In the past, financial planning and analysis (FP&A) used to feel like a completely foreign concept. Nowadays, finance teams are dedicating around 10% more time and resources to FP&A to keep their organisations consistently ahead. Despite this effort, many find themselves falling two steps behind for every three steps they take. What’s causing this phenomenon in today’s finance teams?
Today’s modern world is filled with complexity and constant change. Business unit and product line FP&A professionals are facing new challenges due to the emergence of multiple trends. Economic fluctuations, supply chain disruptions, and labour shortages are just some of the pressures finance teams are grappling with. Traditional approaches to FP&A, which focus on quarterly and annual cycles, struggle to keep up with the real-time challenges of today’s dynamic business environment.
As your organisation grows, so does the flood of business data that FP&A teams have to navigate. This surge in data demands more sophisticated reconciliation and consolidation processes before we can uncover the crucial business insights needed for budgets, forecasts, and strategic plans.
Rather than feeling overwhelmed by this new trend, some leading-edge FP&A teams leverage it as a catalyst for improving their operations and strategy development. Instead of being afraid of technology, they find a way to fully utilise it, launch new reporting processes, and make changes in their way of doing things so they can work faster, smarter, and more flexibly.
Using technology isn’t just about speeding up processes. It’s about how FP&A teams can uncover key business insights. These insights are the foundation of every organisation, empowering them to make bold decisions and influence leadership.
These forward-thinking FP&A teams are establishing themselves as valued partners to the business units—a skill that numerous CxOs have sought from the finance function for quite some time. It’s now time for more FP&A teams to proactively revamp their operations to drive organisational success.
Enhancing Operational Execution
This article highlights the moves of next-level FP&A teams. They figured out the importance of integrating speed and adaptability into their processes, which can lead to improved efficiency and streamlined operations across the organisation.
It’s All About Speed
It’s not uncommon to see many FP&A teams still using outdated methods like generating reports in spreadsheets or static presentations. The problem with relying on these legacy systems is that they can’t keep up with today’s market’s fast-paced and ever-changing nature. Manual processes leave FP&A teams struggling with outdated data, making it challenging to access real-time information, especially as the influx of business data continues to increase.
Top-notch FP&A teams have wholly revamped their processes and created customised reports that they use regularly with meticulous attention to detail.
Every industry you can name wants to optimise its processes to keep pace with competitors or stay one step ahead. Sticking with outdated data just won’t cut it. That’s where technology comes in, empowering FP&A teams to harness real-time information on resources, pricing, and other crucial factors. Relying on manual report generation and monthly forecasts simply can’t keep up in today’s fast-paced environment.
The underlying crucial role of FP&A teams is often overlooked. They are involved in every aspect of the organisation, from sales and operations to IT and HR. These teams tirelessly review existing reporting processes to find better approaches. The next-level FP&A teams are taking advantage of AI-driven solutions like Workday Adaptive Planning. With this platform, they can gather data from servers across the company and use advanced algorithms to create and update real-time sales forecasts and other reports.
Additionally, they have developed a digital dashboard and a mobile app for the CFO and business unit leaders to access the latest information and make quick adjustments to production in response to market changes.
Intuition Or Data?
Next-level FP&A teams do things differently. The technology leveraged is being fully optimised by integrating financial and non-financial data to create a consistent fact base that can help inform critical business decisions and improve organisational performance.
They emphasise collaboration between departments and seek a good approach to ensure every data (general-ledger financial data, inventory data, sales data, HR data, and a range of external business information) is taken into account as they become a crucial part of decision-making. In this way, FP&A teams can efficiently collate facts and figures and feed them in real-time to business leaders who are charged with improving key performance indicators.
Take a look at this example: The FP&A team at a consumer products company collaborated with IT to develop an enterprise dashboard. This dashboard allows executives to quickly access vital information during their weekly meetings. For example, they can easily find answers to questions like “How can we reduce our transportation and logistics costs?”
By teaming up with inbound shipping firms, tweaking their outbound delivery schedule, and combining shipments at specific manufacturing sites, the company slashed the number of half-empty trucks by approximately 15%. This lowered their carbon footprint and cut down on transportation expenses.
Develop A Deep Understanding Of Your Strategy From All Angles
Next-generation FP&A teams distinguish themselves by pinpointing the essential elements that will significantly impact the business, establishing a clear connection between these elements and financial results using data, and actively contributing to decision-making.
The FP&A team has adopted an innovative approach by identifying the twelve most crucial business factors directly influencing organisations’ top-line and bottom-line performance. By gaining a deeper understanding of these key factors, the FP&A team can create more precise forecasts, ensuring the organisation’s operations run seamlessly.
Consider manufacturers, for instance. The innovative forecasting approach bridged the gap between senior management and business unit leaders, enhancing discussions and guiding the company’s resource distribution between its branded and private-label businesses.
Making The Big Moves
FP&A teams are crucial in guiding the company’s financial resources toward its most valuable activities. This dynamic process involves constant shifts between planning and execution. The CFO, CEO, and other senior leaders depend on the FP&A team to navigate the uncertainties that accompany strategic decision-making.
The FP&A team collaborated with sales, operations, R&D, and business development to uncover trends in the growth and profitability of several major product lines. By analysing market growth, product adoption rates, customer preferences, product capabilities, and costs, they built a compelling case for change. This led to a strategic shift in resources from larger platforms to a smaller one with higher growth and profitability potential. As a result, the business unit achieved impressive double-digit growth rates and delivered a remarkable 50% increase in incremental margin over the following three years.
A path to next-level FP&A
To elevate your FP&A organisation to the next level, it’s essential to drive internal transformation in three key areas: processes, technology, and talent. These changes are pivotal for financial planning and analysis organisations aiming for next-level success.
Improve processes to drive performance. To kick things off, FP&A leaders, the CFO, and other C-suite members should dive into their current processes to pinpoint the key factors that drive company performance.
Invest in technology to deliver deep insights. Making strategic technology investments is another essential aspect. FP&A needs to collaborate with the CEO, the CFO, IT leaders, and other key stakeholders to showcase the benefits of integrating business process improvements with cutting-edge technologies, just like some of the companies mentioned earlier have successfully done. The FP&A team can play a crucial role in making data accessible to everyone through dynamic, action-focused dashboards that unite the organisation around a shared source of truth, as illustrated by the consumer products company.
Develop talent beyond core finance capabilities. FP&A’s role is constantly evolving to become a more strategic business partner and challenger. It’s all about bringing in top talent to identify the key performance drivers specific to the industry, defining the competitive dynamics affecting key financial trends, and influencing the organisation to make bold moves. We saw this in action with both the food and industrial equipment manufacturers.