Integrated Business Planning (IBP) is a method for identifying the gap between company objectives and expected outcomes. IBP is a cyclic monthly procedure that enables collaboration planning and departmental alignment through cross-functional inputs.
While implementing IBP is a major organizational shift, much knowledge has been gained about the essential success elements. When planning the adoption of IBP, the finance function plays an important role.
Using specified company objectives, IBP develops accurate financial and operational resource requirements to minimize risk and maximize cash flow or profit. Sustainable growth in IBP refers to the maximum expansion rate a company can support without new funding, not to more significant environmental, social, and governance factors.
Which Businesses Can Use Integrated Business Planning?
Integrated business planning can assist any company, whether you’re a big company with many assets or a small business.
IBP isn’t prescriptive. It can be customized to your company’s needs. Regardless of size or complexity, an integrated business planning approach can align departments.
This article breaks down the IBP journey into steps. See the IBP process below:
1. Identify What Is Preventing The Company’s Success
The complexity of a company’s functions varies greatly.
A company’s finance process may never attain its full potential if it’s not connected with other financial operations. Process integration may be inadequate, causing a bottleneck that stops the company from realizing its full potential. Thus, the first step in the IBP journey is to identify the constraints limiting the company’s potential.
2. Create A Product Prioritization System
Profit and loss are crucial factors to consider when performing a project.
When IBP is enforced, only the initiatives that are assured to be profitable are funded. Similarly, products are ranked. A company may also have to discontinue a product line with minor growth prospects, even if it’s currently profitable.
When IBP is implemented, cost-benefit analyses (CBA) become critical. Project managers must first conduct CBAs to ensure that the estimated costs and benefits line with the company’s aims.
Using hit-and-miss strategies reduces overall business efficiency and boosts chances of success.
3. Ensure IBP Process Is On Track
A strategically aligned IBP process can transform a firm. Rather than just balancing supply and demand predictions, IBP can assist professionals in making decisions that maximize overall corporate profit.
Once a company has defined goals, it must guarantee that they are being met. As a result, the business must regularly report on its progress to meet its deadlines and budget.
During this step of the IBP process, the organization has determined its skills. Some examples of these capabilities are as follows:
- Collaboration. Companies that realize the strategic advantage of collaborating with their suppliers and customers and combining their business plans can create a collaborative IBP phase. This is unlikely to be a strategic focus for organizations with supply chain dominance due to size or product distinctiveness.
- Risk management. This is for firms with extensive networks susceptible to global and geopolitical developments—for example, global supply chain companies and the finance industry.
- Innovation. Companies that can innovate and develop new products faster than their competitors in a highly competitive market are often seen in the tech industry.
- Knowledge management. For firms that rely heavily on knowledge employees and knowledge sharing between departments. Companies have IP to sell and protect. For example, consulting and software.
Once a corporation has determined its strategic competencies, it needs to implement or improve them. It will include an update on the plans’ status, risks, mitigations, and progress. The update provides sensitivity analysis around the techniques to achieve the strategic capability’s goals.
4. Set Common KPIs
Verify transparency of existing position and budget targets. Create cross-departmental key performance indicators (KPIs). Ensure that all parties agree on the definitions of these KPIs. This ‘good governance’ allows you to work towards similar aims. Transparency and confidence in information are improved. Assembling a ‘single version of the truth’ ensures a smoother planning process.
5. Adopt IBP-Supporting Technologies
Finance teams must have easy access to data from all operational areas. Rolling forecasts and better data usage require technology and transparency. You can’t manage well without the right tools. Modernize the planning process. Modern planning requires an IT-integrated planning solution to support all planning phases and provide reliable plan values and real-time analysis. For example, EPM software lets you assess, comprehend, and report on your business. It also encourages transparency, collaboration, and success across departments.
IBP is a continuous process that improves with practice. While IBP may not be flawless the first time around, it can be a very effective strategy for significantly improving business performance and establishing a durable competitive edge in the marketplace when adopted and managed well.
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