Does this situation sound familiar?
The financial target is defined in euros, while the operational plan uses units, liters or kilograms.
The gap only becomes visible once the volume plan has been aggregated and valued.
Adjustments are made manually across items and customers in recurring Excel loops.
This is where Financial Breakdown comes in. The forecast stays honest while realistic actions toward the target are planned separately.
Starting point Starting point: Two sets of numbers, one visible gap
Finance sets a revenue target of €250 million for the coming fiscal year. Valued at the planned prices, the current demand forecast amounts to €232 million. That leaves a gap of €18 million.
At first glance, this may look like a straightforward calculation. But the two figures reflect different perspectives:
- The budget defines the financial target the company wants to achieve.
- The forecast describes the demand that is likely under the current assumptions.
- The operational plan determines which actions can achieve the target and which constraints must be respected.
A budget defines the target. A forecast describes the realistic expectation. Only when the gap between the two is visible can the need for action be managed.
The task is therefore not to keep increasing the forecast until it matches the budget. It is to explain the gap transparently, identify realistic levers and turn them into robust scenarios for Sales, Supply Chain and Production.
The challenge: No one-size-fits-all uplift
There is almost always a gap between the top-down target and the bottom-up plan – and today, that gap is often closed manually.
Two planning worlds
Finance sets annual targets in euros by business unit or product division. Demand Planning works in units, liters or kilograms by item and customer – at monthly or even weekly level.
The gap becomes visible late
The deviation only becomes visible once the volume plan has been aggregated and valued in euros. Different hierarchies, prices, terms, currencies and mix effects make the reconciliation even harder.
Manual fine-tuning
Planners adjust item after item and customer after customer until the total fits – over weeks, in Excel and through repeated alignment loops with Finance.
Blanket uplifts fall short
Historical allocation keys know nothing about additional customer potential, capacity, supply availability or product life cycles. A mathematically plausible uplift may be operationally unrealistic.
A distorted plan
The plan matches the budget on paper, but not reality. The result is forecast bias, inventory in the wrong places and additional risks to supply availability and service levels.
Monitoring through the rear-view mirror
The company's position against its annual targets often only becomes clear at month-end close. By then, it may be too late for countermeasures or reallocations between divisions.
What to do Target state: Keep the forecast honest and plan actions deliberately
A robust financial-breakdown process deliberately keeps three levels separate:
- Target: Which financial objectives apply to the company, individual business units or markets?
- Expectation: Which volumes and revenues are realistic based on the available information?
- Action plan: Which specific levers can close the gap, and what are their effects on capacity, inventory and service levels?
This preserves the forecast as an unbiased basis for decision-making. Additional growth assumptions, sales initiatives and management decisions remain visible as separate scenarios and can be tracked independently over time.
A three-step agent workflow
AI agents can prepare the recurring reconciliation, deepen the analysis and flag relevant deviations early. The business decision remains with people.
Gap Agent
Where does the gap arise?
Values the volume plan using prices, aggregates it by business unit, division and month, and makes the difference from the target visible. The volume plan can be analyzed down to item and customer level.
Resulta transparent breakdown of the causes
Allocation and Scenario Agent
Which target contributions are realistic?
Allocates target contributions based on business logic, considering customer structure, ordering patterns, pipeline, seasonality, capacity and margin. Every recommendation includes a rationale.
Resultscenarios with assumptions, effects and target contribution
Monitoring Agent
Is the plan still on track?
Continuously compares actuals and the forecast with the annual target by division, detects over- and underperformance early and suggests possible reallocations.
Resultemerging action needs become visible early
The agents create transparency and prepare options.
People evaluate, decide and remain accountable for the plan.
Your benefits What you gain in concrete terms
- An explained gap by business unit, division, month and relevant planning level
- Realistic actions instead of blanket uplifts to the forecast
- Documented assumptions, rules and constraints
- Scenarios as a basis for decisions in Finance, Sales and Supply Chain
- Continuous monitoring of progress toward the target
- Less manual coordination and less repetitive Excel work
- Better organizational knowledge of special rules and custom logic instead of relying on individual employees
Required data and rules
The sources required depend on the company’s planning logic. Typically, the following information is brought together:
- Demand forecasts at the relevant product, customer and time levels
- Budget targets and their allocation to organizational units or markets
- Prices, terms, currencies and valuation rules
- Actual sales, incoming orders and known sales opportunities
- Capacities, supply constraints and inventory targets
- Product life cycles, launches and phase-out products
- Business rules and approval processes from Finance, Sales and Supply Chain
Not every dataset has to be complete and perfect from day one. What matters is making its quality and relevance transparent and selecting the first pilot project so that it produces measurable insight.
Our approach
We start with a clearly defined scope and develop the agent workflow together with the relevant business teams – from the initial assessment through integration into the planning process.
approx. 2 weeks
Financial Gap Check
We compare the current demand plan with the annual targets. The result: the gap by business unit, division and month, initial reasoned proposals for closing it and the most important levers.
approx. 2–4 weeks
Model the business rules
In workshops, we translate the knowledge held by Finance, Sales, Demand Planning and Supply Chain into transparent rules – from hard constraints to preferences and approval thresholds.
approx. 4–6 weeks
Implement a focused pilot
We initially test the agent workflow for a suitable business unit, market or planning cycle and refine its recommendations based on feedback from the business teams.
approx. 4–12 weeks
Integrate and improve
Following a successful pilot, we connect data sources and outputs to the existing system landscape. Monitoring and feedback continuously improve the rules, scenarios and recommendations.
Further information Why prognostica?
We combine forecasting expertise with a deep understanding of operational planning processes. Since 2014, we have been developing solutions that go beyond statistical models by bringing data, business rules and human decisions together in a meaningful way.
Our agents are system-agnostic and can be integrated into existing data and planning landscapes. Their recommendations remain explainable: assumptions, constraints and effects are visible before a person makes the decision.
Learn more about AI agents for Demand Review and S&OP
Practical guidance for the budgeting cycle: In our blog post Seven Tips for Better Budgeting Cycles: With or Without AI, we show how financial targets and operational planning can be brought together realistically.
FAQ
Do we need to replace our existing planning system?
No. The agent workflow can initially be set up alongside the existing planning process and connected selectively at a later stage. It complements systems such as SAP IBP, OMP, Kinaxis, or an existing ERP and BI landscape with the logic required to reconcile the budget, forecast, and action plan.
The appropriate integration follows your process and the demonstrated value—not the other way around.
Do our data already need to be complete and clean?
No. Not all data need to be complete and perfectly prepared from the outset. You do not need to provide any data for the initial consultation. We first clarify which targets, planning variables, and systems are available and where the current process creates effort.
A later pilot will typically require budget targets, demand forecasts, valuation information, and the most important business constraints. Data gaps and differing definitions are made transparent rather than silently ignored.
Do the AI agents make decisions autonomously?
No. The agents calculate variances, check rules and constraints, and propose explainable actions. Business decisions and approvals remain with your team.
Assumptions, reasoning, and effects remain visible so that Finance, Sales, and Supply Chain can assess the recommendations together.
How large should a sensible first use case be?
The starting point should be small enough to generate reliable insights quickly, but large enough to reflect the real planning process. A business unit, product division, market region, or representative planning subset may be suitable.
The exact scope depends on where the budget gap, manual effort, and economic relevance come together most clearly.
What happens during the no-obligation initial consultation?
We discuss your starting point: How do you currently reconcile budget targets and demand plans, where does the process create effort, and which systems and data sources are involved? Together, we explore initial possible approaches and determine whether our approach fits your planning situation and what a sensible next step might be.
No preparation or slide deck is required. The conversation provides initial orientation. A more detailed assessment only takes place in a separately agreed follow-up step.
No-obligation initial consultation
Is Financial Breakdown a good fit for your planning situation?
In a no-obligation initial consultation, we look at how you currently reconcile financial targets and volume plans, where the process creates effort and whether our approach is fundamentally a good fit. No preparation or slide deck is required.
Dr. Kristina Krebs
Member of the Board
Your contact for the initial consultation.
Choose a suitable time
Select an available time directly in Dr. Kristina Krebs’s calendar.
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