The coming months feel entirely unpredictable, causing apprehensive businesses to take a hard look at their short and long-term growth plans. The ability to forecast financial performance, identify potential risks and opportunities, and provide insights to management is crucial. To effectively manage the business when you don’t know what’s going to happen next, finance teams should focus on three areas: planning, alignment, and cost control.
Plan for multiple outcomes
Implementing flexible budgeting and forecasting processes and continuously reviewing and updating risk management strategies will help you prepare for eventualities. The most effective teams understand business drivers and metrics and can connect the metrics to the financials. This connection helps teams know what levers to pull and how to pivot throughout the year to achieve financial results.
When you’re putting a plan together, consider the planning methodologies. Strike the right balance between top-down and bottom-up planning in order to gain a comprehensive understanding of the business as a whole. Your team is one of the only business units that’s able to look at all financial aspects of the company — people, vendors, spends, and more — across all departments. The finance teams that drive the most value are the ones that can connect the most pieces together. Leverage all the information you can to tell the story of the business through multiple scenarios.
Build three plans: a best-case scenario for when things go right, a worst-case scenario that you’ll align with board expectations, and a stretch plan that leadership can rally around.
Align across the business
Working together as a team to deliver on the plan you set should be top of mind for leadership. The Finance function has the unique opportunity to work with leaders across the business and bring alignment toward a singular outcome. Start by communicating effectively with business leaders, prioritizing listening and understanding what’s important to other teams. Once you understand their needs, you can help marry their objectives with broader organizational goals. This builds trust among the teams and gives everyone a north star to guide decisions. To do this effectively, ensure that you have alignment across team members, including:
The board. Find agreement on the minimum plan that your organization will deliver on. Based on that, you can discuss the different actions you can take per quarter to achieve results.
The executive team. An executive team that’s not aligned will lead to fragmented decisions and ultimately lost time and money executing on activities that shouldn’t be supported.
Functional leaders. It’s equally important to ensure functional leaders are aligned on overall company strategy and priorities. If you have executive leadership alignment, but line managers aren’t informed, or in agreement with the direction of the organization, that disconnect can waste time and money. Ultimately, trying to execute on a strategy that team members don’t understand or follow is a failure of the leadership team and will keep you from delivering results.
Use transparency to control costs
The key to cost control is visibility. The ability to view costs for people, marketing, and vendors in one centralized location enables you to make decisions with different leaders regarding multiple areas of spend more efficiently and effectively. By keeping costs in check, businesses can identify areas where they can improve operational efficiency and reduce waste, leading to cost savings and improved performance. Prioritizing cost control can help teams
- Ensure financial stability by avoiding overspending, having enough money to cover expenses, and investing in growth.
- Support growth by freeing up resources to invest in growth opportunities, such as expanding offerings or entering new markets.
- Improve decision-making by providing accurate financial information, which can help you make informed decisions about where to allocate resources and how to optimize operations.
- Meet goals by better managing resources.
More Finance priorities for 2023
Interested in hearing more? Check out our on-demand webinar, Navigating the Headwinds: Finance Priorities in 2023, where we spoke with Vareto President Lalit Singh, FP&A Strategy Consulting CEO James Myers, and Mobileum VP of FP&A Glenn Snyder about strategies for FP&A in 2023.