The American writer and humorist Mark Twain once said, “Good decisions come from experience. Experience comes from making bad decisions.” This statement perfectly describes the impact the Financial Planning and Analysis (FP&A) function plays in guiding the enterprise away from poor decision making and into a more agile planning process using intelligent technology.
Everyone in FP&A is aware of traditional financial planning. The traditional methodology involves the scheduled tasks and activities involved with starting the budgeting process on time, updating forecasts once a month, updating the budget a few times a year and the rest of the time or gaps spent cleaning up, reconciling data or make sure the process stays on track. The pandemic has disrupted this paradigm.
Modern finance involves FP&A being strategic and providing best in class support to their business constituents. This support is not just leading the budgeting process, preparing forecasts and analyzing variances but it requires forward thinking that helps accelerate decisions.
To continue on this path to accelerated decision making, modern FP&A must evolve into a role of more scenario-based planning. The pandemic highlighted that traditional paths to budgeting and forecasting, regardless of what kind of normalcy we return to play a secondary role to scenario planning.
During this past year best in-class finance departments according to Mckinsey were able to provide options on multiple eventualities. This role of a forward-thinking finance is the new normal where finance looks ahead versus explaining variances from yesterday.
To help move towards this process there are a few simple things modern FP&A departments can adopt to drive forward.
Integrated ERP and Planning
As Gartner has indicated in their 2021 Magic Quadrant for Cloud Core Financial Management Suites for Midsize, Large and Global Enterprises - Through 2024, 60% of organizations will consolidate core financial management with financial planning and analysis (FP&A) capabilities within the same vendor stack/platform”
Artificial Intelligence and Machine Learning
Similarly Gartner has indicated “Through 2024, 60% of organizations will seek artificial intelligence (AI) use cases in native financial management solutions”
What is the impact of this on decision making? It’s the speed of which things can happen with the right accuracy. By having an integrated ERP and Planning system, FP&A doesn’t need to wait for the end of the month, or end of the week, or end of the day for access to actuals versus plans. Users can obtain that information with the highest level of accuracy and expediency within their planning solution, and use AI and ML driven insights to create predictive forecasts to generate outcomes which they then can lead and present to make organization wide decisions.
All of this helps ensure that FP&A stays true beyond the traditional Financial Planning role and heavily reflects on the “Analysis” piece, and ultimately not just obtains a seat at the table, but is a leader at the table to help drive the best decisions. The reality is that if your FP&A isn’t doing this, the competition is, and taking these steps helps make Planning & Analysis not a status quo function but something completely disruptive in decision making.
This article originally appeared on Forbes.
