After a decade of financial instability, the COVID-19 pandemic, and a period of rising demand for services, robust financial planning and data visibility is more important to the public sector than ever
A strategic approach to your finances will help your organisation build resilience for the long term. But creating this approach will require you to begin planning for a different world from last year – and possibly for a different world next year, too.
But this won’t be an easy process for many. Achieving the kind of new financial planning approach your organisation now requires will necessitate a wholesale change in the structure of your reporting cycles. And it will also mean kicking many of the habits of survival learned over a decade of austerity.
Can you plan to meet changing priorities?
58% of top-tier organisations and 86% of lower-tier organisations report good financial resilience and improving service delivery (including across digital channels.) However, there remains a high degree of uncertainty over national level policies (such as funding and social care reform), which are impacting local authorities’ ability to create plans that are both coherent enough to provide guidance, and flexible enough to permit pivots to accommodate any changes required in the future.
In this environment, robust financial planning and analysis are required. Including the ability to model for multiple scenarios, report quickly on current fiscal realities, and create forecasting and budgeting frameworks that are more sophisticated and flexible than the simple 12-month cycle.
Short term thinking is only getting shorter
Evidence from recent UK Public Sector research suggests that in the last 2 years, the average length of medium-term financial plans has dropped. Shorter-term planning further restricts the ability of the public sector to create strategic long-term horizons. But more importantly, it also suggests a fundamental lack of confidence among local authorities, in their ability to predict either demand for services, or their income, over a period as brief as just 3 years.
And that’s far from all. According to respondents, the majority of financial plans are now becoming increasingly focused on just one year. Medium-term planning is increasingly less robust, limited to broad-strokes ideas and what-if thinking. With the tools currently available, local authorities do not feel that they have the capability to make any concrete decisions about their future beyond the end of their desk calendar – much less the end of the decade.
This shortening of planning horizons is no doubt influenced in part by expected behavioural changes. People – and organisations – become more cautious in times of uncertainty. And although nobody will deny that COVID-19’s economic impact merits a cautious approach, the public sector will have to get a handle on this caution quickly. Several areas of service provision – especially those managed by local authorities, such as social and healthcare – are likely to experience consistently rising demand over the next several years. And dealing with this rise in demand demands an ability to create flexible long-term plans.
Your strategy determines your tools
UK Finance leaders’ research indicates that around 99% of local authorities rely on spreadsheets as their chief tool in the financial planning process. And what’s more, 59% use spreadsheets exclusively. We’re big fans of spreadsheets, but it’s important to realise that they were not created for complex financial planning and analysis processes, or for formulating strategy.
Creating the strategies your organisation needs to succeed will mean adopting specialist tools that can be customised to your particular specifications. This is a fact that 25% of top-tier local authorities have already acknowledged through the adoption of custom, in-house solutions. Smaller authorities have begun (14%) to turn to on-premise FP&A tools to satisfy their requirements. But uptake of cloud-based FP&A tools has been surprisingly slim, with only 9% of authorities questioned suggesting they use them.
Cloud Adoption delivers agility
The failure to adopt cloud solutions means that local authorities stand to miss out on crucial data visibility and architectural flexibility. Currently, no authority claims it can build out different scenarios “with ease” in its scenario planning processes. Both flexibility and data visibility are key to multivariate scenario planning, and cloud solutions provide the compute power, customisability, and security to make both a reality.
Planning and scenario modelling are effective approaches to dealing with financial uncertainty. But in the absence of both the appropriate skills and tools to ensure data visibility and correct application, your organisation will struggle to leverage them effectively. And without a more advanced approach and the tools to make it possible, your organisation will face continued uncertainty, inaccuracy of projected costings, and exposure to increased risk – especially as income and support from central government is reduced in the future.
This means you must get used to the idea of creating not just a one- or three-year plan that’s set in stone – but a more robust and flexible array of longer-term plans with built-in flexibility around pre-agreed milestones and deadline dates (set yearly, half-yearly, quarterly, or even monthly depending on your unique needs.)
Unit4 creates enterprise software built specifically for the needs of the public sector, designed to satisfy the need for flexible planning, integrated data visibility, and a fantastic user experience that helps your people focus less on manual data processing and more on delivering the services that citizens rely on you to provide.
Find out here how we are transforming finance in public sector, higher education and not for profit organisations.
Please note: This is a commercial profile
© 2019. This work is licensed under CC-BY-NC-ND.
