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Solver Global

Future Planning: Budgeting, Forecasting, and Modeling


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    This article focuses on what planning will look like in the future, zooming in on what you need to know about finding the right tool for your company.

    In the future, CPM platforms will offer fully integrated strategic planning, budgeting and forecasting functionality as part of their CPM suites. Here are some of the key functionalities that will help support budgeting and forecasting:

    Event-Driven Functionality

    CPM Suites will increasingly offer automated modelling functionality so that managers quickly can provide progressive plans and scenarios that are driven by events. In other words, if there is a market crash, an organization may quickly need to produce an updated cost reduction budget, or if an organization is looking to acquire another business, they may need to analyze the cash flow impact and produce pro-forma financial statements to executives to aid them in making optimal decisions.

    Purpose-Driven

    Other significant functionality that will be easier and greater in future CPM suites is the ability for smaller companies or resource-strapped accounting departments to automatically create budgets or forecasts to be utilized. This can remove the big use of manual, non-integrated spreadsheets that exists today for special or departmentally-driven micro-planning processes such as the examples provided.

    Strategy-Driven

    Today most organizations enter and store their strategic goals and initiatives outside their CPM tools, in Microsoft Word or PowerPoint but in the future they will be able to easily capture these in their CPM suite and therefore integrate the related key metrics in budgets, forecasts and reports, thus making sure that all users have constant transparency to strategy and goals for their decision-making processes. This is incredibly valuable to an organization because it helps ensure that decisions at all levels are aligned with the planned strategic direction of the organization.

    Budget Planning Optimization

    While preparing an organization-wide budget typically is a formidable process in itself, especially for bottom-up processes where a big number of people are involved in entering and reviewing budgets, it gets even more complicated when advanced business rules and constraints are involved. The actual planning process ends up becoming very complicated and time-consuming as a result of many decision points that need to be evaluated all at once, including demand in market and availability in funding. In future CPM suites, planning and analysis optimization techniques will more effectively translate business rules into mathematical formulas that can be used to create dynamic budgeting and forecasting scenarios. Furthermore, integrated algorithms will be able to solve those equations and produce the best budget allocation options among all possible scenarios and types of drivers, such as risk reduction, cash flow targets and profitability goals.

    Machine Learning and Forecasting Automation

    Wikipedia describes machine learning as “the subfield of computer science that gives computers the ability to learn without being explicitly programmed.” Recently, there has been increasing interest in and development of algorithm-driven programs to automate the ability of software programs to perform all kinds of personal and business tasks. In the field of CPM, this includes forecasting future metrics based on historical data as well as current and estimated conditions, such as weather, inflationary risk, and more. The more variables you add to the mix, the harder it is for a human brain or basic spreadsheet models to figure out, and the better suited advanced algorithms that dynamically update and improve themselves are to perform tasks such as forecasting.

    To read more about Future Planning in Budgeting, Forecasting, and Modeling, click here.

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