What exactly is a best practice?

A Best Practice is strictly defined as a methodology or approach that consistently--almost always--delivers improved performance. The performance improvement needs to be clearly defined and measurable to meet these criteria. For a tightly defined process like account payable, this is fairly straightforward. The process itself is highly comparable company to company, and performance measures are well established. When a new, innovative practice emerges, it can quickly and accurately be assessed as a best practice--or not.

Planning is a little different. For one thing, the process itself is often defined differently across companies. One company might think of planning as encompassing everything from strategy development to operational planning and quarterly forecasting, to management reporting and performance scorecards. For another company, planning might mean nothing more than developing departmental budgets once a year. A declared "best practice" tot this company may simply mean than it's able to consolidate its departmental budgets faster. While that's a good thing, it may not mean as much to another company that's looking for a way to link strategic planning with concrete operational plans--its goal for a best practice.

That brings us to another point. The performance measures for the planning process vary far and wide. Of course, cycle time and FTES (Full Time Equivalents) are often used, but once again them measures may not be very comparable across companies, given the many different ways companies define the process. Obviously, a company that defines file start of the planning process with the initiation of strategic planning, and ends it with the final approval of next year's budget, will define their cycle as being longer than a company that doesn't consider strategy as a part of planning.

Are these efficiency measures, like cycle time and FTEs, all that meaningful? Improved efficiency implies reduced costs, and that's always welcomed. But is flint the only goal? If it is, then seriously consider halting planning, and you'll be able to realize 100 percent of your goal overnight. Unlike Accounts Payable or Accounts Receivable, there is no absolute necessity for the process, is there? The real purpose of planning--which companies can easily lose sight of--is to improve decision making. Better planning also provides powerful foresight, more fix-used execution, and improved operational results. Are these benefits captured in measures like cycle time and FTEs? Obviously not, and that's the reason why these measures--although helpful--are inadequate on their own.

The point here is that the term Best Practices as it applies to planning should be taken lightly and not absolutely. The five Best Practices that are described here are the most widely discussed solutions to better planning, and most likely are the ones you've heard of. Consider them as providing sonic degree of insight and innovation, and most certainly "food for thought".

Rolling Forecast/Continuous Planning

The objective of Rolling Forecasts/Continuous Planning is to make planning more than a "once a year, one time" event, which can turn a plan into quickly forgotten and irrelevant credenza-ware. There is wide variability around exactly how this approach has been implemented. Some companies employ a rolling four quarter or six quarter forecast, which simply means that each quarter the company projects four or six quarters ahead. Other companies finalize an annual plan, then review it on a monthly basis and re-project the balance of the year expected results (while sticking to a more traditional calendar for planning the upcoming year).