Building on our previous insights about the importance of a strong EPM and FP&A function and bridging the gap between strategic planning and operational execution, this article centers on a practical journey. We'll examine how to transition from your current state to achieving the benefits of advanced Financial Planning & Analysis (FP&A). This includes a step-by-step guide for assessing your current situation, defining a clear vision, implementing necessary changes, and leveraging the expertise of external resources.
From Luxury to Necessity: Why Advanced FP&A is Critical for Group Controllers
In today’s business environment, a robust FP&A function is no longer a luxury but a necessity. We've established that a mature EPM and FP&A function is vital for navigating the challenges of the modern business landscape and linking strategic goals with everyday operations. However, many organizations struggle with data chaos, manual processes, and disconnected systems.
I provide a practical roadmap to overcome these challenges and outline the path to advanced FP&A:
- Define your vision
- Assess your current organization, systems, and data maturity
- develop a roadmap and implement the necessary changes
- partner with external experts.
The goal is to transform your FP&A from a reactive function to a strategic business partner.
Define Your Vision: Start with the End in Mind
Having a clear vision for the future of your FP&A function is just as critical as assessing your current state. This involves thinking about the ideal future state and how it can support your overall business strategy:
- Define your Ideal FP&A Function:
- What are your key FP&A objectives? Do you want to reduce cycle times, or to accelerate your planning cycle and budgeting process?
- What decisions need to be supported? Do you need more thorough information to support decisions?
- What does the ideal report and analysis look like? Do you want the ability to customize dashboards, financial models, and reports?
- How should different stakeholders be able to view and interact with the data? Are your reporting and analytic tools easily accessible?
- What technologies are best suited to achieve your goals? Do you need AI-driven insights, or the ability to use what-if analysis?
The Role of a Long-Term Vision: You need a solution that is scalable, adaptable, and able to grow with your business to avoid switching platforms. Anticipate future needs and technological advancements while setting clear, measurable objectives.
Evaluate Your Current Situation: a realistic assessment
Before starting any transformation, a comprehensive and honest evaluation of your current situation is crucial. This entails a detailed examination of several key areas:
Data Integrity:
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- How reliable is your data? Data integrity is the backbone of successful FP&A. Are you using accurate and dependable data to make informed decisions, predict trends, and drive your business forward quickly and confidently?
- Where is your data stored, and how integrated are your sources? Are you manually collecting data from multiple data silo’s?
- Do you have a single source of truth, or are you using disconnected spreadsheets prone to errors and inconsistencies?
- Is your data validated, and can you trust the data that feeds into your forecasts and reports?
Process Maturity:
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- How efficient are your current budgeting, planning and forecasting processes?
- Are your reporting procedures standardized, or is there a lack of consistency in generating your reports?
- To what extent are tasks manual, and what is the potential for automation? Are you spending more time on data entry than strategic analysis?
- How are scenarios planned? Is it difficult and time-consuming to compare different assumptions and scenarios using Excel?
System Capabilities:
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- What systems are you currently using for planning, budgeting, and forecasting? Are you mainly relying on Excel?
- Are your current systems scalable and flexible, or are they hindering your ability to grow?
- Can you easily create visualizations, and are your systems user-friendly?
- Are you using new technologies, such as Artificial Intelligence (AI), to enhance your capabilities?
Organizational Maturity:
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- How well do different departments collaborate?
- Are roles and responsibilities clearly defined?
- Is there sufficient expertise in using data and analysis tools, or is there a gap in knowledge?
The Importance of Thorough Self-Evaluation: Being honest about current shortcomings is crucial. Setting realistic goals that align with the size and resources of your company is key.
How to get started: a step-by-step approach
Transitioning to advanced FP&A doesn't need to be overwhelming. Consider a phased approach with the following priorities:
- Start Small, Think Big: Implement FP&A tools and processes in phases. Begin with specific areas and gradually expand as your team gains experience and confidence.
- Data Integration as a Priority: Set up a reliable data platform. Integrate data from diverse sources, such as ERP, CRM, and HRIS systems, and centralize it for a "single source of truth". Ensure data is cleaned, validated, and readily accessible.
- Choosing the Right Tools: Many FP&A software options are available, each with its strengths. Here’s an overview of some popular tools:
- Cube: Cube is a good choice for mid-market companies that want to start quickly with scalable technology. It is simple and intuitive, with automated data consolidation, multi-scenario analysis, and native integration with Excel and Google Sheets.
- Workday Adaptive Planning: Suited for large enterprises with extensive planning needs, it offers flexible financial planning and analytics.
- Anaplan: a powerful tool for complex scenario modeling and strategic planning. It helps connect strategy to outcomes.
- Jedox is renowned for its flexibility. It is a powerful EPM platform, with built-in AI capabilities. Jedox facilitates integrated planning and customized reporting, creating forecasts and budgets, analyzing data with AI assistance, and integrating with Excel.
- Planful is ideal for larger companies with big FP&A teams.
- Prophix is best for companies with slow, manual, and repeatable FP&A processes.
- Oracle Essbase and Hyperion Planning: Suited for large enterprises with robust IT resources.
- NetSuite Planning and Budgeting: Good for organizations of all sizes, with pre-built templates and capabilities.
- Acterys offers an integrated CPM and FP&A platform that works with Power BI and Excel.
- Focus on Training and Adoption: Ensure all users are comfortable with the new tools and processes. Provide training and support to all stakeholders. Choosing systems with a user interface similar to existing systems, like Excel, will minimize the learning curve.
- Agile Implementation: Regularly evaluate and adjust the implementation. Be flexible to changing business needs, and value feedback from users and stakeholders.
Why Partner with an External Expert?
External experts offer valuable knowledge and experience, significantly accelerating your FP&A transformation:
Expertise and Experience: They bring deep knowledge of best practices in FP&A.
- Challenge and soundboard your vision: before starting your transformation, is your vision complete? How does it compare to peers in your industry?
- Objective Assessment: provide a new perspective on your current situation, emphasizing your strengths and areas for improvement
- Faster Implementation: experts can streamline and accelerate the implementation process
- Support and Training: They can help train your team and ensure the adoption of new processes.
- Cost Savings: An efficient implementation can save costs
- Risk Reduction: Experts help avoid pitfalls and maximize success
Transform Your FP&A Today: Start Your Journey to Strategic Excellence
This post outlines a step-by-step approach to achieving FP&A transformation. A successful journey requires a clear vision, a realistic assessment, a structured implementation plan, and the support of external experts. By focusing on data integrity, process maturity, and the proper tools, your FP&A function can evolve into a strategic asset. Remember that investing in FP&A is an integral part of modern business strategy, offering substantial benefits, including:
- Informed decision-making
- Higher efficiency
- Improved strategic alignment
- Strong financial performance
- Increased flexibility and agility
