The COVID-19 pandemic caught most companies unprepared. Overnight, the impact of uncertainty, dynamics and complexity on markets could no longer be ignored. Local events in an increasingly interconnected economy and uncertainties such as the climate crisis will continue to create high volatility and even chaos. Accordingly, many organizations will have to adjust their corporate governance to meet these demands. Although many initiatives have already been realized around planning and forecasting in recent months, too many were just short-term fixes that did not bring the significant and lasting improvements required.

This study examined the contribution modern planning and forecasting can make to corporate management. We asked companies around the globe about the measures they are taking to modernize and the challenges they need to address to meet elevated requirements.

Planning and forecasting is currently being put to the test in many companies due to shifted priorities. Experts and decision-makers are asking themselves the following questions: Is our approach still up to date? Is our chosen technology still fit for purpose? Does the effort match the benefit? Are there better methods? Particularly in dynamic markets, up-to-date information is essential for well-founded decisions. In order to discuss the contribution that planning and forecasting can make in the future, we asked our survey respondents about their importance as well as their new requirements and challenges. We also reveal the measures companies are taking and planning to take to achieve their goals.

In an increasingly dynamic world, the predictability of events is low

89 percent of the companies surveyed believe that the predictability of important events that significantly affect their own business is low or close to zero. Where dynamics and complexity are high, predictability is low. Increasing dynamics means that traditional budgeting is losing relevance for many companies. Therefore, more than 80 percent of organizations agree that it will become more important to rely on quick forecasts instead of elaborate budgeting in the future. The relevance of continuous forecasts with automated projections will thus continue to increase.

In dynamic markets, the regular updating of forecasts and projections is a core requirement in order to quickly interpret signals from the market and understand their impact. Forecasts must be able to be produced quickly and at short notice to provide relevant and timely insights for management. Today, four out of ten companies update their forecasts at least once a month, and for leaders it is even more than six out of ten. This is not feasible with a ‘more of the same’ approach, so the pressure for substantial adjustments is correspondingly high.

The importance of planning for agile corporate management has increased as a result of the pandemic

Especially during the first months of the pandemic, controlling had a very high priority in many companies, as it is often the controllers who collect information from all areas of the company, organize it and translate it into helpful recommendations for action.

The elevated importance of forecasts and plan revisions in the context of high uncertainty is reflected in the frequency with which companies put in increased effort. One driver for this was the need for many revisions due to significantly changed epidemiological parameters and the political measures taken to tackle the pandemic. As a result, investment in these areas has been extended rather than reduced, unlike many other areas.

Current challenges in planning and forecasting exist in almost every company

Planning and forecasting is viewed with suspicion in many organizations. It takes too long, ties up too many resources, produces high costs and the quality of the results is not good in relation to the effort involved. This is the opinion of many critics. The main challenges include the efficiency, duration and transparency of planning processes.

Lengthy planning processes with bureaucratic coordination and negotiation rounds have long been outdated. Especially in times of crisis, no company can afford this. With increasingly dynamic markets and competition, up-to-date information is essential to make well-founded decisions. For their management, organizations require faster forecasts more frequently.

Automation plays an important role here. Automated forecasts require a high-quality data inventory that is regularly fed with up-to-date data from internal and external sources. The time-consuming consolidation of this data from a variety of source systems not only involves plenty of effort, but also delays its provision. As a result, the use of data from multiple sources is by far the main cause of many of the challenges mentioned above.

Modern software for better integration and stronger automation

Many companies have already invested in better data management, responding to the challenge of having many source systems – even if this struggle sometimes seems similar to that of Sisyphus.

Technical integration automates the data flows between sub-plans by translating the business planning model into processes and rules in the software. As the relevance of linking further operational sub-plans increases, the technological basis must also become more powerful.

The introduction of new software as well as the more extensive use of existing software is the third major area in which companies have invested. This shows once again that organizations see the right software support as an essential lever for improving planning and forecasting.

Operational sub-plans and sophisticated simulations provide directly actionable findings

The expansion of planning, which is often very financially oriented, to include operational sub-plans is one of the most important topics in planning and forecasting. With this, companies get a better picture of their internal and external situation and interrelationships.

Simulations, on the other hand, are essential for the well-founded evaluation of alternative courses of action. Done correctly, they provide important information for decision-makers. Increasing dynamics and the associated uncertainty increase the importance of simulations for corporate management.

They help to better evaluate possible future developments as well as one’s own measures. Based on the insights gained, the necessary preparations and measures can be initiated.

BARC Recommendations

For the future orientation of planning and forecasting, several major challenges need to be addressed: Lack of efficiency, excessive bureaucracy, long lead times and lack of transparency in planning processes.

Based on the results of the survey and our consulting experience, we at BARC have formulated the following recommendations to help you align planning and forecasting with your current and future requirements:

  • Identify the time wasters in your processes. Is it never-ending reconciliations, the tedious entry of meaningless details or the lack of automation in data imports, transfers or projections? Do users have problems understanding or using the solution? Is the software too slow? Can changes be incorporated without time-consuming programming or not? If you do not understand the disease, you cannot recommend the right treatment.
  • Evaluate the costs and benefits of planning and forecasting. In volatile markets, plans are often difficult to formulate and, once written down, can prevent new opportunities from being seized. That is why eight out of ten companies say it is more important to rely on efficient forecasts and projections instead of tedious budgeting. A similarly high proportion also sees the advantage of rolling forecasts compared to forecasts with horizons stopping at the financial year-end.
  • Automate forecasts and projections with predictive methods (statistical methods or machine learning). Only with decent automation can you calculate and update forecasts quickly enough and with little effort. Automated forecasts require comprehensive data of high quality to create meaningful projections. Automated forecasts significantly simplify and accelerate the simulation of different scenarios and thus offer another important glimpse into the future.
  • Think beyond finance. Incorporating key operational sub-plans into your business model broadens the view of important challenges, integrates knowledge and expertise from many areas and clearly shows crucial interrelationships. Absent operational plans are often the missing link between the design of an action and its implementation. Good connection speeds up implementation and returns relevant results quickly.
  • Modernize your software if you have not already done so. Modern software not only supports planners through better usability, but it also facilitates the efficient preparation of the required data, enables the integration of operational sub-plans and provides the tools for automated projections. Many long-established solutions no longer meet current requirements. If it takes a lot of manual effort to prepare your data, creating projections takes forever or adjustments to the planning model are avoided because they are too risky or expensive, then you should consider better software support.
  • Work together more closely. Assistance for planners from controllers significantly reduces the effort of planning and forecasting and improves the flow of information in all directions. To make optimal use of predictive technologies, you need the right skills in your company. A good understanding of the methods and data (data literacy) is needed in controlling to obtain valid results.
  • Optimize technology, methods and organization in a well-coordinated way. Isolated adjustments often only lead to short-term improvements. New methods usually require different software, but new software always enables new approaches and often more efficient processes. Software alone does not solve problems; it is merely the technological basis for an agile and flexible environment. However, the necessary skills for effective use must be actively built up. Completely relying on external expertise for changes and adaptations is no longer appropriate in the face of constant changes.

Infographic of the key findings

BARC's "The Future of Planning" Infographic


The Future of Planning

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