Is your Company struggling with its strategic plan?

Although your Company may be well-organised and resourced, significant problems can consume its strategic planning process. These problems can be a result of financial modelling experience and a lack of best-practice financial modelling with the model build of the strategic plan.

Some of the potential problems consuming time and money with the strategic plan

Firstly, there needs to be some roadmap for the planning process. The strategic plan is a detailed process involving numerous stakeholders. You need to set some milestones for at least two or three cuts of the strategic plan – and stick to them!

It is vital to maintain a rigid approach to archiving or backing up your file at least daily, if not twice daily. If something fundamentally happens to the model, at the very least you can close the model and open up the previous archived file from that morning or from lunchtime, and begin using that model version as the live model. Another benefit of model archiving is the capacity to cycle back to previous model versions and understand the evolution of the model build.

A related problem is version control. This is especially an issue if there are multiple developers of the strategic plan model in your Company. It is vital your colleagues are using the latest model to update business unit XYZ’s financial numbers, or the revised forecasted economic numbers from the treasury department. Communication and strong attention to detail are paramount.

If your Company is diverse with multiple operations, business units or operates in complex industries, then it is even more fundamental to engage relevant stakeholders from the business units or corporate functions in the strategic planning process. If possible, assuming they work close to your office, try to avoid initially communicating with them via email and instead set up face-to-face meetings. Throughout the planning process where appropriate, copy them on all email correspondence as they will feel greater stakeholder buy-in.

Maintain a record of all pertinent emails and source data files. Never source financial data from an email, as you will be sourcing data from a temporary email folder, which may throw up errors in your model in the future. Save all required source files from stakeholders and then import them into your Company’s strategic planning model. Never reference external files randomly in the model; maintain a designated section in your model for imported file links.

The strategic planning process is time-consuming and demanding on model developers. But you must always rectify model errors or alerts that appear through the model build. What may seem like an innocuous error in the income statement may cascade into multiple errors throughout your Company’s entire strategic planning model. The five minutes lost in correcting one error will be painless, compared to the thirty minutes or longer spent solving ten errors and two alerts.

It may sound comical, but compromised attention to detail can cause elementary mistakes. Be aware of foreign operations or business units sending source financial statements in foreign currencies; if it appears unclear then reconfirm with them. Incorporating a currency conversion schedule of their source file is an easy task to achieve seamless modelling in your Company’s strategic plan.

The strategic planning process can be iterative. Certain stakeholders in your Company will send you revised forecasts; especially business units exposed to commodity prices, or treasury who are compiling forecast interest rates or commodity prices. If you have built seamless functionality into your strategic plan model, and assuming the source file format has not changed; you can simply update the external link – but remember to open the file. Attempting to update a closed file’s links will not work – your file links will not update and your model will freeze. You will most likely have to shut down the file.

If your Company is sophisticated, then you may need to build separate strategic planning models by business unit or division. This will be especially true if you are using an older computer, because a model beyond 80MB starts to become unyielding and very hard to manage.

Solving your strategic planning problems

If your Company can overcome some of the above hazards and maintain financial modelling discipline during the strategic planning process, then you will be able to deliver a value-adding reporting tool for executive management. It is better to over-plan and be over cautious in the short-term, rather than the painstaking need to seek greater detail and implement it into your strategic plan at a later date.