Financial and Operational Planning

Financial planning, specifically, refers to the process a company uses to plan its resources and reach its monetary goals. Operational planning is the process of mapping out what needs to be done to make those goals happen.

Financial and operational planning aligns financial goals with a roadmap for day-to-day execution and establishes guardrails for resource allocation. By connecting financial targets with operational tactics, strategy can be delivered efficiently and in a financially feasible way.

The end goal of financial and operational plans is to optimize resources, manage risks, and stay on budget. To do this, financial and operational plans typically include the following components:

Budgets and forecasts

Plans generally include financial guardrails and estimates to determine what costs and resources are realistic to allocate or achieve given revenue targets or profitability goals. These can be static forecasts for a given period or project, or rolling forecasts that update over time. 

Workforce and capacity plans

Workforce and capacity plans lay out the people and skills required to meet business demand and strategic plans. These plans determine headcount levels, labor costs, and productivity assumptions across warehouses or factories, functions, regions, and time periods. Capacity planning specifically seeks to align resources, including workforce availability, with expected demand and service levels, ensuring the workforce isn’t overworked or underutilized. 

Supply chain and demand planning

Supply chain and demand planning focuses on forecasting customer demand while ensuring supply, production, inventory, and distribution plans meet that demand. Supply chain plans help organizations meet service levels, manage costs, and optimize capacity across suppliers, manufacturing, and logistics. 

Capital and capital expenses planning

Capital and capital expenses planning focuses on allocating resources for long-term investments, such as real estate for facilities and warehouses, heavy equipment purchases, and enterprise technology implementation. Capital expense plans help organizations manage financial constraints, estimate return on investment, and gauge operational capacity. Ultimately, capital plans ensure that major investments support the company’s strategic objectives.

Scenario modeling and what-if analysis

Assumptions, market conditions, demand, costs, pricing, and capacity are all fluid, and when they change, they directly impact financial and operational plans and expected outcomes. Scenario modeling and what-if analysis give finance teams a sandbox to test various scenarios, compare potential outcomes, and evaluate trade-offs, helping teams anticipate risks and prepare for best-case scenarios. 

Performance measurement and key performance indicators (KPIs)

Arguably the most important part of planning is reviewing the results. Performance management and KPIs allow finance and operational teams to track actuals against plans and budgets, identify variances, and gain a better understanding of performance drivers to improve the accuracy of future plans. 

While financial and operational plans are intertwined, they have notable differences. Financial plans focus on financial resources, such as budgets, revenue, expenses, and investments. Operational plans focus on the actions needed to achieve financial goals, including production processes, supply chain requirements, and workforce needs.

Financial and operational planning focuses on aligning financial targets and operational plans to improve budgeting, planning, and performance management. IBP extends this process beyond finance and operations to include other business functions. Sales, marketing, supply chain, and HR are brought into the fold to apply financial planning and analysis techniques, such as scenario planning, forecasting, and KPIs, to improve their own planning and performance management processes. IBP can be seen as the next level of financial and operational planning.

Even despite best efforts, organizations are typically held back in their financial and operational planning efforts by the systems and software they use to house data and create plans. Three of the biggest challenges planners face are as follows: 

• Disconnected data: When financial and operational planning data exists in departmental silos and can only be accessed via email requests or by manually combing through spreadsheets, aligning assumptions and maintaining consistency becomes a constant struggle: “Is this the most updated figure?” and “Who do I call to get that metric?” 
• Static plans in a dynamic market: Changing market conditions, demand shifts, cost volatility, and sudden policy adjustments can make annual budgets and quarterly forecasts feel rigid. When plans are set in stone, companies are less agile in responding to dynamic conditions. 
• Limited visibility: Without predictive analytics or AI to model scenarios and identify the true drivers of performance, teams cannot accurately assess risks or determine the best course of action. 

CCH Tagetik is a complete extended planning solution that covers all requirements for financial planning and analysis (FP&A) as well as supply chain planning, operational planning, and integrated business planning. In addition to bringing all enterprise planning functions under one roof, CCH Tagetik supports finance, operations, and business teams with rolling forecasts, scenario modeling, and robust KPI tracking.

The bottom line: Using CCH Tagetik Extended Planning, finance and operational teams are equipped with the insights and flexibility needed to plan confidently, respond to changing conditions, and optimize performance.