Integrated financial planning is paramount to a successful organization. Industries face unique challenges when it comes to aligning and unifying their organizational plans with financial plans.
Within the Utilities industry, the various business models have unique drivers that affect their approach to budgeting, planning and forecasting. However, there are similar KPIs within the diverse industry.
Each of the below disparate pieces of information needs to come together to maximize financial success.
Project Planning & Departmental Expenses
When developing an approach to integrated financial planning, Utilities organizations must account for recurring departmental expenses such as personnel costs, business leases and other line items, which are closely tied to project planning. These costs also affect the organization’s wider financial model and budget.
Sales Planning and Forecasting
The Utilities industry is heavily regulated and many organizations require time to analyze and generate their rates, which in turn are submitted to a regulatory body. The sales planning and forecasting function allow these businesses to determine a rate that will cover costs as well as generate revenue, without exceeding the ROI set out by regulatory bodies. To understand the costs that need to be covered by utility rates, sales planning and forecasting must also take capital costs into account.
Many of the assets owned by Utilities companies require long-term maintenance forecasting. Power stations and transmission lines require consistent upkeep over a period of 10, 15 or even 25 years. As a result, Utility companies must be able to predict when costs involved in the maintenance of their assets need to be renewed.
Utilities companies should be able to anticipate how much electricity will be needed. To do this, these organizations must break down data into customer type and cooling degree days.
Demand planning allows the Office of Finance to evaluate baseline consumption against subtle variances in temperature, which can affect the demand for electricity. This process must consider weather predictions, customer type, and historical trends.
Utilities companies must also be able to anticipate line loss and other business drivers like outages and natural disasters that may require additional line maintenance.
Multi-faceted reporting allows Utilities organizations to adhere to GAAP, FERC, IFRS and other industry standards for reporting. Multi-faceted reporting affects reporting actuals more than planning data. However, once Utilities companies have established a foundation for effective integrated financial planning, they can also complete multi-faceted reporting for actuals and comparative actuals, as well as budget reporting.
To successfully undertake an integrated approach to financial planning, Utilities companies should merge the aforementioned functions. Implementing a single unified system, such as Prophix, will allow these functions to connect to their organization’s wider financial and budget models, allowing for a cohesive and aligned approach to financial planning.