It’s Time to Upgrade Your Financial Analytics

Financial planning and analysis needs to upgrade in four key areas to keep pace with digital business initiatives.

Everyone with a smartphone, tablet or laptop knows the feeling: Your hardware starts lagging, and you struggle to communicate with the newest and most vital technologies used by peers and associates. It’s time for an upgrade. Well, it’s no different in financial planning and analysis (FP&A), which could soon become stranded by outmoded applications if it doesn’t set a roadmap for upgrades.

Mature reporting processes move beyond simple “board books” toward a more comprehensive “playbook”

“Traditional finance organizations weren’t designed to answer the types of questions that a digital business consistently asks of them,” says Christopher Iervolino, research director at Gartner. Applications must enable a more flexible and collaborative approach with business partners.

To that end, says Iervolino, applications leaders should first assess their current maturity in four key areas, so they can plot a roadmap for each:

  • Planning & budgeting
  • Integrated financial planning
  • Management and performance reporting
  • Forecasting and writing

Planning and budgeting

Heavy use of Excel is a good indicator of an immature budgeting process. More mature processes rely less on spreadsheets, and favor purpose-built FP&A solutions that provide access to common databases, manage data scenarios and related workflows, and ensure transparency.

Immature financial planning capabilities often resemble a shadow budget process, with iterative reporting that can take nine months or more to produce results by which time the results are often outdated or irrelevant. Other earmarks of immaturity are simplistic reports, scarce analytics, and a lack of (or visibility into) business-value insights.

Maturity in integrated financial planning (IFP) is a binary measure: you either have it or you don’t

“Higher levels of maturity are characterized by a focus on business drivers that impact the financial line items,” says John E. Van Decker, research vice president at Gartner. “The level of detail used must be appropriate to test a hypothesis (“what if”) in a way that has business relevance. For example, this may include planning at low product stock-keeping unit (SKU) or customer levels, even if it requires tens of thousands of planning elements.”

Integrated financial planning

Maturity in integrated financial planning (IFP) is a binary measure: you either have it or you don’t. Finance departments that struggle to generate business insights in a timely and accurate manner from high-level financial data can rarely support an IFP program.  

By contrast, says Iervolino, higher levels of maturity in IFP translate into increased collaboration with other business domains, and greater business influence. For example, a mature IFP program can target specific financial planning objectives in outside business areas and generate fresh insights for its sales team.

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Management and performance reporting

Relatively immature FP&A functions routinely struggle with answering the “why?” behind the numbers. In these departments, spreadsheet-based deliverables often focus solely on accounting numbers, and lack many (or any) outside input and analytics, making it difficult to generate any insight.

Less mature FP&A capabilities typically rely on traditional planning and budgeting tools for forecasting and modeling capabilities.

More mature performance reporting takes a holistic approach to answering the “why?” behind financial results. Key to the mature state is the ability to capture and integrate a wide variety of data from different source — from enterprise resource planning tools and FP&A systems to the disparate Microsoft Office files that inevitably float around various outside departments.

Mature reporting processes move beyond simple “board books” toward a more comprehensive “playbook” that incorporates a variety of data, builds a narrative around it, and ultimately generates actionable insights.

Forecasting and modeling

Less mature FP&A capabilities typically rely on traditional planning and budgeting tools for forecasting and modeling capabilities. These tools tend to be static, and can’t cope with highly complex business environments.

Greater maturity in these areas is marked by the ability to provide faster and more predictive analytics, adjustments “on the fly,” and an emphasis on high performance through leveraging in-memory computing (IMC) and advanced analytics.  

Upgrade for the future, not just today

Once applications leaders have assessed the current maturity of these key FP&A processes, they can more ably develop a roadmap for upgrades that will ensure FP&A can understand the questions their business partners are asking today, and will likely need to answer in the future. As AI-enabled solutions begin to enter the workplace, finance will become an increasingly tech enabled field.

Gartner for Finance Leaders clients can read more in The Future of Financial Planning and Analysis by Christopher Iervolino and John E. Van Decker.