Users can create separate, long term plans that are more summarized and span many years

Description

Long term, summarized plans in Corporate Performance Management (CPM) software allow users to create multiple, multi-year strategies that provide an overview of the company's future financial path. These plans encompass budgeting, forecasting, and strategic considerations to facilitate informed business decisions, and are ideally suited to mid-market or enterprise-sized corporations across various industries.

Example Use Case

Scenario: A multinational healthcare company uses CPM software to forge long-term plans. They need to balance multiple budgetary and strategic considerations, including R&D investment, production, regulatory clearance, market competition, among other factors over a span of 10 years.

Solution: The CPM software allows the corporation's users to create separate, long-term plans such as 10-year R&D roadmap or market expansion strategy. These summarized plans allow for a broader, more strategic viewpoint, helping stakeholders make informed investment and operational decisions based on forecasted returns and market dynamics.

Considerations

Long-term planning involves greater uncertainty due to the extended time horizons. Because of this, the system should offer robust scenario and sensitivity analysis tools to model a wide range of future conditions and their potential impacts on the financials. This means that the tool should include predictive analytic functions that allow long term modeling and are not dependent on, for example, individual accounts in the ledger.

More sophisticated products include functionality for long term capital structure planning, eg debt and equity financing models, share repurchases, and so on. We see that in the largest of companies.

If the vendor says “yes” to supporting long-term planning, make sure they're clear on the question. We're not referring to simply collapsing months to quarters and quarters to years. Long-term strategic planning is its own planning category with much higher-level mechanism and priorities when developing a model.

Questions to Ask a Vendor

• Summarization Capabilities: How does your software handle the summarization of complex, detailed data for long-term plans?
• Macro-Economic Factors: How can we incorporate macro-economic factors and projections? (e.g., inflation rates, interest rates, GDP growth)
• Capital Structure: How do we plan for debt financing, equity financing, dividends, share repurchase plans, and so on?
• Strategic Initiatives: Where do we track initiatives and investments like new product launches and market expansions?