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Connected Financial Planning System

Before diving into the Financial Planning System, we suggest reading The Finance Calendar, a playbook for building Corporate Finance. The Finance Calendar provides an operating guide to define your annual and monthly cadences for key Finance activities. The Financial Planning System will help you execute on your cadence with efficient, frictionless collaborative financial planning.  

Financial Planning System Template

To help other finance leaders establish a more defined process, we’ve created a free Connected Financial Planning System template. It includes a total of six separate but connected models: 

  1. Operating Model
  2. Corporate Finance Model
  3. Customer Operations
  4. S&M
  5. G&A
  6. R&D

Components of a Financial Planning System

Building a financial planning system starts with setting up your (1) data models that provide the system’s foundation. Next, you set up your (2) Long-Range Plan to do strategic planning and set guardrails for your financial planning. Then, you give your targets to budget-owners with (3) department models. Lastly, you add everything up in the (4) Operating Model, which serves as the source-of-truth.

(1) Data Management Models: These models are home to crucial data that is fundamental to the financial planning system, and include:

  • Financial Reporting Data: Actuals from an ERP or accounting system. This data is used to calculate a budget v. actual to measure budget owner performance.
  • HR Data: Payroll information used to forecast payroll expenses. Providing your financial planning system with this data eliminates the need to enter current headcount information manually.
  • CRM Data: Customer and sales information to allow the sales and revenue forecasts to start with the most accurate starting point.
  • Metadata: All other necessary information, such as general ledger accounts and departments.

(2) Corporate Finance Model: This model serves two primary functions. First, this is where The Long-Range Plan (or “LRP”) is forecasted for 3-5 years using high-level assumptions that are typically growth or margin focused. After the LRP is set, the Finance team asks budget owners to forecast expense and revenue for a much shorter period (called the “Bottoms-up” period). The top-down plan created in the Corporate Finance Model serves as guardrails for budget owners to control spending.

(3) Department Models:
Each department (or operating function, such as Customer Operations, S&M, G&A, R&D) has its own personalized financial model. Once a bottoms-up period is defined by the Finance team in the Corporate Finance Model, budget owners input their forecasted hiring and spending into their models within the top-down budget parameters. After forecasts are created, budget owners can then compare their forecasted spend relative to their respective budgets set by the top-down budget. In summary, department models allow budget owners to:

  • Compare forecasted spend to their budget set by the top-down plan.
  • Input forecasted spending by type (software, professional services, etc.).
  • Input forecasted hiring and corresponding incremental payroll costs.
  • Measure their actual performance relative to their forecast for a given period to identify performance gaps.

(4) Operating Model: This model serves as the source-of-truth for the entire finance function of your business. In summary, the Operating Model:

  • Aggregates all department-level expense and revenue forecasts from the department models for the bottoms-up period;
  • Pulls in the top-down expense and revenue forecasts from the Corporate Finance Model for the long-range period;
  • Updates all forecasts with actuals from the Financial Reporting Model as time passes, and;
  • Pulls in archived financial plans presented to the Board of Directors, allowing the user to compare previous plans with current projections and actual performance.

Due to varying export formats from ERP and HR systems, we did not build the template to incorporate actuals, CRM, or HR data. This template focuses primarily on forward-looking planning but can be updated with your historical information.

Once your team copies the template for your internal use, we highly recommend creating and connecting one additional stand-alone model that is home to your accounting, HR, and CRM data to incorporate the Budget v. Actual aspect within your Financial Planning System. Simply use the IMPORTRANGE function within Google Sheets to send actuals data to the existing models within your system. See more guidance here.

Each model has instructions on helping your team get set-up to distribute the department models to your budget owners and start creating your forecasts. Please reach out to financeace@tracehq.com with any questions, comments, or concerns.

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Before diving into the Financial Planning System, we suggest reading The Finance Calendar, a playbook for building Corporate Finance. The Finance Calendar provides an operating guide to define your annual and monthly cadences for key Finance activities. The Financial Planning System will help you execute on your cadence with efficient, frictionless collaborative financial planning.  

Financial Planning System Template

To help other finance leaders establish a more defined process, we’ve created a free Connected Financial Planning System template. It includes a total of six separate but connected models: 

  1. Operating Model
  2. Corporate Finance Model
  3. Customer Operations
  4. S&M
  5. G&A
  6. R&D

Components of a Financial Planning System

Building a financial planning system starts with setting up your (1) data models that provide the system’s foundation. Next, you set up your (2) Long-Range Plan to do strategic planning and set guardrails for your financial planning. Then, you give your targets to budget-owners with (3) department models. Lastly, you add everything up in the (4) Operating Model, which serves as the source-of-truth.

(1) Data Management Models: These models are home to crucial data that is fundamental to the financial planning system, and include:

  • Financial Reporting Data: Actuals from an ERP or accounting system. This data is used to calculate a budget v. actual to measure budget owner performance.
  • HR Data: Payroll information used to forecast payroll expenses. Providing your financial planning system with this data eliminates the need to enter current headcount information manually.
  • CRM Data: Customer and sales information to allow the sales and revenue forecasts to start with the most accurate starting point.
  • Metadata: All other necessary information, such as general ledger accounts and departments.

(2) Corporate Finance Model: This model serves two primary functions. First, this is where The Long-Range Plan (or “LRP”) is forecasted for 3-5 years using high-level assumptions that are typically growth or margin focused. After the LRP is set, the Finance team asks budget owners to forecast expense and revenue for a much shorter period (called the “Bottoms-up” period). The top-down plan created in the Corporate Finance Model serves as guardrails for budget owners to control spending.

(3) Department Models:
Each department (or operating function, such as Customer Operations, S&M, G&A, R&D) has its own personalized financial model. Once a bottoms-up period is defined by the Finance team in the Corporate Finance Model, budget owners input their forecasted hiring and spending into their models within the top-down budget parameters. After forecasts are created, budget owners can then compare their forecasted spend relative to their respective budgets set by the top-down budget. In summary, department models allow budget owners to:

  • Compare forecasted spend to their budget set by the top-down plan.
  • Input forecasted spending by type (software, professional services, etc.).
  • Input forecasted hiring and corresponding incremental payroll costs.
  • Measure their actual performance relative to their forecast for a given period to identify performance gaps.

(4) Operating Model: This model serves as the source-of-truth for the entire finance function of your business. In summary, the Operating Model:

  • Aggregates all department-level expense and revenue forecasts from the department models for the bottoms-up period;
  • Pulls in the top-down expense and revenue forecasts from the Corporate Finance Model for the long-range period;
  • Updates all forecasts with actuals from the Financial Reporting Model as time passes, and;
  • Pulls in archived financial plans presented to the Board of Directors, allowing the user to compare previous plans with current projections and actual performance.

Due to varying export formats from ERP and HR systems, we did not build the template to incorporate actuals, CRM, or HR data. This template focuses primarily on forward-looking planning but can be updated with your historical information.

Once your team copies the template for your internal use, we highly recommend creating and connecting one additional stand-alone model that is home to your accounting, HR, and CRM data to incorporate the Budget v. Actual aspect within your Financial Planning System. Simply use the IMPORTRANGE function within Google Sheets to send actuals data to the existing models within your system. See more guidance here.

Each model has instructions on helping your team get set-up to distribute the department models to your budget owners and start creating your forecasts. Please reach out to financeace@tracehq.com with any questions, comments, or concerns.

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