The future competitiveness of real-time business relies on more accurate forecast planning and analytics (FP&A). Not only is this important in the short term (for example, analyzing customer demand and supply-chain optimization), it is also critical to the decisions upon which long-term digital transformation will be based.
The TCS CFO 2020 Study shows that finance leaders understand this but, when asked specifically about their longer-term forecasting priorities, a juxtaposition emerges: technology evolution and financing/capital allocation stand out as the two most important areas—yet the best way to achieve greater accuracy and insight in these areas is to invest in new technical FP&A capabilities.
Take a holistic approach to implementation
So, what is the answer? CFOs can drive the shift to more agile FP&A capabilities by starting small, investing in impactful tools and then championing their development, says Sujith Chandran, Senior Director, Supply Chain Finance at The Hain Celestial Group. “This is not just a case of introducing more flexible technology—although that is, of course, important—but also investing in talent, selling the benefits to secure the buy-in of both the wider workforce and the leadership team, and taking control of the enterprise data that will feed the new tools.”
"CFOs can drive the shift to more agile FP&A capabilities by starting small, investing in impactful tools and then championing their development."
— Sujith Chandran Senior Director, Supply Chain Finance, The Hain Celestial Group
Defining agile leaders versus traditionalists
This research reveals big differences in the business attitudes and processes of the more digitally enabled businesses and those of their more traditional counterparts.
In this analysis, we refer to these two groups as “agile leaders” and “traditionalists.”
■ Agile leaders are those organizations that are able to access 90-100% of key operational and financial performance data, and act upon the insights with immediate effect.
■ By contrast, traditionalists are able only to access, and act upon with immediate effect, 1 29% of key operational and financial performance data.
Indeed, the agile leaders in our research deliver a clear message to those looking to accelerate their FP&A capabilities: it is never too early to start managing workforce challenges. Workforce resistance, inconsistent data and difficulty working with the C-suite are key issues that leaders are currently grappling with (see Figure 1). Traditionalist businesses that can embed robust change-management strategies while rolling out technical strategy will secure a much quicker transition to agile FP&A.
Question: What are the biggest challenges you face when compiling accurate forecasts?
The agile FP&A vision
CFOs view new, agile forecasting models as tools for overcoming the common challenges they face, although these challenges differ across sectors. For example, financial services organizations are significantly more focused on using FP&A to forecast capital allocation than are most other industries (this also tops CPG’s priorities); retail is predominantly focused on technology; and insurance is most interested in planning effective business partnerships.
Question: Between now and 2025, what aspects of forecasting do you expect to be the most important?
Real-time forecasting will enhance your scenario-planning capabilities considerably, says Sandip Thakrar, Finance Director, Major & Public Sector at BT Group. “The link between your KPIs and your financials sounds obvious, but a lot of organizations aren’t reporting in that way. An agile FP&A tool will allow you to understand that, ‘If you execute this activity in region X with this product, you’ll see this benefit at this point in time.’ Within two to three years, that automated view should be the norm,” he says.
Appoint champions of change
"The link between your KPIs and your financials sounds obvious, but a lot of organizations aren’t reporting in that way."
— Sandip Thakrar
Finance Director, Major & Public Sector at BT Group
Question: What are the principal benefits of agile FP&A systems in your enterprise?
Driving better business performance is not the only benefit that agile FP&A unlocks. No matter where an organization is in its transformation to real-time enterprise, our research shows that agile FP&A is expected to deliver significant impact. For example, traditionalists who are in the early stages of technology implementation see improved capabilities around cost/ROI and decision making. Meanwhile, agile leaders, who are likely to have more deeply embedded digital FP&A technologies, see the biggest returns in areas such as data quality, enterprise-wide collaboration and scenario planning.
“Once you have solid control over your costs, you can start to gain transparency on the drivers behind them and work more collaboratively to meet the needs of the wider enterprise,” says Rajiv Subramanian, Head of Finance at Nokia IT. “We have built a tool that combines the financial and non-financial data that enable users to slice and dice costs in every possible way. For example, it answers questions such as, ‘Which vendor do I spend money on? Which service does a vendor provide me with? How much cost is each application consuming?’ Understanding those cost drivers is really the next step in terms of improving forecast accuracy,” he says.
Agile FP&A will be a critical tool in the CFO’s kit as the role evolves over the next five years. Embracing innovation and championing the cross-enterprise digital change will be key to moving at the pace required.
Appoint champions of change
"Once you have solid control over your costs, you can start to gain transparency on the drivers behind them and work more collaboratively to meet the needs of the wider enterprise."
— Rajiv Subramanian
Head of Finance at Nokia IT