Carlson Thought Leadership in Finance & Technology

Per Unit Planning: A Key Financial Planning and Analysis Exercise

February 22, 2016 / by Jotham Lane
Jotham-Lane-director-Carlson-Management-Consulting A financial plan with at minimum a balance sheet, income statement and cash flow forecast is critical to managing and guiding a business.  In order for the plan to be relevant, it needs to offer up clear information that stakeholders in the organization can act upon.  A good financial plan also forms the foundation from which additional models and analyses can be developed in order to manage performance along business lines and departments.

Per unit planning is a key exercise that can help businesses formulate a realistic sales plan

Models and analyses naturally can differ across industries.  For manufacturing, retail, consumer package goods (CPG), distribution companies and others, per unit planning is a key exercise that can help them formulate a realistic sales plan.  Per unit planning assists the sales and marketing team with developing sales and revenue targets to meet the organization’s financial performance goals.  It also feeds into analyses for measuring the success of product lines, sales channels, territories, etc. and identifying where any corrective action should be focused.

The core elements of success in business can be measured by looking at cash, velocity, margin, return and growth

As we know with any business, the core elements of success can be measured by looking at cash, velocity, margin, return and growth. Per unit planning, tackles three of those elements:  velocity, margin, and return. Velocity can be defined as the organization’s inventory turnover or, more simply, how many units do we expect to sell.  Margin is the price less the cost to produce, typically used in a cost volume profit analysis or breakeven point analysis, while return is the product of velocity multiplied by margin.  Per unit planning is a highly dimensional and data-intensive exercise that should be performed whenever there is a change in, for example, the cost of materials or fixed and variable overheads.  Typically, data from the ERP/MRP system will need to be imported into the model.  The outcome of per unit planning is detailed insight into profitability of specific SKUs and product lines.  Importantly, it should enable drill down into all the cost factors and any impacts of pricing adjustments.  Reporting should identify seasonality, trends and other important indicators.

Modern cloud-based corporate performance management (CPM) solutions excel over traditional spreadsheet options

For CFOs and finance teams accustomed to planning in spreadsheets, this can seem like a daunting task.  And it is.  By using modern cloud-based corporate performance management (CPM) solutions, a well-seasoned implementation consultant can develop a per unit revenue and cost of sales (COS) model with the efficiencies required to make planning by unit a real option. Creating a plan with thousands of items or SKUs is now possible whereas attempting the same with spreadsheets would be an incredibly time-consuming and onerous process.  When the financial portion of the plan is complete, the CFO can present to his or her sales and marketing department actionable sales objectives that line up with organizational goals. With the proper planning and reporting structures in place, the organization is better positioned to collaborate on achieving targets.

Carlson Managment Consulting pre-designed solutions built in Adaptive Insights save time and cost less

At Carlson Management Consulting, we have eliminated the need to build a comprehensive planning model from the ground up.  We have pre-designed a model specifically for manufacturers, distributors, CPGs and others that incorporates all of the necessary model elements for budgeting, planning and reporting.  Our solution is built in Adaptive Insights, the leading cloud corporate performance management solution.  In collaboration with our implementation consultant, the model is configured to meet any unique requirements of our customers.  This enables our customers to enjoy the benefits of the solution quickly and at less cost.  Available only from Carlson, our solution allows organizations to benefit from “best in class” technology and finance capability around key areas of manufacturing budgeting, forecasting, planning and reporting including:

  •  AdaptiveMonitorRevenue Forecasting
  • Cost of Goods Sold
  • Margin Analysis
  • Per Unit Planning
  • Plant/Department Cost Breakdowns
  • Bill of Materials
  • Overhead Allocations
  • “What if” Scenario Analysis
  • Multiple Currencies
  • Capital Budgeting
  • Debt Schedule Projections
  • Financial & Operational Ratio Analysis
  • KPI’s & Dashboards

Want to see our Manufacturing CPM solution in action?  Then, please request a demo.

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