As the director of financial planning and analysis (FP&A), you know the ability to turn around insightful analysis in a timely manner is key to being seen as a trusted business partner. In a world of digital transformation and constant disruption, your analysis must keep pace with queries that will change midstream and anticipate questions that have yet to be asked, but should be. To meet these challenges, you’ll first need to assess the current state of your financial analytics processes.
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 them,” says Christopher Iervolino, Managing VP at Gartner.
Applications must enable a more flexible and collaborative approach with business partners. To that end, says Iervolino, application leaders should first assess their current maturity in four key areas, so they can plot a roadmap for each:
- Planning and budgeting
- Integrated financial planning
- Management and performance reporting
- Forecasting and modeling
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with iterative reporting that can take nine months or more to produce results — by which time the results are often outdated or irrelevant.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, VP Analyst 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 SKU or customer levels, even if it requires tens of thousands of planning elements.”
Integrated financial planning
Most finance departments are just beginning on the path to maturity in integrated financial planning (IFP). 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, 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.
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 inputs 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 sources — 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.
Read more: 3 Steps to Implement Rolling Forecasts
Upgrade for the future, not just today
Once application leaders have assessed the current maturity of these key FP&A processes, they can more ably develop roadmaps for upgrades that will ensure that FP&A can understand the questions their business partners are asking today and will likely need to answer in the future. As solutions enabled by artificial intelligence begin to enter the workplace, finance will become an increasingly tech-enabled field.
This article has been updated from the original, published on April 6, 2018, to reflect new events, conditions or research.