December 4, 2023


The Number One Source For Business

Now what? Bridge the gap in financial planning and analysis

How do you know when it’s time for your business to change? More importantly, how do you know which changes will help grow the business?

During the COVID-19 crisis and its ongoing aftermath, many financial planning and analysis (FP&A) teams were challenged to update and develop financial models that accurately reflected the massive shifts in strategy, revenue and operations — not just in the United States, but everywhere around the world — at the same time.

Many finance teams struggled to be agile and flexible enough to meet these challenges. The 2021 Agility in Planning, Budgeting and Forecasting (PBF) survey conducted by FSN found that only 39% of teams had the ability to forecast earnings within 5% accuracy.

The solution? Develop new capabilities that boost agility, accuracy and flexibility. Finance teams that mastered zero-based budgeting, scenario planning and rolling forecasting were far better equipped than those who didn’t.

In conference rooms around the world, I can easily imagine the CEOs and board mMembers asking, “How do we accurately budget in the uncertainty of the current environment? Do we have the resources — both people and technology to analyze and course-correct in real time?”

While each of those are critical questions, my favorite question gets to the heart of it: “What are the costs of doing nothing?” Or, asked another way, “What is the cost of continuing business as usual?”

Finance teams need to be equipped to answer that question and its inevitable follow-up: “So what, now what?”

The cost of business as usual

Eighty percent of the companies that FSN surveyed are unable to forecast beyond a year. Over 50% are unable to see further out than six months. This inability to adequately plan and forecast company operations is a significant disadvantage in a highly competitive, continually disrupted environment.

In contrast, the 5% of companies that transformed their PBF processes are faster and more accurate than the rest of the pack.

This data indicates significant opportunities for agility, defined in the survey as the ability to move quickly, easily and clearly on factors that indicate the financial performance and health of the company.

Transformation is no longer just “nice to have.” Business leaders must be able to rely on the validity, trustworthiness and relevance of the data used to analyze and report on end-to-end planning, budgeting and forecasting processes. The cost of continuing business as usual is duplication of the efforts, fragmented systems that take lots of people and time to reconcile, challenges to meeting regulatory compliance, an inability to determine where to prioritize resources, and lower stakeholder confidence.

We can expect to see the impact of over a year of pandemic-related challenges for years to come. These changes must be reflected in our strategies, risk management, operations, cash management, financial processes and reporting. Digital transformation is a key component of meeting these challenges.

So what, now what?

One key finding of the survey is that breaking free of spreadsheets and embracing intelligent automation is a critical step. Respondents who were less reliant on spreadsheets were also more likely to have advanced capabilities like 12-month rolling forecasting, zero-based budgeting and detailed scenario planning.

This data demonstrates there’s an urgent need to equip the FP&A team with the technology they need to truly advise the executive suite. The hindsight view of what happened last year or even last quarter is easier but less valuable as compared to the insight and foresight demanded by leaders, shareholders, regulators, customers and clients.

I couldn’t agree more with FSN on the need for mastering data and PBF cloud software for companies that want to enhance and/or revise their current planning, budgeting and forecasting capabilities.

Leveraging cloud PBF software

Leveraging cloud PBF software is critical to an overarching transformation. According to the survey, the majority of the companies have not made any major PBF process changes in the last three years, with 64% having implemented minimal to no changes at all. These results indicate that FP&A teams are stuck with time-consuming, manual processes that not only reduce efficiency, but also introduce the potential for more human error.

Unifying and standardizing the budget process in the cloud will add resiliency and continuity of operations as well as improve analysis and reporting. Further, configurable workflows that are informed by other FP&A customers will reduce the implementation time, while AI-driven processes for rolling forecasts, zero-based budgeting and scenario planning will highlight performance.

The ability to forecast accurately for multiple timeframes — from a few months out to over a year — is just the icing on the cake of leveraging technology. With the additional time saved, the FP&A could work on other high-value areas like business partnering. Modern technology will also help attract and retain team members. Win, win and win.

Preparing for the next “thing”

The FSN survey is a clear call to action for the FP&A function. We can’t afford the cost of business as usual; we need to align strategy with company results and collaborate with internal business partners.

Hindsight is always 20/20, of course, but by asking, “So what, now what?,” we can be further along by the time the next unfortunate new normal occurs.