Real-Time Scenario Planning: A Modern Day Superpower

One of the highest-profile tasks for those working in financial planning and reporting roles is the preparation and delivery of the financials. Some love it. Some dread it. But regardless of how you feel about it, the tools which support you in your work can be pivotal to your ability to be successful in this key task.

Let’s explore one of the most important settings, the monthly management meeting. This example looks at a consulting business but can be applied to any type of business.

The Situation: A ‘Last Minute Surprise’ in The Monthly Management Meeting

Today is the Monthly Management Meeting. You’ve prepared your slides. You know your numbers. The deck is up on the big screen, and everyone has a paper copy. You are ready to kick off the meeting. Then the CEO walks into the room looking a little uneasy…

“I just got off the phone with the CEO of our largest customer. The ongoing uncertainties in the economy are creating significant problems for them, and they have to cut back their spending with us from next month by 50% for at least the next few months. What does that mean for our numbers?”

You are the person responsible for providing the analysis of the numbers. You know your script inside out. But that script is no longer relevant in the same way as it was 1 minute ago. Your numbers are out of date.

An awkward silence hits the room. It is your turn to speak.

Outcome 1: “I need to go away and re-run the numbers.”

You currently run your forecasts out of models in spreadsheets, which you copy into a slide deck each month. The models do a decent job but can be cumbersome to update each month, and they are becoming increasingly slow as they increase in size.

You: “Thanks for the updated information. I will need to go away and update the numbers and come back with some estimates.”

CEO: “Please can you give me an estimate now?”

You: “Sorry, I understand why you need to know the financial impact of this situation, but I don’t want to provide inaccurate information. If you give me a couple of days I can re-run the numbers and come back with something. Would that be ok?”

CEO: “I need to know the answer now, because I have a meeting with our investors straight after this meeting, and they will need to know full details and what we are going to do about it.”

You completely understand his challenges, but you need time to go and proof-check any changes to the numbers. Whilst it feels unfair, your position in the room has weakened, and you know that this shouldn’t be the case. You knew your numbers. You just didn’t know this was going to happen.

Frustrations in the room begin to rise.

Outcome 2: “Yes. Let’s Work This Through Here and Now, Together”

You have a modelling platform that is designed to manage real-time scenarios like this, and even better, it is connected to a digital version of the management report which can be accessed by all in the room. This report will update automatically as you make changes to the underlying financial models.

You: “Okay. Let’s update these together now. If I pull out the revenue from next month for the upcoming 3 months, you will see a revenue decrease of around £1m, which equates to 1% of our revenue for the year. Ignoring any cost management, this will carry down to the bottom line, which will decrease our profitability by almost 10%.”

CEO: “I feared this could be the case. We can’t control this revenue situation, but do you have any thoughts on how we can recover some of the profitability through cost savings?”

You: “Looking at our headcount plans, I see we have planned for several staff to be hired to manage a new customer we just won. However, if we aren’t going to be working with our main customer so much for the coming months, our team can be reallocated to this new customer, and we can push back the new planned hires who haven’t signed yet. This would recover around £200k. It doesn’t fix the whole situation, but it definitely will help.”

CEO: “Thanks. Yeah, it is a bad situation, we just have to do the best we can. Does anyone else have anything else to help with?”

Head of Account Management: “Just this morning I heard that we will get a brand new project in from another customer, which we hadn’t yet committed to the revenue forecast. They want to start next week, but I told them we need to start in a few weeks because of capacity issues. If I can get staff, we can get going right away. This will be around £300k over 3 months.”

CEO: ” Brilliant. Thanks. Can you update the forecast numbers?”

You: “Yes – the updated number is in the model and up on the screen now. As you can see, if we can execute these changes, then we can recover £500k of the lost £1m, and after this meeting, I can get to work with finding more opportunities. I will book a meeting with the Account Directors now and will review our operating costs for some additional saving possibilities.”

CEO: ” Brilliant – please keep me updated. This will help in the meeting with the investors.”

You showed that you have true ownership of the numbers and even better, you have:

• Built credibility with the CEO and the Leadership Team
• Demonstrated that you are a valuable business partner to the team.
• Driven collaboration to find a solution in real-time time that can be acted upon.
• Provided the CEO with information to navigate a potentially difficult meeting with the investors.

The Reality Today: Real-Time Scenario Planning Has Become a Business-Critical Capability

There has arguably never been more uncertainty in the economy than what we are experiencing now. Events like Covid, Brexit, The War in Ukraine, The Energy Crisis and even the Suez Canal Blockage are creating enormous challenges for businesses. The strategic importance of being agile and making quick decisions from reliable forecasts has never been greater. Businesses that aren’t doing this increase the risk of being left behind, and those that are embracing real-time scenario planning will significantly increase their chance of succeeding in one of the most challenging economic eras in recent decades.

Ultimately, the message is simple: Embrace real-time scenario planning and get yourself a seat at the table to drive improved decision-making in the business.

For further information read our scenario planning best practice guide here.

By Iain Main

Iain has been working at Bedford since 2021, and partners with customers around Europe to help them get the most out of Anaplan by utilising it in new ways across their organisations. He has also implemented Anaplan with a number of customers.

Prior to joining Bedford, Iain worked in various roles across finance in both large multinationals as well as start-ups and is passionate about the role that finance teams can play in driving organisational performance.