<p>Mark Bodger, Director at ICit, looks at how FP&A is breaking out of the cycle of low value-add, manual tasks and becoming the trusted advisors CFOs need</p>
Mark Bodger, Director at ICit Business Intelligence
These are challenging times to run a UK business. While advanced economies are forecast to grow by just 1.2% this year, Britain is expected to dip into recession on the back of falling consumer confidence and business output. At times of economic crisis like this, firms need data-driven insight they can trust to make the right strategic decisions. How accurate this insight is depends in a large part on financial planning and analysis (FP&A) teams. But research reveals that many still aren’t supporting the business as they should.
To help FP&A fulfil its potential and break out of a cycle of low value-add, manual tasks, static reporting and poor-quality data, teams need the right tools to help them plan ahead with confidence. Technology isn’t a panacea, but it can play a key role in helping FP&A become the trusted advisor that CFOs and the wider business need during these challenging times.
FP&A should play a critical role in any finance department. ICit research reveals that over half (56%) of senior UK finance leaders feel the board packs they produce are highly valued and form an integral part of strategic decision making. Over two-fifths (44%) add that this FP&A-curated intelligence allows them to quickly reassess or change the direction of a business plan. That’s exactly the value FP&A is meant to provide. So why aren’t those percentages higher?
A Gartner survey of CFOs late last year revealed that ‘developing a planning, budgeting and forecasting strategy’ is high on the to-do list for organisations this year, cited by 80% of respondents. This suggests that FP&A still isn’t as mature as it should be in many enterprises. McKinsey goes further, claiming that even though the average finance department spends 10% more time and resources on FP&A than it did 10 years ago, teams are still ‘a step behind’.
Our recent research reveals more. It finds that the vast majority of UK organisations need more timely and relevant reports and dashboards, and identifies that even senior finance team members are still stuck doing menial and manual tasks. Many are also dissatisfied with the quality of data they have to work with. This is symptomatic of a function which still over-uses static spreadsheets and legacy business processes – which add manual effort and human error and make collaboration challenging for distributed teams. This approach may have been suitable for traditional quarterly and annual budgeting, forecasting and reporting cycles. But it’s simply not fit-for-purpose for a modern organisation – especially at a time of tremendous economic volatility, where business agility is critical.
[McKinsey claims that] even though the average finance department spends 10% more time and resources on FP&A than it did 10 years ago, teams are still ‘a step behind’.
Where tech is failing
Technology can be an important part of the solution. But at present, it appears to be a major cause of FP&A failings. We found that nearly three-quarters of UK firms are still working from disconnected legacy systems which are cumbersome to maintain. A similar number lack a single source of truth to work from – one of the main challenges with working from static spreadsheets across a distributed team. And a majority say that scenario modelling is still manual and immature.
It's not all about the technology, of course. Culture is also key. Bureaucracy and inertia are commonplace and can stifle the kind of business transformation that FP&A needs if it is to break out of its current malaise. Data quality is also key to delivering critical business insight. That means more focus needs to be placed on sourcing, cleansing and reconciling data across organisational silos.
Modern cloud-based solutions deliver a single source of truth to offer the kind of agile planning, budgeting, forecastingand reporting capabilities that FP&A teams need today.
The CPM difference
Modern cloud-based solutions deliver a single source of truth to offer the kind of agile planning, budgeting, forecasting and reporting capabilities that FP&A teams need today. Many organisations are using ERP tools for these tasks, but they’re not enough to deliver the kind of insight needed to manage business performance. This is where corporate performance management (CPM) tools come in.
While advanced ERP platforms may feature data visualisation and performance measures, their core focus is on improving operational efficiency. In contrast, CPM tools are about not running the business but managing it in an optimised way. Those that incorporate ERP data will add even more value for FP&A – reducing effort otherwise spent on data collection and manipulation, so they can spend more time on high value tasks like data analytics. CPM tools can also provide assurance to auditors and regulators about the integrity of audit trails, financial records and processes.
If ever there was a time FP&A needed to step up, it’s now. With stagnant growth forecast for many months to come, UK businesses must be able to plan ahead with confidence – making strategic decisions with conviction and reacting with agility as market conditions change. That’s the key to unlocking productivity and growth in a post-pandemic economy characterised by business uncertainty. And it will help FP&A become a trusted advisor to the CFO, not just in half, but in all organisations.
If ever there was a time FP&A needed to step up, it’s now. With stagnant growth forecast for many months to come, UK businesses must be able to plan ahead with confidence.