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Planning and Predictive Finance

In finance, when you talk about planning and future prediction there are always two levels. One is the macro level where you plan the strategic direction of a company and the other is the micro level, where all business operative are acting on a daily base to reach strategic goals. Best possible “decision-making” is one of the key activities of both levels and plays a vital role in any process. A decision-making process results in a final choice what action to be taken.

In a contract award process (micro level) for example it is key to calculate the best possible offer faster and cheaper than your competitors do. Having not enough or not the right information or having an overload of information but not the right tools to analyze will lead to the following: Either you calculate a too high risk premium and get underbid by your competitors or you calculate a too low risk premium and cannot hit your gross margin later on. Either way won’t be beneficial and can threat the persistence of your business or your personal career at least.

No Accuracy, No Prediction

With traditional systems (no complete and fast calculation in one system) these disadvantages are hard to avoid. Iterative processes are heavily time consuming due to different planning processes and interfaces of different teams, areas and departments of an organization. Quite often there is no consolidation of related plans between objects. This results in a lack of insights of operational planning into the financial bottom line and manual consolidation of planning across objects has to be performed - which is time consuming and cost-ineffective.

The inability to update plans and forecasts and missing “what-if” capabilities will result in the fact that little information and a historical analyze combined with gut feelings are the foundation of decisions.

Rely on Real Facts rather than your Gut Feelings

The unique business value of SAP S/4HANA is to have access to a single consolidated view of all planning and forecasting information in one system, which combines transactional and analytical data. Consequently the rollup of planning from different subsidiaries into corporate planning and planning from operations into financial planning is possible to manage the impact of operational plans. The risk of your offers can predicted better. Therefore, instant financial analytics across multiple dimensions of finance and operations should be in place, so that real-time information to immediately update plans and forecasts, real-time revenue and cost analysis and liquidity forecasts can be performed.

But knowing in real-time that you lose a customer to a competitor right now is actually too late. The use of planning and “what-if” simulations is necessary for both, a backward- and a forward-looking perspective on your business. To evaluate the financial implications of strategic business options and make the right decisions, modeling and prediction have to be employed for both, the macro and the micro level.

Finance can build representations of the most likely business scenarios for revenue, margin, and operational costs. Pattern, trends, variances, and correlations that directly drive financial business performance can be exploited. Anticipate cash-flow issues and take preventive action. It will bring you into the pole position during the next contract award while keeping the risk at a minimum level.

Stay tuned for the next use cases and follow me via @SDenecken for latest news.


Overview of SAP S/4HANA use cases: #S4HANA - the use case series - Intro & Overview