04 Jan 2018
By Mike Reed, Partner at Oliver Wight Asia Pacific
In the first part of my four-part blog series on the Role of Finance in IBP, I lay down the groundwork and explain how finance is placed within an organisation’s structure. In part two, I discuss the three core roles of finance, and how finance is integral to IBP’s success.
The central role of finance in IBP is to provide a vital business partnership, enabling visibility and accountability for the financial outcome. It becomes part of leading the business, not only in day-to-day activity, but by engaging in commercial strategies and solutions that drive better results.
The job description
The three core roles of finance in IBP can be described as the following:
Collaborator: finance collaborates with its business partners and process facilitators through the different elements of the IBP process to help develop and critique assumptions and translate these into financial terms.
Enabler: finance challenges and supports the organisation, and ensures that all the financial implications are explored and understood, and built into the recommendations that lead to decisions being made within the IBP process.
Custodian: finance safeguards the integrity of the financial projections, making sure forecasts are credible, business cases are robust, performance measures are accurately reported and gaps to commitments are made visible and are understood across the planning horizon. It also ensures that the drivers for the 24-month financial forecast are correctly captured, including; volume, sales, trade spend, costs and capital expenditure plans.
How finance can make IBP a success
For IBP to function as intended, there are two key principles which the finance team must uphold.
i) being ‘roughly right’ is preferable to being ‘precisely wrong’. The finance team should focus on the things that make the difference, rather than losing time in arbitrary details. IBP is about the future and is based on assumptions and as such, nothing can be precise, only directional. This approach may be a culture change for some, who are more accustomed to a high degree of precision in reporting.
ii) Insist on one set of numbers to run the business, with finance driving the integrity of the financial projections. This means all areas of the business use the same ‘source numbers’, and questions are managed through the monthly IBP cycle, rather than off-line or in separate forums.
In the next part of this series, we take a closer look at the IBP review process, and the five key IBP questions that the finance team are responsible for.
For more information on the role of finance in the IBP, read our latest white paper here.
Partner, Oliver Wight Asia Pacific
Mike Reed has twenty-five years experience within industry that includes a number of multinational firms such as Unilever, Mars and Simplot. His very strong knowledge of how to effectively redesign and implement key business processes and ensure alignment