Plansmith Blog

For six wonderful years, I’ve had the privilege of being a part of Plansmith’s marketing team. From marketing assistant, to department manager, to my most recent role as Director of Marketing, I’ve experienced firsthand how important our company’s mission is: improving planning. Why? Because there is nothing more frustrating than having a brilliant idea with no real way of making it come to fruition. However, with incredible people and a quality plan, anything is possible – and doable.

Like many of you, I notice how important the planning process is when I’m putting together my ideas for next year. Though a marketing plan is a bit different than financial institution planning, the core concepts are the same.

Each January, we love to set resolutions. We painstakingly choose a lofty goal or two and optimistically embark, declaring, “this will be THE year for change!”.

Unfortunately, we often lose steam and quickly return to what is comfortable. For lack of a better term, we fail. We fail to change our approach and to reach our goals.

2020 was an unprecedented year. Just when you finished creating a budget, it was decimated by the economic crisis. From there, time was spent reforecasting, helping allocate PPP loans, and adjusting to changing rate environments. Fast forward a year, and we’re slowly starting to get back to business as usual.

In addition to the usual financial planning, what do regulators want you to focus on in 2021? For most financial institutions, it’s going to be CECL.

Although we develop software to mathematically convert ideas into measurable outcomes, we have always viewed Plansmith as an education company. Not education as in ‘a + b = c,’ but in the way relationships and behaviors drive a financial outcome. This year, we are introducing a new educational solution called Budget Playbook. This online tool connects vision with purpose and execution to help you reach your budget targets. At Plansmith, we use Budget Playbook to dive into the relationship between ideation and plan execution to foster communication and drive better results.

At Plansmith, we focus on not only helping our clients with preparing an annual budget, but identifying the action items involved in making the plan come to fruition. When you work all week helping banks and credit unions do a better job of planning, it’s probably not uncommon to take a step away on the weekend and refresh the batteries.

But do we ever really stop planning?

Last year, shortly before COVID hit, I was making plans (there’s that word again) to attend a concert at Chicago’s Thalia Hall. Since this was a general admission show, my goal was to arrive early in order to be relatively close to the stage. If you’re a bank or credit union CFO, think of this as my desired ROI.

Regulatory guidance states that the board of directors has the ultimate responsibility for the risks undertaken by an institution – including interest rate risk (IRR) and liquidity management.

The board is typically made up of a diverse group of individuals from varying backgrounds and career paths. Unlike most positions within a financial institution, a board member does not necessarily come from a banking background. One board could easily include a local entrepreneur, a farmer, a financial planner, a retired financial institution CEO, and a local insurance agent; while another board could be comprised of almost all former bankers. It’s often the most differing group in a similar role across financial institutions – so, since one size does not fit all, how do you train directors for their position on the board?

Due to the COVID-19 pandemic, Paycheck Protection Program (PPP) loans are a strange new addition to every banker’s reality. The role of the community bank and credit union has always been to serve customers and local businesses with compassion and trust. This responsibility has only been amplified by the current situation.

PPP loans help ensure businesses have funding to stay open and continue to pay their employees through the uncertainty of the crisis. Financial institutions play an essential role by assisting in creating, processing, approving, and allocating these loans.

Plansmith is a planning company, as our name implies. For 50 years, budgeting has been what we’re known for. We get a lot of questions about our top budgeting advice, and as we kick off a new year, it’s the perfect time to offer some fresh tips for successful budgeting.

Though we certainly suggest using a robust budgeting solution like our Compass software, this advice applies to any process. We understand many organizations still use spreadsheets or outdated software, and that may work for them because they’re used to it. However, quality planning software makes budgeting much easier, more accurate, and more approachable for all parties involved – including the board during presentations.

So, what are some realistic tips for effective budgeting?

During the Middle Ages the town controller or accountant would show the citizenry how much was in the town’s “bouge,” a leather bag or wallet. With this knowledge, they would decide how best to spend it to cover the town’s expenses. Eventually, the term became the “budget” and was adopted by various enterprises to control expenses. Since not all expenses are immediate, the idea of forecasting revenues and expenses slowly entered the picture. However, expense control remained the primary objective. Hence the saying familiar to all of us: “That’s not in the budget.”

Quick, what pops into your mind when I say, Budget? Oh… I hear a lot of groans, but nothing specific. When I hear Budget, I feel the same way. Now, I know as the president of a planning software company, I shouldn’t have that reaction, but I am human. Even with the best tools, the fact remains that all businesses struggle with the same issue: balance. How do you maintain balance between growth and earnings given the costs associated with obtaining new business?