Changing public sector planning and reporting styles requires greater agility and total data visibility

After a decade of financial instability, the COVID-19 pandemic, and a period of rising demand for services, robust financial planning is more important to the public sector than ever.

A strategic approach to your finances will help your organization build resilience for the long term. But creating this approach will require you to begin planning for a world that’s completely different to how it was just a year ago.

Unfortunately for many, this won’t be an easy process. Achieving a new kind of financial planning approach will require a wholesale change in the structure of your reporting cycles. And it will require your organization to kick many of the habits of survival it has learned over a very difficult decade.

Priorities are what you’d expect – but current approaches to planning can’t always meet them

58% of top-tier organizations and 86% of lower-tier organizations reported financial resilience and improving their 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’ abilities to create plans that are both coherent enough to provide guidance, and flexible enough to permit pivots to accommodate whatever changes the future may hold.

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 on the rise – and the terms are only getting shorter

Evidence from the Chartered Institute of Public Finance and Accountancy’s (CIPFA) paper on Post-COVID-19 Scenario Planning suggests that in the last 2 years, the average length of medium-term financial plans has shortened. This further restricts the ability of the public sector to create strategic long-term planning horizons – but it also suggests a fundamental lack of confidence among local authorities. A lack of confidence in their ability to predict either demand for services, or their income, over a period as brief as just 3 years.

But it doesn’t end there. According to respondents, the majority of financial plans are now becoming increasingly focused on just one year. And medium-term planning is increasingly less robust, limited to broad-strokes ideas and what-if thinking.

This shortening of planning horizons is no doubt influenced in part by expected behavioural changes. People – and organizations – 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 reign in this caution quickly, as 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.

Your strategy is a reflection of your tools

CIPFA’s 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 realize that they were not created for complex financial planning and analysis processes, or for formulating strategy.

Creating the strategies your organization needs to succeed will mean adopting specialist tools that can be customized 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.

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, customizability, 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 visibility of data and correct application, your organization will struggle to leverage them effectively. And without a more advanced approach and the tools to make it possible, your organization 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.)

How Unit4 can help

Unit4 creates enterprise software build 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.

To experience what Unit4 FP&A can do for yourself, check out its dedicated product page or click here to book a demo.