Planning and control is the activity of planning, executing and controlling the operational behavior of an organization based on its predefined objectives and strategies.

Although there are several different theoretical conceptions from the academic point of view about what management control implies in a company, in general today the so-called «modern» vision prevails. It ponders the development of a comprehensive financial management scheme for a company, covering the different areas and promoting continuous interaction between planning and control.

In today’s post we are going to tell you what we have seen from our experience that are the most common obstacles in small and medium-sized companies in Latin America when having a healthy planning and control process that adds value to the business. We will also provide you with a recommendation for the technological support of this task, which is our FP&A solution: Plika.

We believe it would be of great help to you and your company and we are going to tell you why. We invite you to join us!

Common problems in the planning and management control of a company

We know that some of the tasks that the Controller, Finance Manager, CFO or, in smaller companies, the CEO himself, are usually in charge of are:

• accompany the process of creating the Strategic Plan,
• the establishment of an internal control system,
• the integration of multiple business information sources,
• the elaboration of the budget in conjunction with the areas,
• the generation and monitoring of performance indicators of the different areas of the organization in themselves and of them with respect to the budget.

Taking this into consideration, according to our experience, some of the most common problems that arise in the planning and management control of an SME in LATAM are the following:

• Difficulty in compiling and integrating the information that arises from the different parts of the company.

This, added to the lack of collaboration (very common) between the areas, delays the following phases of the process. Faced with the aforementioned situation, it is interesting to think about the integration of software systems such as an ERP, CRM or the one used in the management of the core of the business with a superior integrating solution that facilitates the work of the finance team. An FP&A solution can not only do this: it is ideal for it.

According to the prestigious consulting firm Accenture, 80% of the world’s large companies use cross-integrated systems to manage their finances.

• Lack of time in the assigned resources to be able to fulfill the entire task.

This often hides another drawback: the non-optimization of the allocated time. We see it when a financial controller spends too much time collecting data or modeling an insight that is done every month or once a year. Something that perhaps happens to depend on Spreadsheets.

Again according to Accenture, 75% of the CFOs of large companies surveyed by the consulting firm stated that they needed to spend more time on decision tasks, predictive analysis and performance management.

On the other hand, in a Plika study, a sample of financiers from Latin American companies stated that they spend only 26% of the time of the year on Planning, Forecasting and Analysis processes.

• Lack of a clear definition of the objectives and their assertive communication to the rest of the company.

A recent statistic from an American job search site showed that less than 20% of employees consult the company intranet daily and that almost 75% feel that they are missing news. This leads us to the question: how do we align all areas of a company within the framework of a process? And on the other hand, how are we communicating the changes? Are we effective?

• Lack of predictability in the markets and in the macroeconomy.

At this point we want to recommend our post about the financial risks to which a firm is exposed and how to use planning to face them: you can see it by clicking here.

The problem analyzed here, which has an external cause to the SME, is often combined with an internal symptom, which is a lack of foresight in the financial area. Undoubtedly, it happens because we are focused on tasks that are probably “one hundred percent operational”.

The same Plika study of 2018 mentioned above, carried out on hundreds of financiers of small and medium-sized companies in Latin America, revealed the following: the Forecasting process is the one that they consider requires more development in their organizations because they are » very immature.»

In this way, the aforementioned circumstances tend to hinder the work of the finance area and prevent the reports and reports necessary for decision-making by the executive body of the company from being generated in a timely manner.

Let’s see below some recommendations to enhance the process of putting together a company’s financial plan and its management control.

Good practices to enhance the planning and management control of your company

Planning and Management Control are two tools that complement and strengthen each other. If a plan is carried out but is not controlled later, it runs the risk of being no more than an expression of will. On the other hand, a Management Control is carried out on a previously defined plan.

In this section we list some useful tips when following a management planning and control process:

• Think long, act short.

  Management planning and control is an activity that is carried out in the short term with a long-term vision. With this conception, we will be able to stay better aligned with the objectives proposed by the company. The strategy must be “grounded” through concrete and proximate measures (tactics).
  In other words, the financial controller must have the map that shows him where he is going, and indicates what the next step should be to move in that direction.

• Make an effort to communicate assertively.

  The solidity in the planning and management control of the company is incorporated from the leadership and naturally goes down to the entire organization. However, many times it is necessary to force the necessary communication to transmit the vision.
  The recommendable American film Moneyball (2011) tells the story of Billy Beane, a manager of a sports franchise in the United States who innovates in management and decision-making processes. You won’t get positive results until you decide to communicate first-hand your ideas and what you need from each player.

• Measure.

  “What cannot be measured cannot be controlled; what cannot be controlled cannot be managed; what cannot be managed cannot be improved” (Peter Drucker).
  The company’s management needs accurate and reliable feedback on the status of the plan and its monthly, quarterly and annual evolution. They need to see if the actions taken are contributing to reaching the objective or not.

• Add value to raw data.

  In any presentation information is the essence. But if you can provide a personal look, it will be a plus of value. Remember that the purpose of Management Control is to obtain information on the health of the company and preview possible future scenarios to know where to go.

• Read the internal state of the organization, but don’t stop looking at the context.

  A 360º reading will help you understand the business in relation to the market. In this way, you will be able to better anticipate the different probable scenarios to which the business will be exposed.

Final conclusion on Financial Planning and Control

As we have seen in this post, a large part of the problems and inconveniences that we face in the planning and management control of SMEs in Latin America can be solved with investment in technology.

Some aspects are based on soft skills such as communication and collaboration between teams, where the idea prevails over the tool. But in very pragmatic and technical points such as information gathering, data processing and modeling of presentations and graphics, the use of a suitable software solution is essential.

With an FP&A solution, your planning and management control processes will take a leap in quality. Some of the benefits of adopting this type of system are:

• It is scalable. By operating on a subscription model, you can scale up or down the number of user licenses you need from month to month. This, of course, will allow you not to spend more and have a dynamic service adjusted to your needs. Even being able to start with a centralized tool in Finance and then add business areas little by little.
• You don’t have to buy the software. Again: being by subscription, you pay for it as you need it.
• It will help you streamline your financial practices. With FP&A software like Plika, you can automate repetitive tasks, improve the relationship between the areas and your finance team, and become independent from the IT team, since you can resolve situations within the tool.

You can get to know the tool by requesting a demo at no cost and thus assess whether it is really what your company needs or not. Until next time!