Planning software holds the budget, the forecast and the models behind them, and compares them with what actually happened. It is where a finance team answers "what will next quarter look like" and "why did last month differ from plan."
What it does
A ledger looks backward. Planning tools look forward: they hold drivers (headcount, prices, volumes, rates), turn them into a projected income statement, balance sheet and cash flow, and let the team change one assumption and see the effect. They load actuals from the ledger each month so that variance against budget and forecast is computed rather than assembled by hand. Most products also handle the collaborative part of the budget: templates sent to department owners, approvals, version control and a record of who changed what.
Many products sold in this category have grown sideways into workforce planning, sales capacity planning and supply chain planning, which the vendors often call extended or integrated planning. Some also include financial consolidation, which overlaps with close and consolidation.
For a listed company, the forward view also informs what management discusses about known trends and uncertainties; the SEC's guidance on management's discussion and analysis is the standing reference for that section of the filing.
Who uses it
FP&A analysts and managers build and run the models. Department heads enter or approve their budgets. The CFO and the board read the outputs. Business partners in sales, operations and HR use shared models where the product supports them.
The parts a typical product has
- A modelling engine, either a spreadsheet interface or a multidimensional model
- Budget templates, workflow and approvals
- Rolling forecasts and scenarios
- Actuals loaded from the ledger, with drill-back where supported
- Variance analysis and management reporting, often exported to slides
- Workforce, revenue and capital planning modules
Where it meets other categories
Actuals come from the ERP and general ledger, usually after the close. Revenue plans for subscription businesses draw on revenue recognition and billing data. Cash forecasts overlap with treasury, which forecasts at a shorter horizon from bank data. Board reporting may pass to financial reporting and disclosure management.
Questions to ask a vendor
- Do analysts work in a spreadsheet interface, the vendor's own modelling language, or both?
- Which ledgers, HR systems and CRMs load natively, and how often?
- How are versions, scenarios and approvals tracked?
- Can department owners enter budgets without training in the modelling tool?
- What does a model change require: a finance user, an administrator, or the vendor?
- How is access controlled for salary and other restricted data?