If the COVID-19 crisis teaches us anything, it proves that the annual operating plan (AOP) is a relic of the past. Want proof? According to the Association of Financial Professionals (AFP),[1] 85% of FP&A teams are now expecting to miss their revenue and earnings targets. Why does that matter?
Well, AOPs comprise tens and sometimes hundreds of business drivers designed to help guide decision-making. And now they’re all wrong. This is nothing new for Finance leaders, of course. Even without a viral pandemic, AOPs are often wrong within seconds of the final submission. What does that tell us? Here’s my take: AOPs do little to help guide decision-making in a fast-paced environment. They’re basically just tools to anchor performance targets.
That’s why Finance teams are adopting a combination of scenario analysis and rolling forecasts during these unprecedented times. Unlike the AOP, rolling forecasts and scenario analysis help Finance leaders actually manage financial goals AND help guide decision-making.
They are, after all, designed for rapid-response finance—keeping Finance teams leading at speed and staying agile. Let’s dive into how.
Re-posted with permission from Source
