The FP&A Role is Changing – What Phase is your Organization in?

The FP&A Role is Changing – What Phase is your Organization in?

Today’s competitive business environment demands more from the FP&A function. Innovation, agility, and growth are competitive necessities, and now more than ever businesses are turning to finance to identify and drive the initiatives that support these strategic goals.

But for finance to play a more expansive and value-added role within the organization, it requires an investment in the structure of the finance team itself, specifically in people, process, and technology. That investment is an evolution and many organizations find themselves in one of three phases of development:

  • FP&A 1.0: Reactive
  • FP&A 2.0: Proactive
  • FP&A 3.0: Optimized

FP&A 1.0: Reactive

Companies in Phase 1.0 do not have an EPM system installed. As a result, all processes are manual. The finance team uses Excel spreadsheets for all of their budgeting, forecasting, modeling, and reporting activities. Collaboration is inefficient because the primary tool is email. Finance spends so much time producing budgets and forecasts, that by the time the plans are complete, they are already out of date. As a result of these issues and more, finance is able to deliver the basics but has limited time for value-added activities to help decision makers make educated decisions, faster.

FP&A 2.0: Proactive

Companies in Phase 2.0 have a finance-owned EPM system installed, which means they are using the system to automate a significant portion of critical EPM activities like data collection and validation, budgeting and forecasting, and reporting. They’re likely experiencing significantly shortened budget cycles, providing self-service reporting, and performing monthly forecasting. But while they’re becoming a trusted business partner with a seat at the table, they have not fully maximized all that EPM has to offer.

FP&A 3.0: Optimized

Phase 3.0 takes the basic use of EPM up a notch – enabling rolling forecasts, full automation, and empowering budget owners to create and manage their own budgets and forecasts. Companies in Phase 3.0 have an EPM solution installed and are also optimizing for continuous, connected and collaborative planning. Decisions are made in real time – not in hindsight – because decision makers have visibility into accurate and timely data. Budget owners are engaged, empowered, and accountable. Finance owners benefit because there is more participation and accountability in the planning process, reduced support and training required by finance personnel, more accurate forecasts, and fewer surprises.

We want to see all finance teams maximize their potential – evolving to Phase 3.0 should be a priority for all finance teams because the competitive benefits are critical. Learn more about these three phases and what other companies are experiencing in next week’s webinar, The Evolution of Enterprise Performance Management. We’ll discuss the three distinct phases in detail and deep dive into collaborative planning with Project Orion.

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Why is Finance Now Moving to Cloud-Based EPM?

Why is Finance Now Moving to Cloud-Based EPM?

Enterprise software solutions for budgeting, planning, and forecasting (BPF) provide chief financial officers with higher quality results and with much greater efficiency than the traditional method: spreadsheet solutions shared via email. A survey of senior finance executives shows that most—54 percent—still use spreadsheets for their BPF. But the survey also shows that more companies will be feeling the pressure to transform their BPF functions to enterprise systems over the next 12 to 18 months to improve performance.

The Shift

Budgeting, planning, and forecasting are obviously some of the core responsibilities of the CFO, and accurate, timely, and insightful BPF can mean the difference between success and failure for a company. Enterprise BPF software solutions integrate the components of a company’s business, so they can exchange and incorporate information from each other as well as various internal systems. By allowing companies to disseminate and retrieve data throughout the company, enterprise BPF software solutions strengthen the acuity and timeliness of the BPF processes.

A survey of 154 senior finance executives, conducted by CFO Research in collaboration with Planful, found that four out of 10 of the companies polled currently use an enterprise solution as their BPF system. But more than half of the surveyed executives expect to be using an enterprise software solution for BPF in 12 to 18 months.

The surveyed finance executives also showed a strong preference for cloud enterprise performance management (EPM) systems. EPM software helps managers plan, monitor, analyze, and manage performance across all aspects of a company with the aim of improving that performance. Of the surveyed executives there are some compelling stats to show the shift toward EPM software.

  • 85% reported that an integrated cloud-based EPM solution would make their jobs easier
  • 66% stated they believed that a cloud EPM solution would deliver a strong return on investment
  • 68% said they would consider an implementation of cloud-based EPM as “a key milestone in an advanced finance transformation at my company.”

Pressure Ahead

Why the movement to enterprise software solutions? The survey respondents whose companies already use an enterprise solution for BPF may have the answer. Among those respondents, 79 percent say that over the next 12 to 18 months, the pressure on the finance function to improve the collaboration among key decision-makers will increase substantially. And 71 percent say that the pressure to deliver faster BPF data will increase substantially over that period. Seven out of ten of those respondents say that the pressure on the finance function to tightly integrate BPF processes across the enterprise will increase substantially over the 12 to 18 months, while 63 percent say that the pressure on the finance function to provide better tools and technology to support decision-making will increase substantially. (See Figure 1.)

Figure 1. Survey respondents believe that, over the next 12-18 months, pressure on their finance functions will increase substantially to:

Users of Spreadsheet BPFUsers of Enterprise Solution BPF
Facilitate improved collaboration among all key decision makers79%79%
Deliver faster BPF data70%71%
More tightly integrate BPF processes across the enterprise75%70%
Provide better tools and technology to support decision-making74%63%

Even the senior finance executives who currently use spreadsheets for their budgeting, planning, and forecasting are seeing the same pressures building to improve their BPF performance. With some more feeling the pressure to have more tightly integrated processes across the enterprise (75% of spreadsheet users) and also to provide better tools and technology (74% of spreadsheet users). (See Figure 1.)

Plans that finance produces from the BPF process, such as annual plans and longer-range strategic plans, are made stronger by accurate and timely data pulled in from all corners of a company. Cloud EPM solutions are designed to do just that, and so are better equipped to deliver better-integrated results faster than spreadsheet BPF systems.

Conclusion

While most CFOs still use spreadsheets shared via email for their budgeting, planning, and forecasting, the tide is turning. More than half of companies will be working with enterprise BPM solutions within 18 months, and the apparent preference for cloud EPM solutions is running high, the CFO/Planful survey shows. The executives predict they will experience substantial increases in pressure to improve collaboration among key decision-makers, to deliver BPF data faster, to tightly integrate BPF processes across the enterprise, and to provide better tools and technology to support decision-making. EPM software solutions provide benefits in all of these areas, while spreadsheets delivered via email do not. More important than the negatives avoided by switching from spreadsheet tools, EPM software solutions and especially cloud EPM solutions offer opportunities for CFOs to implement planning and performance management improvements that will boost their company’s bottom line, both immediately and over the long run.

Download the eBook – What CFO’s Need to Know about EPM to learn more.

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