzz phrase in finance. It means merging the financial and operational planning processes to allow management to make smarter decisions up and down the value chain.

To execute on this mandate, finance must combine disparate streams of information into one view, which includes financial and non-financial information, so everyone can feed the same data into their models. Finance, business, and management need to see down to the transaction level how changing business drivers affect financial performance today and in the future.

According to Dean Sorensen, an independent consultant and integrating planning expert, the approach helps companies handle the growing complexity of their businesses. As complexity rises, integration provides the means to accomplish objectives that become increasingly difficult to support with fragmented processes and systems. Integrated planning gives companies a real advantage.

·           It provides greater insight into financial and operational risks

·           It optimizes operating performance, by breaking down functional silos

·           It optimizes investment ROI, by managing risks associated with project cash flows

·           It cascades realistic and adequately funded targets

·           It helps them to respond quickly to change.

The drivers of change

The primary reason integrated planning is become more of a household term is the changing role of the CFO. “The CFO is becoming more important,” said Pras Chatterjee, senior director of product marketing, enterprise performance management at SAP. In the past, the budget and planning were done at a centralized, high level only. Today, finance functions are embedded in regional and functional entities and each create its own budget. According to Chatterjee, Integrated Planning is the glue that holds all these together, allowing senior finance leaders to have a line of sight into various budgets and allowing budget owners to make sure they’re all looking at the same numbers. “Technology brings all these plans together,” he said.

Integrated planning is happening within a broader context. According to Christian Gheorghe, CEO at technology vendor Tidemark, three shifts are affecting the office of CFO and driving companies to take a holistic view of the business:

1.      The impact of digitalization: Companies are changing the way they are thinking about how to compete and measure performance in the digital economy. To have a clearer line of sight into what’s ahead, companies must engage more people in the activity of forecasting. “In the past, planning was an activity handled by a few. Going forward, the pressure of this new environment will force companies to push it into the periphery of the enterprise,” Gheorghe said.

2.      Shifting business models: The digital transformation also is forcing companies to rethink their business models.  “The finance team is moving from a small ‘a’ to a big ‘A,’ from analysis to analytics.”

3.      A secular shift in technology. Finally, new technologies are not just about handling ever-larger sets of data, but also bringing together different data sets. “We’re moving into the intersection of collaboration, mobility, conversation platforms, consumers and internal data,” he said.

Cox Wood: How Integrated Planning Works

A good example of how integrated planning works in practice is Cox Wood, an industrial manufacturer of treated wood products. Matt Yaun, Chief Administrative Officer, oversees enterprise wide functions in the areas of finance, HR, IT and business analysis. He relies on a solution called River Logic to bring all these parts together into a single integrated platform, so he can run models that connect operational decisions to financial outcomes and vice versa. For example, Cox models how capex decisions affect its credit capacity and how pricing decisions impact operational choices.

Finance plays a key part in the company’s integrated business planning approach, according to Yaun. “Finance verifies that the models remain current; it also runs different scenarios that help discern the income statement and balance sheet impact of operational decisions in real time,” he said.

Finance and operations must work hand-in-hand in the budgeting process. “At the C-level we guide Finance to run different scenarios to test how the budget will perform at different levels of capex expenses and pricing,” Yaun said. “Planning is only as good as understanding how demand will impact the organization’s financial performance,” Yaun said. “You can’t reach back into the supply chain with promises or requirements without that understanding.”

Integrated business planning enables Cox to make tough resource-allocation decisions. Cox Wood is privately held and has limited financial resources, namely a bank revolver and some access to family equity. As a result, managing capital capacity is essential. “I need to know what my balance sheet will look like in three, six and 12 months,” Yaun said. To do that, “I need to run all these scenarios and continuously improve our capability for prescriptive analytics.” Not figuring those out upfront can mean not having capacity later to take advantage of attractive opportunities.


Today’s finance departments face a very different set of challenges, according to Meredith Hobik, Product Line Leader, Finance, at Anaplan. The stakes are higher and the pressures are greater. “To perform its basic tasks and get the enterprise conversation going, FP&A need tools that break down organizational silos. When you’re not connecting finance and operations it’s hard to make smart decisions.” According to Hobik, “it’s an opportunity for FP&A to take on more responsibility.”