The expert view: is your financial planning and analysis fit for purpose?

“A company’s success in financial planning is determined by whether its financial planning and analysis (FP&A) system is fit for purpose,” said Troy Martin of Unit4, opening a Business Reporter breakfast briefing at London’s Goring Hotel. If that system isn’t good enough, he explained, then decision-making will be sub-par.

 

Senior experts from a range of sectors who attended the briefing agreed that getting the right system in place is vital, but also a challenge. Some said they were using automation to make things easier, but even that brings its own difficulties.

 

Consolidating the data

 

The problems start with the financial planning data itself, attendees agreed. Aggregating the data in the first place can be difficult. Not everyone supplies it on time, crucial information has to be chased and key parts can be missing. Different businesses within large groups might follow entirely different systems. At some stage, somebody has to enter the relevant data into the system but some employees see this as red tape, and input the bare minimum before getting back to what they see as more important work.

 

And that’s assuming you know what data you want to collect. Headline metrics such as revenue growth are easy to track, said attendees, but emerging KPIs, such as annual recurring revenue (ARR), need more thought. How do you track them, measure them and incentivise employees to drive them? Measuring or incentivising the wrong thing can distort the data.

 

Once you have the data, it can be very hard to consolidate it into something useful that helps leaders to make decisions, set forecasts and plan strategy. One attendee spoke of meetings where leaders would be discussing 20 pages of data, which made it almost impossible to reach any actionable decisions.

 

Applying automation

 

Automation can’t decide your KPIs for you, and it can’t get people to input the right data. But proper system design can make it easier for people to input the relevant information and harder for them to leave things out. Reducing friction through system design is a great way to get people to participate with them feeling coerced.

 

And automation can help with lots of other things, such as organising the data. Everyone at the briefing was at least using Excel for some level of automation in data processing. However, this is at the most manual end of the automation scale. True automation can go a lot further, for example by connecting to other applications and cloud services.

 

Fishing relevant information out of the data lake was the most common use of automation, but there were struggles with integrating the various tools and applications needed to gather the data. And some attendees warned that too much automation can be just as bad as not enough, creating a wealth of new systems that need to be managed.

 

Clearing the obstacles

 

Most attendees agreed it is better to apply automation where it can create value – and not customise it too much. Too much customisation eventually turns an off-the-peg solution into a bespoke one that needs a team to look after it. Martin described how Unit4 applies “model-based configuration”, ensuring that the tool works for a particular customer’s needs without endless customisation.

 

Despite the advantages, few attendees had automated their FP&A processes, and the obstacles mostly came down to people. Some attendees said their organisations didn’t have an internal mindset that was open to new ways of working. Others said their organisations were suffering from change fatigue after a lot of technology upgrades.

 

Tackling this, attendees agreed, depends on buy-in at senior levels. This is especially true in large companies where there can be a lot of stakeholders to manage for any new software project. With support from senior management, it’s easier to get people to take the time to learn new systems and to understand the long-term benefit of short-term disruption.

 

Clearly it is relatively early for some businesses when it comes to automation of FP&A, but that also means the potential gains are significant.