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  • Neil James

Integrated Business Planning (IBP) - A Key Process for the Finance Function

Updated: Dec 10, 2019

Integrated Business Planning (IBP) (and its forerunner Sales and Operations Planning or S&OP) have traditionally been perceived and managed as tactical, supply-chain centred processes. However, as I have outlined in various articles, IBP builds a number of enterprise capabilities which drive competitive advantage. With respect to the Finance function in particular, IBP represents a valuable enabler as outlined below.

Key Roles for the Finance Function – Planning & Business Partnering

A key responsibility for the Finance function is leadership of enterprise planning, with the goal to ensure that the business develops aligned and integrated financial plans across its various functions which meet the strategic goals of the organisation. This is typically a complex and resource-intensive activity, often consuming significant resource both in Finance and other functions – often in major exercises once or twice per year. IBP provides a defined enterprise standard for creating and refining these plans.

A further, increasingly important, role for the Finance function is that of business partner. This requires that finance teams have a detailed understanding of business performance and combine this with good insight on upcoming risks and opportunities in order to provide guidance and challenge to business leaders. A sound IBP process is also a key enabler for this business partner role.

In these key Finance responsibilities of planning and business partnering, IBP offers four key benefits as outlined below;

1. Planning Effectiveness & Efficiency

Corporate financial planning processes typically share common templates, milestones, high-level assumptions and top-down targets across functions in order to support the development of a joined-up enterprise plan. However, in the absence of a disciplined process such as IBP the planning process can often effectively default to silo-based planning where each functional area works on their plans in isolation. The finance function is then tasked with reconciling the various functional inputs with significant manual effort in order to create an integrated corporate plan which delivers the strategic and tactical goals of the business.

IBP addresses this problem in several ways. Firstly, IBP defines a company-wide, cross-functional standard for financial planning. In particular, this standard process aligns commercial and supply chain plans on an ongoing basis which removes the need for major intervention at ‘planning time’ to align them.

Secondly, volume forecasts, and the underlying business assumptions, are discussed and agreed across the functions as part of the rolling monthly planning process used in IBP. This design, supported by regular cross-functional discussion at various levels in the IBP meeting cycle, ensures that the financial plan (which is in turn derived directly from the volume plans agreed in IBP) is already aligned and balanced across the commercial and supply chain teams.

Finally, the IBP process fundamentally transforms the enterprise planning process to one in which all functions take responsibility for creating an aligned plan rather than this being seen as a Finance arbitration task. In doing so, IBP enables a much more effective and efficient process in which rolling plans are agreed across the business on a continuous basis.

2. Transparency

A key requirement for the Finance function in operating as an effective business partner is that it maintains a clear and detailed understanding of plans and ongoing performance in the business.

IBP is a key enabler in this area as it supports increased transparency of both emerging plans and current performance. IBP delivers this in two ways that support the finance function to fulfil its role as business partner;

The IBP process reviews both volume and value forecasts on a monthly basis. Value forecasts (ie revenue forecasts) are derived directly from these volume forecasts. This analysis provides a comprehensive picture of business performance and outlook which is then readily analysed and discussed (for example, what proportion of sales growth is due to volume, and what is due to price? How robust are those trends? How realistic are the pricing assumptions being made to create the value forecast? etc). The IBP process is underpinned by regular dialogue between commercial and supply chain teams. This means that where there is any misalignment between the commercial plan and the required capacity, working capital and expense levels in the supply chain this quickly becomes visible.

Secondly, as the IBP process runs on a monthly basis this allows the cross-functional team (supply chain, commercial, finance) to continuously build their mutual understanding of both current business performance and medium-term outlook through the ongoing monthly IBP cycles. This allows the Finance function in particular to work closely with functional leaders to develop early awareness and build consensus on expected business scenarios and then plan enterprise responses to those as part of the IBP process. The outcomes of these various planning discussions across the business are aggregated so that the business outlook at global level is readily prepared by the finance function without the need for a compressed and resource-intensive planning period. This is important as it provides ongoing reliability and consistency of forecasts and avoids surprises in an isolated annual planning process.

This transparency, both in current performance but also in the medium-term outlook, enables the Finance function to adopt a proactive and impactful business partner role across the business.

3. Enhanced Risk & Opportunity Management

In the absence of a strong IBP process, problem solving and decision-making on risks and opportunities often reverts to a silo-based or functional bias. This inevitably leads to sub-optimal performance at enterprise level. For example, a commercial decision to shift promotion from one brand to another may have positive benefits on revenue and margin but may create overall negative consequences for financial performance (eg due to inventory or operating expense impacts).

However, IBP provides the opportunity to gain foresight on risks and opportunities and to plan the optimal enterprise response to these. A sound IBP process routinely considers a forward business outlook of 3-24 months (and in more mature processes out to 36 months). This means that risks and opportunities are identified as soon as possible allowing scenario planning to test strategic and tactical options. The cross-functional nature and financial discipline of IBP ensures that these strategic options are joined-up, end-to-end solutions which meet strategic goals in a profitable way.

The IBP process also provides a regular discipline for identifying and addressing performance gaps vs plan. IBP uses exception-based reporting and decision-making so that any emerging performance variance vs the current plan (or latest expectation) is clearly flagged and subject to appropriate discussion and action in the IBP cycle. As a key participant in the various IBP meetings, the Finance team are able to develop a clear view on upcoming business challenges and the functional perspectives of these challenges. This in turn is a significant enabler for Finance to influence and facilitate optimal solutions for the overall business.

This early involvement of Finance in key business risks and opportunities provides the opportunity not only to advocate optimal enterprise approaches, but also facilitate cross-functional discussion involving commercial and supply chain partners. An important part of this role is to model alternative solutions, typically through scenario planning. This is a key tool to illustrate the impact of various scenarios on a balanced set of enterprise-level KPIs (eg market share, revenue, margin, working capital, supply chain flow etc). This combination of what-if analysis backed by an illustration of the outcomes for agreed company-level KPIs is a further powerful tool to enhance the impact of Finance in its business partnering role. It also enables Finance to lead risk and opportunity management underpinned by enterprise thinking rather than a siloed approach.

4. Performance Monitoring & Management

The IBP process defines clearly the key goals and metrics to be achieved by the business and these set the context for the ongoing monthly IBP reporting and discussions. This means that in addition to developing and updating an integrated cross-functional plan, IBP also provides the discipline to reconcile the evolving plan back to corporate goals and ensure any deviation from the existing plan is clearly highlighted and discussed as part of the process.

As outlined in section 3 above, IBP provides a regular discipline for identifying and addressing performance gaps vs. plan in a consistent way across functions. The adoption of a common standard for this process is underpinned by the use of common, shared data which ensures that all teams are focused on ‘one version of the truth’. This avoids the otherwise common situation where debate on the performance figures can overshadow the problem solving and decision-making required to actually drive performance.

These features of IBP - setting KPIs and monitoring performance against them - provide the Finance function with further key capability to drive strong business partner impact at all levels through the organisation.


  • 2 key expectations of the Finance function are leadership of enterprise planning and business partnering

  • Integrated Business Planning (IBP) provides key infrastructure, disciplines and insights which enable Finance to deliver on these expectations in an increasingly complex and fast-moving environment

  • IBP achieves this through enabling

  • Planning effectiveness and efficiency – supporting Finance to lead robust yet practical planning processes across the business

  • Transparency – enabling Finance to excel in business partnering through maintaining a fundamental understanding of both current performance and the longer-term business outlook

  • Enhanced risk and opportunity management – with Finance leading scenario planning to create timely strategic options to leverage opportunities and manage risk

  • Performance monitoring and management – providing the common performance measures and defining a common performance management approach across functions which can be supported effectively by Finance business partners

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