People, Processes & Technologies: Tools for FP&A

The past 18 months have been difficult for finance teams. Modern FP&A professionals are charged with providing strategic, data-driven advice that helps leadership make sound decisions in the near and long-term future. Finance teams need to answer specific questions, such as: What will the business look like given the economic climate? Where and what are the risks we need to watch out for? What opportunities can we seize and exploit? And most important of all: How do we position the company to mitigate potential risks, and pivot to benefit from opportunities, both anticipated and unpredicted? In the best of circumstances those questions are difficult to answer. The past 18 months can hardly fit that description! Lockdowns, the retail apocalypse, the Great Resignation, remote workforces, supply chain uncertainties, and major disruptions in the logistics industry pose unprecedented challenges for companies and their FP&A teams. Now more than ever, FP&A teams need to forecast, budget and plan on a monthly, and sometimes even a weekly, basis, but for many, that’s a tall order, especially if they rely on spreadsheets to reforecast and provide strategic advice on a regular basis.

We surveyed FP&A leaders about their top FP&A priorities and the challenges in achieving them. Next, we asked John Murdock, CEO of Centage, and Nick Fischer, CEO of Cadilus to address these challenges head on, which they did in a webinar, People, Processes & Technology (available for free and on-demand).

Top Priorities of FP&A Teams

We asked FP&A leaders about their top priorities for improving budgeting, forecasting, planning and reporting those insights to their organizations. This is what we heard:

1. Collaboration & Coordination. Collaborating with business contributors is a top priority. Now more than ever it’s important for everyone to be on the same page. Yet with people working remote, getting everyone into the same room to whiteboard a path forward isn’t an option. FP&A teams want tools that enable better collaboration and coordination across the organization.
2. Reforecasting Weekly & Monthly. Inflation is rising, supply chains are disrupted, and numerous companies are shutting their doors. Business leaders want and need to see revenue and expense projects on a weekly basis. A more granular look at business performance is essential to plotting a course for growth.
3. Data-Driven Planning Process. Companies have a plethora of data, but it's siloed in numerous systems, including ERP, GL, CRM and countless other databases. FP&A teams want their data to be harnessed, harmonized and deployed to enable smart decisions based on a single source of truth.

If those are the priorities, what realities get in the way of FP&A teams, and how can they be resolved?

Challenge #1: increased pressure on the office of finance to provide strategic insights and complete picture of financial health delivered on demand.

Across the board, FP&A professionals are at a loss in terms of planning for an uncertain economy. How can they move forward? John Murdock: Time is a common theme we hear at Centage and I know that the folks at Cadilus hear it as well. Weekly forecasting, with richer data, takes more time than most FP&A teams have in their days. Here’s where automation is key. Automation can eliminate the heavy lifting that manual tools, such as spreadsheet-based forecasts, demand of finance teams. If you can buy time through automation, you can spend more time focusing on strategy and advising business partners. Nick Fischer: Weekly forecasting is much harder with smaller organizations with small FP&A teams, so I agree with John that automation is an absolute requirement. The other challenge with manual tools is that they can’t help FP&A teams achieve organization alignment. The more flux we face, the more important it is for the entire organization to align around a common set of goals and objectives, as well as the operational drivers of the business. A strong cross-functional understanding of what drives the business will allow FP&A teams to scenario plan and forecast plans that are actionable.

Challenge #2: data is critical but it’s everywhere and it’s not connected. Without connected data teams have limited ability to predict future performance to inform current decisions.

Nick Fischer: Finance teams need to do three things: compile data, analyze data, and then use that data to advise leadership decision making. Unfortunately, they spend too much time compiling data, leaving them too little time to do the high-value functions.

A good FP&A technology platform will integrate and organize native data sources into a single source of truth. A great platform will also apply business logic to transform data into business drivers that feed forecasts, models and plans, leading to integrated operational decisions with financial projections that business leaders can act on.

John Murdock: Technology can integrate all the myriad data scattered in silos throughout the organization. It can also deliver speed and agility so that FP&A teams can make sense of that data quickly. In fact, we’ve seen SMBs use smart technology to outperform big companies.

But technology is only one aspect of what’s needed. It’s great to have a single source of truth, but it won’t benefit an organization unless everyone in the company commits to using it. A change in mindset is also needed.

Challenge #3: Need to quickly answer tough questions with confidence, and easily translate a company’s financial health into action items to address risks and opportunities.

“I’m not confident in the accuracy of my models,” is a refrain heard often in corporate finance suites. Now more than ever leadership teams are leaning on FP&A to help them navigate the future of their company. What do the experts advise?

Nick Fischer: The FP&A professional’s currency is credibility. We don’t make decisions, we influence our business partners with data-driven insights. That’s the FP&A professional’s value proposition.

Finance teams need two components to drive positive outcomes. First, the information they tap into needs to be accurate and up-to-date, and second, it must be credible. It takes a long time to build credibility, but it only takes one bad insight to destroy it. This is an area where technology can play a meaningful role. Technology can eliminate data integrity issues that result in incorrect analysis. Technology can also speed up analysis. Answers a week late are not that useful. John Murdock: C-levels are asking tough questions, that’s a fact. But I see that as a positive development, because it means that they want to drill down, get deeper into the data and have confidence in what they see. Dashboard summaries are fine when business is growing and there’s no uncertainty. Nick mentioned the importance of confidence, which absolutely comes from the data, but it also comes from technology that allows stakeholders to dig in and explore data in meaningful ways. If they can explore the data to answer the questions they have, they’ll have more confidence in the decisions they make.

Challenge #4: Finance teams are largely dependent on manual tools, such as spreadsheets and this lack of FP&A automation tools limits their ability to keep up with the pace of business.

Manual tools like spreadsheets capture a moment in time, but today’s FP&A professionals need more functionality than that. Can FP&A automation tools help? If so, how? John Murdock: Automation tools will absolutely help finance teams keep up with the pace of business, but we need to dispel some of the myths that surround it. Automation doesn’t remove people from the process, it removes manual steps. All the steps you need to take every week or month -- whether that’s compiling data from your GL and ERP system or collecting new opportunities from CRM to forecast -- is ripe for automation.

The other myth is that automation requires teams to adapt their practices to the platform’s workflow, and not the other way around. A good platform will absolutely mirror a company's structure and business logic. If it can’t, don’t implement it. Nick Fischer: I agree with John, automation is not a substitute for people, and vice versa. They’re complimentary to one another. Here’s an analogy: Think of yourself as a pilot, and all the technology you require to fly and land a plane safely. What happens if suddenly the entire cockpit goes dark and none of the gauges work. You’ll need to rely on your instincts, but it’s dangerous.

At the end of the day you want to ask: how can we best leverage the advantages people bring to the table? If automation can reduce the time required to compile data by 80%, that means the finance team will have 80% more time to focus on insights and advising their business partners. Technology allows SMBs to deploy their resources in an optimal way that supports best-in-class FP&A teams with the processes and solutions needed to innovate and grow. Interested in hearing the webinar in full?‍