Keeping Annual Plan Financials Simple To Digest

Keeping Annual Plan Numbers Simple

If you want to lose a room, really quickly. I have a way to do it. Without bringing your team on the journey of understanding conversion costs, material margins, return on sales, start talking about these numbers. It will work like a charm. Why you would want to do that though?

In our last post, we talked about how making the annual plan a living and interactive document yields tangible results. In this post, we will talk about making the financial element of the annual plan accessible and informative. Keeping team members on board, but also delivering value.

Work Behind The Scenes

Of course there will be a huge amount of financial work behind the scenes. After all, bridging financials should be the very basis of target setting – we don’t necessarily have to send the entire bridging pack through to every member of the team, nor explicitly detail individual account movements through phasing changes and increases. Each action within the annual plan should have a financial ramification, be it negative due to it being a medium term investment, or positive as the revenue lands this year. Whilst financial diligence is a foundational key to excellent annual planning, the key to a good annual plan is delivering it in a worthwhile manner.

Keeping Delivery Simple

In order to keep entire teams, many of whom are not financial experts, engaged with finances is no easy task. So now your bridging financials are done. All areas of the business is rolled up and you have signed off on the annual plan. It is time to deconstruct the component elements and make them directional and understandable for the rest of your teams.

Here are some guiding principles for delivering that detail.

Keep it to the headline

It’s really easy to get bogged down into the numbers and phasing and profitability, but keep it to a headline. If an account has a new product line, spell out what the revenue growth is over the year. It really can be as simple as, “We are bringing in product X to support customer Y. This is really important to us as a team because over the year we are expecting £XYZ revenue growth from this product into this customer, allowing us to ABC. You can support in ensuring we deliver this by ABC”

In this example, what we have done is kept the numbers simple, relayed what the target is, moved to explain why it is important and then dissolved it down to how an individual is part of this success. The financials are there, and it is accessible on a granular level.

Don’t shy away from more complex theory, just explain it.

If you are on an efficiency drive, or a major project will increase profitability, don’t shy away from the theory. You can include it, but keep it relevant. If for example you are changing supplier of packaging, explain the theory of it.

“Our current supplier costs mean that our variable costs, a cost associated with each additional sale, for packaging, are at 8% of the total sale. If we can reduce this down to 6%, which we think the new supplier can do, that means we have 2% extra profit from each additional sale. That 2% means we can reinvest in XYZ. We need your support to deliver this cost saving, as we know switching suppliers will, in the short term be a change of process and relationships”

Roll it up.

At the end, roll it all up and explain the direction and reiterate how every team member can support. “Over the next year, we are looking to increase our revenue through the plans outlined by £XYZ, that means we will deliver £ABC more profit. We need your support in the following areas… so we can all deliver….”

Rolling everything up is a great way of bringing the entire team together, but also creating empathy between departments of their goals too. Creating a focus every team member can be a part of.