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Finance planning today
How can one transform the financial planning and analysis (FP&A) function to adjust to changing business needs without disrupting the core principles of decision-making?
Today’s business environment is characterized by increased uncertainty, complexity, and risk. CFOs and business leaders have long recognized the need to transform the FP&A function, but even organizations with the commitment to transform are realizing that traditional process improvement methods are no longer sufficient.
A recent survey conducted by TCS with 750 global finance leaders across three regions and 14 industries highlighted the challenges. Our findings showed that stakeholder expectations on quality and speed of business insight are growing, but traditional FP&A methods and tools are not living up to these expectations.
The need to transform
FP&A transformation programs in the past have used a siloed approach with point solutions, rather than addressing underlying data quality issues.
This Band-Aid approach has introduced risks rather than opportunities. Despite redesigning the process and deploying point solutions, the outcome falls short of expectations.
The traditional F&P approaches have not worked because they are:
Finance only: Single-dimensional data set impairs FP&A from unfolding its full potential as an entrepreneurial management discipline.
Too rigid and system-heavy: This prevents the organization from responding in an agile fashion to rapidly changing external parameters and business demands.
Data quality issues: Trust and governance issues prevent FP&A from maturing into a dependable and sustainable strategic business function.
Analytics not integrated: Misses out on being at the centre of strategic decision-making by generating value-adding business insight on demand.
To be effective, FP&A transformation must catch up on the latest trends in decision making.
Before embarking on the journey, FP&A leaders need to explore new technologies to gain lasting competitive advantage.
Given the significant evolution in technologies, the FP&A function needs to fundamentally change how its services will be delivered today and beyond. The transformation should not only redefine the FP&A operating model and reduce inefficiencies, but also look around the corner for the next wave of opportunities.
The two fundamental trends disrupting traditional decision-making are fast-advancing disruptive FP&A technologies and increasing demand for multi-dimensional business insights.
For instance, to navigate this modern business environment, the FP&A function must build capabilities that encompass early warning signals. These predictive analytics systems can be used to anticipate business cycle risks and allow organizations to respond proactively.
Trends in disruptive technologies:
Analytics: Combines heterogeneous data sets from internal and external sources to gain deeper insight
Mobility: Provides access to information anytime, anywhere, or ‘data on the move’
Cloud: Allows for faster and more agile implementation cycles along with strategic flexibility in the use of software
Visualization and collaboration: Presents insights and intuitive formats to establish a constant performance dialogue among decision makers.
Predictive features: Leverages predictive models to anticipate likely future scenarios and assess sensitivity.
Trends in business insights
True business partner model: Merge financial, operational, and external data for richer business insights and expand the service function from a finance-focus into a true business partner model
The need for speed: Establish a scalable analytical capability to provide business insights independent of monthly reporting cycles at the time of decision-making
More flexible digital services: Revitalize the FP&A value proposition through digital service delivery channels and methods.
Strategic data management: Utilize external and internal, structured and unstructured sources, and move from silo solutions to ‘data lakes’
An integrated approach
Close integration with business and enhanced use of financial and operational data are cornerstones of FP&A transformation.
The key elements of an integrated approach:
1. Assess the value of digital: Explore the value of digitally-enabled FP&A.
2. Refresh the vision: Reset FP&A objectives based on technology enablers.
3. Revise the operating model: Identify the changes that will be required to embed and operate digitally across the organization.
4. Plan for the change: Align the current initiative with the new one, and then plan the journey.
5. Execute the plan: Develop a sprint plan to build foundational and priority capabilities.
Capitalizing on an agile, digitally enabled FP&A function will lead to significant opportunities.
There is no “do nothing option” Stakeholder expectations of quality and speed of business insight will only grow as digitization progresses. To steer the business in a highly volatile and uncertain
environment, the FP&A function needs a digital pivot to not only meet the need of today but for the needs of tomorrow.