The Four C’s of Financial Planning in 2021 (2024)

The Four C’s of Financial Planning in 2021 (1)

September 24, 2021

insightsoftware is a global provider of reporting, analytics, and performance management solutions, empowering organizations to unlock business data and transform the way finance and data teams operate.

The Four C’s of Financial Planning in 2021 (2)

If the world was fairly predictable, financial planning would be a relatively straightforward process. You are likely familiar with the traditional approach to budgeting, in which you adjust last year’s numbers upward by some fixed percentage, followed by a review process and perhaps some adjustments here and there.

But today’s world is far from predictable. As business leaders around the world have learned, major events can appear out of nowhere to drastically alter business conditions, demanding a level of agility and responsiveness above and beyond anything ever seen before. For many businesses, the idea of financial forecasting or planning based on last year’s numbers seems far less advisable than it was in the past.

The Four C’s of Financial Planning in 2021 (3)

Fortunately, there are some powerful tools available to make financial planning, forecasting, and budgeting processes significantly easier than they once were. The best financial planning and analysis (FP&A) software integrates with your enterprise resource planning (ERP) system, drawing real-time information about what’s happening in the business. It allows for communication and collaboration across multiple functions within the organization, enables continuous financial forecasting, and empowers business managers to see to the company’s ability to survive and thrive amid chaos.

Finance Plays a Pivotal Role

Decades ago, the finance department was viewed in many organizations as a collection of people whose job it was to tally the numbers and keep score for the business. Although that is still an important function, it’s only a small portion of what most modern finance departments actually do.

Finance is no longer just about processing information and spitting out reports; it’s about strategic guidance. If an agile business is analogous to a fighter jet, then finance is a combination of the dashboard and the pilot’s training and experience. Finance owns the accuracy of the information presented to management, but financial professionals are also there to interpret, advise, and help the rest of the C-suite grasp the implications of that information.

As owners of FP&A processes, today’s accounting teams must be well-versed in the four C’s of financial planning: context, collaboration, continuity, and communication. Today, financial planning and budgeting are more important than ever. By keeping these four disciplines in mind, finance teams can ensure that their strategic value is clearly understood and appreciated throughout the organization, including in the C-suite.

The Value of Context in Financial Planning

The interpretation of financial results is highly dependent on context. Imagine you are running a chain of restaurants, and your dine-in revenue suddenly drops 80 percent below your financial forecast. There’s also some good news, though; take-out sales have skyrocketed. If you already guessed the context here, you’re probably not alone. This is precisely the situation in which most restaurateurs found themselves at the start of the second quarter of 2020.

While the contextual importance of that example might be painfully obvious, there are plenty of cases that illustrate how context operates at a much more subtle level. What does it mean when the sales of one of your key product lines does poorly, despite having fairly healthy margins? Was there a drop in market demand, or perhaps a sharp fluctuation in foreign currency exchange rates? Did a change in sales personnel or marketing processes precipitate a sharp drop off in the pipeline? Or were company resources diverted elsewhere, resulting in lower sales of the product in question?

All of these questions underscore the importance of context when interpreting the numbers. FP&A processes must be built with a clear understanding that the numbers are just one piece of the picture, albeit a very important one. The broader context in which those numbers play out is essential.

Collaboration Improves Financial Forecasting and Planning

The events of the past year have underscored the critical importance of agility and responsiveness. That has led many executives to consider alternative approaches to financial forecasting and planning, including driver-based budgeting, continuous forecasting, rolling forecasts, and zero-based budgeting. To be effective, those approaches require cross-functional participation from stakeholders throughout the organization.

The Four C’s of Financial Planning in 2021 (4)

The best FP&A tools facilitate that kind of collaboration, enabling comments, trackable changes, version control, and the exploration of multiple “what if” scenarios. If your organization is still using spreadsheets for planning and budgeting, you’ll have to resort to emailing copies from one user to another, hoping that multiple users don’t overwrite each other’s changes in different versions of the same file. Good FP&A tools with robust collaboration features eliminate that problem. Perhaps more importantly, they allow the finance team to operate effectively in their role as orchestrator of FP&A processes.

Continuity Is Key to Accurate Financial Planning

In the context of FP&A, continuity is about having a constant stream of accurate, up-to-date financial information. It’s about making information available in near-real time so that business leaders have the insights they need to make decisions based on the latest data. When the world around you is changing rapidly, the companies that can adapt quickly will gain a clear advantage over those that cannot.

When you build financial plans on collections of disconnected spreadsheets with no live links to the current information in your ERP system, decision-makers are blind to what’s happening in the business. When the finance department takes a proactive approach to optimize the flow of information, important insights are available when they are needed most.

Communication Seals the Deal for Financial Planning and Budgeting

Ultimately, FP&A experts in the finance department are in a unique position to communicate the meaning that surrounds the numbers. That may involve modeling various scenarios, including best case, worst case, and likely-case scenarios so that executives have a deeper understanding of the road ahead. It may also include recommending trigger points for key business decisions based on those scenarios, or advice on potential responses to adverse situations. Finance is in a unique position to interpret the numbers, bringing context, collaboration, and continuity together, and then communicating that to the C-suite leaders who rely upon it to make sound decisions.

If your organization wants to take FP&A processes to the next level, insightsoftware can help. As a leader in financial planning, budgeting, and reporting, we develop software that helps companies automate and streamline processes, with near-real-time integration to over 140 different ERP systems. To learn more about how the right FP&A software can help your business, download our guide:

The Four C’s of Financial Planning in 2021 (5)

Eight Key Factors to Consider when Evaluating Continuous and Extended Financial Planning Software

Download Now:

The Four C’s of Financial Planning in 2021 (2024)

FAQs

The Four C’s of Financial Planning in 2021? ›

As owners of FP&A processes, today's accounting teams must be well-versed in the four C's of financial planning: context, collaboration, continuity, and communication. Today, financial planning and budgeting are more important than ever.

What are the 4 Cs of financial management? ›

4 Cs of Financial Planning: Creation, Consumption, Conservation & Contingencies.

What are the 4 Cs of lending capacity? ›

Standards may differ from lender to lender, but there are four core components — the four C's — that lenders will evaluate in determining whether they will make a loan: capacity, capital, collateral and credit.

What are the 4 Cs of credit risk? ›

Concept 86: Four Cs (Capacity, Collateral, Covenants, and Character) of Traditional Credit Analysis. The components of traditional credit analysis are known as the 4 Cs: Capacity: The ability of the borrower to make interest and principal payments on time.

What are the 4 Cs of underwriting? ›

Meet the Fantastic Four - the 4 C's: Capacity, Credit, Collateral, and Capital. These titans hold the power to make or break your dream of homeownership. They're the guardians of mortgage approval, keeping a watchful eye on every aspect of your financial life.

What are the four 4cs? ›

Do you know what they are? Communication, collaboration, critical thinking, and creativity are considered the four c's and are all skills that are needed in order to succeed in today's world.

What is the 4 Cs process? ›

The 21st century learning skills are often called the 4 C's: critical thinking, creative thinking, communicating, and collaborating. These skills help students learn, and so they are vital to success in school and beyond. Critical thinking is focused, careful analysis of something to better understand it.

What are the four Cs of investing? ›

Trade-offs must be weighed and evaluated, and the costs of any investment must be contextualized. To help with this conversation, I like to frame fund expenses in terms of what I call the Four C's of Investment Costs: Capacity, Craftsmanship, Complexity, and Contribution.

What are the 4 Cs of commercial lending? ›

Here is what lenders look at when it comes to each of these factors so you can understand how they make their decisions.
  • Capacity. Capacity refers to the borrower's ability to pay back a loan. ...
  • Capital. ...
  • Collateral. ...
  • Character. ...
  • The Other “C” of Credit.

What are the 4 pillars of lending? ›

Credit score, income, employment and down payment are the four pillars of the loan approval process. Your approval, interest rate and program will largely be based on a combination of these four items. That being said, these four are not the only factors that constitute loan approval.

What are the 4 Cs of risk? ›

KCSIE groups online safety risks into four areas: content, contact, conduct and commerce (sometimes referred to as contract). These are known as the 4 Cs of online safety.

What are the four 4 Cs of the credit analysis process? ›

The “4 Cs” of credit—capacity, collateral, covenants, and character—provide a useful framework for evaluating credit risk.

What are the 4 categories of risk in finance? ›

There are many ways to categorize a company's financial risks. One approach for this is provided by separating financial risk into four broad categories: market risk, credit risk, liquidity risk, and operational risk.

What does capital mean in the 4 Cs of credit? ›

Capital: This is how much money an applicant has and provides a backstop if there are any issues with cash flow; a lender will likely look to the applicant as a debt guarantor. Additionally, lenders are looking for how much skin in the game you have in the business.

What are the four Cs of surety underwriting? ›

A number of these factors fall under what the Surety industry calls “The Three C's”; Character, Capacity, and Capital. All three of these are important to the underwriting process. The principal needs to exhibit the Character, Capacity, and Capital to qualify for surety credit.

What are the 5 Cs for securing loans? ›

The five Cs of credit are important because lenders use these factors to determine whether to approve you for a financial product. Lenders also use these five Cs—character, capacity, capital, collateral, and conditions—to set your loan rates and loan terms.

What are the four C's for a good financial manager? ›

Character, capability, charisma, and courtesy show the trait of being a good financial manager, but these traits are not sufficient to make a person best financial manager.

What are the four 4 process of financial management? ›

The Financial Management Cycle includes four phases that are essential for the overall evaluation of the financial management of any firm. The four phases are Planning, Budgeting, Managing Operations, and Annual Reporting.

What are the 4 types of financial management explain? ›

Most financial management plans will break them down into four elements commonly recognised in financial management. These four elements are planning, controlling, organising & directing, and decision making.

What are the C's in finance? ›

The 5 Cs of Credit analysis are - Character, Capacity, Capital, Collateral, and Conditions. They are used by lenders to evaluate a borrower's creditworthiness and include factors such as the borrower's reputation, income, assets, collateral, and the economic conditions impacting repayment.

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Kareem Mueller DO

Last Updated:

Views: 5557

Rating: 4.6 / 5 (46 voted)

Reviews: 85% of readers found this page helpful

Author information

Name: Kareem Mueller DO

Birthday: 1997-01-04

Address: Apt. 156 12935 Runolfsdottir Mission, Greenfort, MN 74384-6749

Phone: +16704982844747

Job: Corporate Administration Planner

Hobby: Mountain biking, Jewelry making, Stone skipping, Lacemaking, Knife making, Scrapbooking, Letterboxing

Introduction: My name is Kareem Mueller DO, I am a vivacious, super, thoughtful, excited, handsome, beautiful, combative person who loves writing and wants to share my knowledge and understanding with you.