3 Ways to Modernize Your FP&A Practice Right Now

Can your Financial Planning &Analytics (FP&A) team alter financial plans, reforecast and modifybudgets in real time? Or, have traditional processes kept your entire corporatefinance team tied to spreadsheets and outdated expectations?

Extended planning and analysis (xP&A) is the gold standard for how companies will approach planning. xP&A is the focus of digital transformation, and FP&A is one of the defining use cases.

Accurate forecasting drivesreliable, data-driven decisions, but too often the work is created in an ad hocmanner and siloed across business units. As finance enters a new era of digitaltransformation, CFOs and senior management need financial models that informbusiness strategy at the speed and insight of true innovation. The rightFP&A solution is key to success and the financial health of your companyfive months from now, and five years from now, depends on it.

A digital-first approachto FP&A means adopting strategies that are focused on process automation,agility, transparency and metric-based insights. Here are three ways tomodernize your FP&A practice right now:

1. Leave the problems of spreadsheets behind

Fifty-eight percent of midsize and large companies still usespreadsheets to manage their planning and budgeting processes, andyet, 41 percent of users say spreadsheets cannot handle their data volumes.

Manual, legacy planningsolutions also come with the cost of time and innovation. Organizations lacking a centralized platform spend as much as 20 percentof their planning and analysis time collecting data and as much as 30 percentvalidating that information. That's a major problem,especially when it comes to managing your financial data.

The broader the use ofspreadsheets within an organization, the greater the chance for human error andrisk. Too often, spreadsheets create flawed models and inaccurate calculationsdue to a lack of standardization, poor data integrity and ineffectivecollaboration methods.

Lessons from the pandemic for FP&A

The COVID pandemic hastaught many CFOs and FP&A professionals the value of an agile planningprocess. To survive the pandemic, organizations needed the ability to shiftgears or pivot plans quickly, incorporate external factors to mitigate risk,adapt strategic plans to new business models, focus on cash flow and workingcapital as part of a continuity plan and integrate planning across theorganization to achieve a holistic view of performance. There are certainevents that can't be modeled in a spreadsheet the pandemic was, and still is,one of them.

Spreadsheets can impedecollaboration, creating data and planning siloes and cause a delay of criticalinformation that can cause a ripple effect, driving poor decision-making andpoor results. And yet, people like working in spreadsheets. They're familiarwith them. So, is there a way forward? Fortunately, yes.

Moving past spreadsheets with modern FP&A solutions

Modern FP&A planningsolutions are fast, flexible and provide a holistic view of the company's data.They provide stakeholders with transparency into FP&A processes, allowingusers to streamline planning and financial reporting, plus analyze thousands ofdata points in real time. You can create rolling forecasts, timely financialstatements like income statements and balance sheets and compelling datavisualizations that help put insights into action.

With these FP&Asolutions, data from multiple sources is stored in a central database, so allparticipants work with the same information. Having a central repositoryeliminates errors and conflicting data, and helps teams achieve one source oftruth as well as financial information that is reliable and accurate. Yourorganization can begin transforming digitally by automating key processes, suchas data collection and validation, to maximize team effectiveness.

With modern planningsolutions, employees spend less time on manual tasks and more time on analysis,gaining visibility into their data and uncovering deep insights. FP&A analysts canalso perform in-depth, what-if scenario analysis to test alternativeassumptions for future performance and see the impact of decisions beforemaking them to improve actual results.

Don't give up on Excel just yet

You don't have to giveup Excel, as many modern FP&A solutions offeran Excel interface so you can eliminate the challenges ofspreadsheet-based processes, but work in an interface you are familiar with.And when it comes to moving from Excel to modern planning solutions,IBM clients are already experiencing the benefits.

IBM Planning Analyticswith Watson has been recognized as a 2021 Gartner Peer Insights Customers'Choice in the Cloud Financial Planning & Analysis (FP&A) market. Learn more about IBM Planning Analytics withWatson.

2. Harness the power of integrated planning or extended planningand analysis (xP&A)

Working in silos is athing of the past. The business leaders of the future are those who leverageintegrated planning alongside artificial intelligence and automation to augmenthuman intelligence and drive better outcomes. The rapidly evolving business conditionsof the COVID-19 pandemic have only underscored this imperative. Companies thatrelied on siloed, manual processes were caught in a reactive position whilemore digitally or AI-focused enterprises were able to take a proactive stancethanks to the agility to pivot plans and forecasts quickly.

These enterprisesharnessed the power of integrated planning or extended planning &analysis (xP&A), as it is often referred to, as well as scenario modeling,and predictive forecasting. Integrated planning mirrors the modern waywe do business it elevates the critical value of collaboration and cutsthrough data silos, driving more access to information and faster insights. Itallows all users to access the information they need when they need it, and itunifies data from diverse data sources such as ERPs, CRMs and HRMs, and ensuresthat plans, budgets and forecasts are created with a holistic approach.

Consider supply chainplanning and management. To effectively match supply and demand requirescoordination and collaboration across the organization cash flow and workingcapital need to be accounted for, alongside production capacity and inventory.Organizations must orchestrate a convergence of the elements that make up theentire analytics journey across multiple departments of the enterprise. And theprocess needs to be steadfast and transparent. One centralized planningsolution can help connect operational planning tactics with financial planningand analysis to allocate resources more effectively in response to changingdemand, market opportunities or competitive threats.

Operations, sales,finance, human resources and other departments and disciplines all have a needfor fast, flexible planning and analysis. And all of them can use the sametools to provide insight and manage performance. When people in one part of theorganization see how their decisions affect other parts of the organization,all of the activities will be better coordinated and drive higher results.And one integrated solution that streamlines planning, budgeting andforecasting across the enterprise can drive major cost savings.

3. Reimagine the back-office role

The career path forback-office personnel is about to evolve. As FP&A is automated, CFOs andFP&A managers will play a leading role in reinventing the workforce:creating a knowledgeable, agile, collaborative and empowered team to lead theorganization into the future. This means evolving the back-office role from anadministrative one to a strategic one.

Business leaders can automate tedious and labour-intensive tasks like data collection, aggregation and cleansing through the use of AI. This empowers them to spend more time on value-added work and enables them to make better informed business decisions. And with financial planning, scenario modeling and performance management KPIs and metrics streamlined, data can be leveraged toward creating a feedback loop that informs present and future operations.

Business leaders can alsoincorporate predictive capabilities into their FP&A practice for more accurateand reliable forecasts. Predictive forecasting uses statistical andpredictive analytics to identify and assess trends and seasonality patterns inhistoric values, greatly improving forecast accuracy. It also reduces the timerequired to produce accurate profitability and balance sheetforecasts, allowing users to focus on process optimization, managing exceptionsand making adjustments.

Freed from rote tasks,FP&A teams will have the opportunity to think innovatively and contributetheir deep expertise and skill sets to strategic decision-making and moremeaningful work. Meaningful work ensures that employees' skills and talents arebeing fully utilized and there is greater alignment to shared, core values. IBMEmployee Experience Index shows that 80 percent of employees report a morepositive employee experience when their work is consistent with theorganization's core values. And the happier employees are, the more satisfiedcustomers and end users tend to be.

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