In my next couple of blog posts we are going to highlight both the problem and potential solutions to what I believe to be a key issue
Click to download Supporting Collaborative Fact Based Decisions White paper
impacting agile planning and forecasting within companies. That is:
- Accounting typically requires most budgets and forecasts to be prepared using the chart of accounts
- Operation’s think in terms of operational metrics which are independent of the chart of accounts.
Both agile planning and fact based decision making requires the data, information, drivers and calculations to move seamlessly between both.
Agile planning and fact based decision making requires operations to have visibility to, and an understanding of:
- The implication of changing financial drivers that accounting is in the best position to forecast (typically defined in terms of the chart of accounts).
- The implication that changes in operational drivers have on overall company profitability (typically defined in operational terms).
Likewise, Accounting needs to have both visibility and an understanding of:
- The operational levers, knobs and constraints that operations use to manage their business.
- How the business flows from the operational perspective to the financial results.
Unfortunately, typical budgeting and forecasting systems are defined based on the chart of accounts.
For a more in depth look at some of the difference ways operations and accounting look at problems please check out the interactive whitepaper “ Supporting Collaborative Fact-Based Decisions”. The premise of the white paper is “When Finance and Operations make decisions in isolation, the opportunity is lost”.
My next blog will discuss how CPM and a metrics approach can help bridge the differences.