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In many organisations, planning processes are still too siloed and manual to support making the right and timely decisions. A modern Financial Planning & Analysis (FP&A) function generating forward-looking and connected insights – without wasting time – is key for organisations to thrive in today’s dynamic environment. In this article we will address why a modern FP&A function is important and what you need to do to make that happen.

Before we get there, let’s begin with a simple question.

Do you have the insights to steer business performance, without wasting time on non-value adding activities?

If your answer is YES, it means you probably have an aligned setup in place, which we would call modern FP&A:

  • streamlined processes and data models, enabling efficient planning and reporting, with full control over your data;
  • modern technology for EPM (Enterprise Performance Management), with advanced planning and reporting functionality, such as workflow, validations, what-if scenario modelling, predictive analytics and driver-based top-down and bottom-up planning;
  • and talented people and a well-governed organisational structure enabling a bridge between business, finance and technology.

In case you didn’t know, you belong to the happy few, as long as everything stays as it is. Do keep in mind to ensure the support and expertise needed to deal with change (which we will address in the last paragraph).

If your answer is NO, it means you fall in one of the following categories:

  • either you are lacking insights in (drivers behind) past or expected business performance…
  • or your team’s valuable time is wasted through non-value adding activities like manual data collection, data processing, production and distribution of reports and plans…
  • or even worse, both: you are lacking insights AND your team’s valuable time is wasted.

If this is the case, there’s work to be done. After all, a lack of insight and inefficiency limits your ability to maximise value creation and minimise value destruction within your organisation.

Why is it important to modernise your FP&A function?

Across various industries, we see that organisations are dealing with similar challenges with an increasing need for a modern FP&A function which provides efficient backward-looking and forward-looking insights:

  1. Market dynamics
    First of all, we see more volatile market dynamics as a result of various political, economic, social and technological disruption. Whether it be Brexit, new regulations, the US-China trade war, the yellow vests movement, or the impact of technology platforms on existing business models, every organisation must adapt to changing circumstances in order to succeed. This not only requires thorough insight in the current situation to assess the impact on current business, but also increases the need for forward-looking capabilities, such as rolling forecasting, what-if scenario modelling and predictive analytics to anticipate future events in the best way possible.
  2. Resource allocation
    In these dynamic markets, it is not only essential to respond quickly, but also to make the right decisions on how to allocate the scarce financial, human or physical resources available to you. As these decisions are key to generating value (or profit), it is important that these decisions are based on connected financial and operational insights. Such connected insights enable both driver-based planning and variance analysis to further optimise the use and allocation of resources. Achieving such connected insights without wasting valuable time requires a modern setup of your FP&A function.
  3. Economies of scale
    As organisations are getting larger and more geographically dispersed, it becomes more important that the right insights are collected in an efficient way. Depending on the management control style, you will be interested in financial, strategic and operational insights of your organisation. However, regardless of the type of information you plan and report on, it is vital to have the right processes and tools in place for realising economies of scale while remaining in control of your dispersed organisation.
  4. Data as a differentiator
    More data is generated than ever before, which provides an opportunity for organisations to use internal and external data to their advantage. As organisations are experimenting with (big) data and analytics initiatives, it is expected that these initiatives will be more integrated with financial planning and analysis. For example, machine learning techniques can be used to predict a sales forecast, which enables FP&A controllers to challenge the forecast provided by sales managers. This way, leveraging data becomes a differentiator in relation to your competitors. However, it does require your organisation to develop the right tools and skills to move beyond traditional FP&A.
  5. Talent scarcity
    The last reason to adopt modern FP&A practices is to attract and retain talent in your organisation. In many organisations, well-educated staff are spending a significant amount of time on non-value adding activities, such as data collection, data processing, and the production and distribution of reports. This takes time and attention away from real planning and analysis. Not only is it a waste of time and money to have well-educated staff work on non-value adding activities, but we also see that in the current labour market, talent (e.g. millennials) changes jobs quickly if the environment does not equip them to learn, add value and make an impact.

What is needed to modernise your FP&A function?

If there are enough reasons for you to modernise your FP&A function, you might wonder what you need to do to make that happen. Most important is to keep in mind the following:

Begin with the end in mind
Before you begin your journey, it is important to envision what your ideal FP&A function looks like. This step includes several questions, such as:

  • What is the management control style to apply – and how does that impact the requirements of your FP&A function?
  • Which planning and reporting processes do you have to deal with?
  • What information is relevant for planning and analysis and which data sources should be used to support that?
  • How can technology be used to modernise these planning and analysis processes?
  • How can you organise your FP&A function in a way which optimises the added value for the business?

Interconnected approach
Modernising your FP&A function requires you to interconnect different building blocks in the right way, such as processes, data models, technology and organisation. Instead of developing these building blocks one by one, we recommend taking an interconnected approach, as this provides the opportunity to generate synergies between them. For example, using modern technology largely expands the potential scope of your FP&A function, which might affect the frequency and reach of your processes, the use of (operational) data and development of controlling roles within your organisation.

Bridge multi-disciplinary expertise
When developing your future FP&A function, you will deal with different domains, such as business, finance and IT. Most likely you have several domain experts inside your organisation. The key to a successful implementation is not only to involve those domain experts, but also to bridge those different domains and ensure that everyone is working in alignment towards your shared vision.

How to get things done

If there is a need for you to modernise your FP&A function, you have several options:

  • DIY (do it yourself), learn while doing about the interconnected elements of modern FP&A and bring together different specialists from within your organisation. This might work well if you have all expertise in house and if you are able to guide and align these experts towards your shared vision.
  • Pick and choose expertise for developing different elements of your modernised FP&A landscape. If you realise that some expertise is missing which you need to realise your shared vision, you might involve individual experts to fill those gaps. If this is your preferred option, keep in mind the importance of aligning different specialists and ensure that everyone works towards your shared vision.
  • Consider Planning as a Service by inlumi: we are experts in Enterprise Performance Management (EPM) with extensive experience in helping organisations to define and implement a vision and roadmap towards modern FP&A – and ensure continuous support to deal with change. We offer Planning as a Service, a unique and integrated way to leverage the latest EPM technology to upgrade your planning processes and benefit from connected insights, control and support – in no time.

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