Scenario Analysis & Rolling Forecasts for Rapid-Response Finance

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

We proactively keep up with latest trends, news and updates in Modern Finance and CPM & EPM solutions and are committed to providing you the same through our CPMConnect newsletters.  Just sign up below.

Happy to further cater our information to your needs.  You are welcome to opt out at any time.