The Future of FP&A

For Group Controllers, business expectations regarding FP&A capabilities are evolving. Monitoring daily operational performance against high-level strategic objectives and ensuring accurate forecasting remain central to the controllers' responsibilities. Traditional methods, which often depend on disconnected systems and manual processes, cannot provide the agility and insights required for modern business management. Leading organizations adopt integrated platforms that align strategic planning with operational execution, allowing Group Controllers to advance from retrospective reporting and analysis to real-time performance management. Advanced analytics and automation can help bridge the gap between strategic goals and operational realities, transforming FP&A from a reporting function into a business enabler.

In this article, I explore the evolution of FP&A, the tools and methods that drive this change, and how group controllers can enhance the company’s performance.

Connecting High-Level Strategic Goals with Operational Metrics

A major responsibility of FP&A is aligning high-level strategic objectives with measurable operational objectives. Setting financial targets is not enough; these goals must relate to the activities that generate business value, and it must be clear to everyone how their work impacts the company's financial performance.
Key performance indicators (KPIs) are critical in linking strategy to execution; this is where controllers and FP&A teams come into play. FP&A provides financial and operational data to provide a single view of the business performance and recommend areas for improvement. Management relies on these insights to make the best possible decisions and ensure that all departments work towards the overall business goals.

Achieving Better Alignment Between Finance and Operations

To effectively perform financial planning and analysis (FP&A), finance and operational teams have to work in tandem. Building a common vision and shared responsibility for financial results strengthen this collaboration. Collaborative platforms and workflows enhance transparency, communication, and cooperation. They can help identify potential problems and, based on insights from the same data, contribute to improving business performance.
This collaboration transforms financial planning from an annual routine to a real-time process of adding value to the business. Finance can enable better decisions based on real-time data, ending the siloed approach, where planning, budgeting, and forecasting are separate exercises.

The History of Planning, Budgeting, and Forecasting Processes

Classic FP&A teams still rely on spreadsheets for budgeting, forecasting, and reporting. A PWC survey revealed that 80% of FP&A tasks are performed using offline spreadsheets and databases. Tools like Microsoft Excel remain valuable for finance managers but are inadequate for real-time insights. Spreadsheets are effective for quick starts, but they also have considerable drawbacks. Working with spreadsheets is a manual process, making it prone to errors. Additionally, version control is an issue and frequently results in the development of data silos.
The shift to automated and cloud-based FP&A tools helps to overcome these limitations. These tools provide a single system for all controlling related activities, ensuring that all the stakeholders have the insights to make informed decisions. Real-time updates and reporting from a single platform improve data accuracy and enable more sophisticated analytical functions. Tools like Workday Adaptive Planning, Anaplan, and Jedox enable users to integrate multiple data sources and perform complex calculations, what-if analysis, and predictive modeling more quickly than through manual methods.
Shifting to continuous planning and rolling forecasts responds to the need for more flexibility and agility. Traditional annual budgeting processes tend to require many iterations, often resulting in outdated budgets soon after they are finalized. This approach may lead to lost opportunities and sub-optimal allocation of resources. A continuous planning process enables the generation of more frequent updates and revised forecasts, thus enabling organizations to respond to changes in the business environment.
Also, using artificial intelligence in forecasting has enhanced the accuracy and speed of the process. Machine learning algorithms can analyze vast amounts of data and identify insights humans may not even consider. These insights can help finance teams move from reactive to proactive financial planning with improved accuracy. According to Gartner, FP&A teams that embrace AI produce forecasts that are 98.5% accurate in hours instead of weeks. According to Accenture, 88% of the finance executives interviewed believe using AI will lead to better forecasting accuracy.

Implementation of Driver-Based Planning Models

Driver-based planning is one of the key aspects of the new FP&A architecture. Classical approaches mainly rely on historical data and trends that are unreliable indicators of future performance. In contrast, driver-based planning develops models that relate the effects of operational drivers to financial results: customer acquisition costs, the cost of the goods sold, increasing DSO,... This approach results in more dynamic and agile models that adapt easily to changing business environments.
FP&A tools are crucial for scenario planning, helping to model different assumptions. What-if analyses can help organizations prepare contingency plans for opportunities and threats. For instance, a major automotive manufacturer develops strategies to address the impact of trade wars and political risks by diversifying its supply chain.

The Role of AI-enabled advanced analytics in Performance Management

AI-enabled advanced analytics and machine learning are expected to revolutionize performance management. FP&A teams can identify patterns and opportunities that are otherwise difficult to recognize using a conventional approach. AI enables FP&A to move from mostly reporting over the past to becoming a "predictor" of future performance.
Predictive models help improve forecast accuracy. AI can link internal financial data, external factors, and operational drivers to provide more accurate forecasts and reliable projections. This level of detail enables finance teams to engage with business operations to develop comprehensive plans incorporating different parameters such as data sources, sales regions, SKUs, and people.
With real-time dashboards and reports, business leaders can closely monitor performance and make ad hoc, data-driven decisions.

The Challenge of Recruiting Skilled FP&A Personnel

The FP&A role is getting more complex, and the need for skilled professionals is rising.
The FP&A function has evolved far beyond traditional number-crunching. Today's FP&A professionals must be centipedes – financial experts who are also technologically savvy, strategy-minded and have excellent communication skills. Organizations need to attract talent with data analytical skills and knowledge of AI while also providing perspectives for professional development to retain talent.
Implementing modern FP&A systems allows for the automation of key finance processes, optimizing the efficiency of FP&A teams and freeing up time to deliver strategic business support. This shift makes the role more attractive to talented people.

Ready to lead the transformation of FP&A?

The future of FP&A is about bridging the gap between strategic planning and operational execution, moving from outdated spreadsheet-based methods to a new world of automated, cloud-based, and AI-driven processes. Data integration and the concept of the single source of truth are critical in financial decision-making. With these tools and best practices, FP&A teams can significantly contribute to improving performance management, create more accurate forecasts, and align daily operations with strategic objectives. FP&A teams must continue to innovate and adapt to these changes to remain successful. The role of FP&A in linking strategy and operations cannot be an afterthought anymore but should be a foundational element of the modern organization.