The main purpose of Financial Planning & Analysis (FP&A) teams is to drive execution of the organizational strategy. They start from where the accounting team stops. These teams focus on what may happen in the future, by using data from the past, make assumptions and explain variances to the forecast so that management can maximize value creation and take better decisions. The FP&A teams support the finance controllers by turning information into knowledge, and knowledge into actionable insights. They are less focused on day to day transaction processing and more focused on forward-looking analysis for the business.
With the speed and complexity of businesses constantly increasing, the prominence of FP&A teams has vastly increased. Apart from doing the budget, FP&A answers strategic questions, forecasts for the future, ensures a timely accounting close, prepares board reporting packages, preps the executive team, divests a division, analyzes product line profitability and performs due diligence on acquisitions, amongst other things!
Here are three FP&A trends that every finance manager needs to be aware of –
1. The new analytics hub
As more & more savvy companies are embracing analytics for their competitive advantage, FP&A is soon becoming the analytics hub of the organization. Investment in high quality corporate performance management tools is helping organizations take better and quicker decisions backed by accurate and fact based data.
2. Integrated planning
FP&A is a very dynamic field and is going through rapid transformation. The function is becoming increasingly forward-looking. It is using new techniques and technologies to focus not just on what happened or what is happening but also on why it’s happening and what’s likely to happen next. FP&A facilitates the growing trend of integrated planning where the operational and financial data are merged for planning and forecasting purposes. The ability to run what-if’s and scenario analysis is making FP&A all the more valuable in today’s business environment.
3. Here, there, everywhere! It’s all on the Cloud!
New technologies are changing the way FP&A was traditionally done. While some companies still rely majorly on spreadsheets, many others are migrating to dedicated financial reporting systems that allow them to pull financial and operational data from across the enterprise and run it through increasingly sophisticated analytics engines that support smarter business and management decisions. These are now implemented via the cloud that is cheaper and faster to implement and has a user-friendly interface. This helps the FP&A perform better and more accurate analysis and offer greater value to the business and senior management. This ongoing is transition is a paradigm shift. From using the cloud as a host, some of the new systems are switching to using the cloud as a computational platform. This helps FP&A provide a holistic view of the enterprise to enable true integrated planning.
FP&A has become instrumental in building a data-driven decision making culture in the organization. Today, FP&A works closely with the C-Suite business leaders to help them improve their financial results by getting deep into the business key performance indicators.