Just a year ago, a survey of finance officers found that financial planning & analysis (FP&A) was at the top of their list of key finance processes in which to build greater competence this year. It beat strategic planning, profitability reporting, internal controls and closing the books on the priority scale.
That’s no surprise to us. In fact, at TCS we believe CFOs’ interest in FP&A solutions are still strong and likely to increase for the foreseeable future.
Why? The reason is that CFOs’ ability to rapidly forecast short- and longer-term shifts in the internal and external workings of their companies has become paramount. Waiting months, or even weeks, to identify and act upon threats and opportunities is increasingly asking for trouble in more ways than one.
Consider this: A company that has a month or more of lead time because its FP&A solution is integrated with its enterprise resource planning (ERP) system, which together can show that customers are going to increase orders for a certain product, is a company with a distinct planning advantage. It has the built-in intelligence to quickly respond and hire additional staff to sell, support, manufacture and distribute that product. Conversely, a CFO with a real-time early warning system of softening customer demand can begin to tighten spending controls across the company – long before the competition has reined in its spending.
The need for better FP&A solutions – and finance people who are masters at using them – is clear. So is dramatically reducing the substantial amounts of manual effort that finance and other business functions make to prepare budgets and forecasts. Companies that automate most of this work and use artificial intelligence (AI) and machine learning technologies to detect changes outside and inside their company gain a big advantage. They create effective FP&A solutions through integrated systems that enable agile budgeting and forecasting. That, in turn, gives them the ability to reallocate capital dynamically in the areas of the business that need it most, and least.
To shed light on these and other financial forecasting issues, TCS has launched a study on CFOs and how they’re handling the mandates of the finance function, including leveraging FP&A business solutions.
Our survey will provide insights around the aspects of forecasting that companies see as most important to move to real-time decision making, including competitors’ pricing and other intelligence, pending skill shortages, financing needs, customer demand signals, and product lifecycles.
The study will also explore what holds finance departments back from taking full advantage of this kind of forecasting solution. Is it bad or incomplete data? A paucity of skills in analyzing the data or using the tools? Is it an inability of functional managers to communicate what the data is recommending that they do – for example, why their budgets need to be cut (or expanded) or why budget needs to shift to more deserving areas of the business? Could it be the internal cultural mindset – like managers and staff who are reluctant to change the way they plan and make decisions? Or perhaps it’s resistance of functional managers to work for the common good vs. their own agenda?
Coming soon: If you want to explore these important issues and get more insights, stay tuned for the upcoming 2020 CFO Study series of reports.