The purpose of business planning is not simply to create a plan — it is to make better decisions. Planning and budgeting software should make the process faster, more agile, less burdensome and more intelligent so that managers can make better decisions more consistently. Since the early 2000s, Ventana Research has advocated using a dedicated application to increase the business value of planning and budgeting. In 2008, we first articulated a new vision of using a planning software platform to improve the business value of corporate budgeting. This approach allows business units to plan the way that best serves their needs while enabling the financial planning and analysis (FP&A) group to integrate their plans to construct a unified operating plan and budget. This idea has since been widely embraced by software vendors and increasingly adopted by organizations. Our Value Index assesses the ability of specific applications to achieve this vision.
Organizations do a lot of planning — some formal, but in practice, much of it informal and almost always in business silos. People plan sales, they plan how to produce products and deliver services. They plan for the headcount they’ll need and how to organize distribution and their supply chain. They also produce a budget, which is a financial plan. When business managers are asked to prepare a budget, they first create a business plan (often informally) and then translate that into financial terms.
Although planning and budgeting are similar and connected, they have different aims. Budgeting sets limits while planning seeks opportunities. Planning is about determining the best path to success while budgeting imposes financial controls to prevent an organization from failing. Not failing is not the same as succeeding. Planning is about the things that departments do and the things they need to do them. Budgeting summarizes the monetary consequences of a plan in income statements, pro-forma balance sheets and cash flow projections. Successful organizations understand that planning for success while respecting financial objectives and constraints is more productive and strategic than just budgeting. Planning software enables organizations to do both faster and more effectively than using stand-alone spreadsheets, which still remains the most popular software for planning and budgeting.