The discipline of Planning, Budgeting and Forecasting has covered a lot of ground over the past 20+ years, sustaining a steady evolution and maturing into a fully-fledged, crucial element of Management Reporting and Enterprise Performance Management.
This evolution of the Planning process really kicked into action in the early 2000’s as the more progressive organisations looked to tackle their often tedious and expensive annual budgeting process. These organisations looked at technology to bring speed and agility, typically opting for a ‘Best of Breed’ system aimed at the collection and aggregation of departmental budgets.
Next, the evolution journey saw the introduction of the term ‘Planning, Budgeting & Forecasting’ (PB&F) as organisations increased their planning frequency with forecasts, or even rolling forecasts, and the ability to track scenarios. Further improvements in system functionality and analysis capabilities led to the ascent of Financial Planning & Analysis (FP&A) – now a mature field typically supported by a dedicated FP&A team.
For a few really forward-thinking companies the evolution continued into Integrated Business Planning (IBP) which proposed integrating FP&A processes with cross-functional data sets and processes, for example, workforce or capital planning. Central to IBP is the idea that all data is an asset to be exploited to help make critical business decisions, and to do this, the data needs to be connected and analysed. It was, however, at this point when many organisations battled to develop a business case for more spend or were not entirely convinced that further integration was even feasible. The organisations that did try implement IBP, or at least aspects of IBP, often battled with cross-departmental push-back and challenges around disparate data sets. The result – a slowdown in the evolution of Planning and a trend that saw existing best of breed solutions or spreadsheet estates growing in complexity and extended with parallel, often disparate business processes.
So, what exactly is this xP&A which has energised the market into action again?
Fast forward to today and Planning as a discipline is on the move again. The market is indeed buzzing with the relatively new concept of Extended Planning and Analytics – xP&A – a term coined by Gartner in 2020 to describe the next step in the evolution of Planning.
Gartner defines xP&A as the evolution of planning, combining financial and operational planning on a single composable platform. It “extends” traditional FP&A solutions focused solely on finance into other enterprise planning domains such as workforce, sales, operations, and marketing.
The premise behind xP&A is for all business functions to benefit from the structure and insights delivered by the financial planning process; and for Finance to benefit from access to data at the level of detail that drives business operations. The intention being a combined, enterprise plan that is more accurate and comprehensive, with increased transparency across the organisation.
The new opportunity of enterprise-wide connected data enables more detailed planning and scrutiny of results. Furthermore, because the plans are not limited to a single data set, there is the added benefit of improved insights from the end-to-end value chain. This is where FP&A extends to xP&A. This is how finance teams aim to tell businesses what they need to know to take meaningful action and drive results.