How Operational Planning Ties into Your FP&A Strategy

We have written a lot in recent blogs about FP&A (Financial Planning and Analysis) and it’s importance in successful companies and we have also written about the term XP&A (Extended Planning and Analysis). Since I wrote this blog we have been involved in a growing number of oppoertunities where operational issues are getting more focus so I thought it would be a good time to revisit and update this blog to include insights from our recent experience.I had a coffee with one of our mining industry clients last week and he talked about their strategy of implementing a CPM solution started from an operational rather than a financial perspective. Their view was that planning and forecasting should be driven by operations in conjunction with finance not the other way around.

Although it can be easy to get caught up in your company’s long-term mission, it is important not to lose sight of the day-to-day operations that must be executed to fulfill the high-level goals. That is why rigorous operational planning is an absolute necessity—the most successful organisations know how to transform strategy into action. So here are some thoughts on how operational planning fits into your financial planning and analysis (FP&A) strategy and processes and moves towards XP&A.

Already, we are seeing FP&A trends coming from organisations that appear to be recovering faster than others. Underpinning these trends is decision-making software and technologies that empower businesses to plan, analyse, and forecast as part of their finance process.

Last year, we saw as – a seriously needed evolution to reshape the Office of Finance, led by FP&A. This year, taking a hard look at the COVID-19 disruptions, even the most established enterprises are no longer able to sit back and must, to remain competitive, challenge the legacy processes that permeate throughout their financial and wider business ways of working. Digital transformation is the key to overcoming these challenges. Read on to discover some other key drivers we believe will significantly shape FP&A this year.

 

Automating the Office of Finance 

Automating simple processes and tasks, such as data entry, can add up to an incredible saving of time. For example, manually adding new financial information to a spreadsheet might take several hours of work each week. With a software solution that can undertake this task and process data in a matter of seconds, the savings in time are clear. Across the Office of Finance, there is an abundance of opportunities to automate.

Saving time by adding a level of automation to processes like planning & control, management reporting, financial closing, consolidation, and disclosure enables users to spend more time doing analysis and understanding data, rather than just managing it.

 

Improving scenario planning 

The impact of COVID-19 is a massive factor for businesses to fully understand and overcome. It has highlighted, in many cases, a direct need for business decisions to be made quickly and accurately. To support this, organisations must have a platform that delivers accurate scenario planning and modelling to help navigate through uncertain times and prepare for all eventualities.

The right technology will enable this by linking all operational data across the entire organisation to build scenario models against. Short- and long-term strategies can be plotted and the best, most profitable, paths can be defined.

 

Combining zero-based and driver-based planning 

Traditional budgeting processes, where budgets are based on spending and trends from the previous year, have little justification when looking back at a year as disruptive as 2020. Instead, businesses should look at reinventing their budgeting process with a Zero-Based Budgeting (ZBB) approach.

Going one step further, combining this approach with driver-based planning, where financial figures are linked to operational drivers, ZBB can be the first step in FP&A transformation, giving finance teams a holistic overview of how each business initiative or strategy can impact across the organisation.

 

Rise of the Digital Boardroom 

In the modern world, companies are turning to finance professionals to offer more to the business by being decision-making leaders across business strategy, finances, and operations. In this sense, powerful data analysis and Business Intelligence (BI) have become more essential than ever before.

The Digital Boardroom, then, is a potent tool for financial professionals and C-suite executives to implement. By digitally transforming the boardroom approach, where data from across the organisation is presented as a single source of truth, senior executives are given accurate, real-time information that can be used to identify opportunities for growth, efficiency gains, and performance enhancements across the business, and in some cases model or simulate particular scenarios on the fly.

 

Planning collaboration and governance 

It may come as little surprise that financial tasks requiring heavy data work, constant reviewing, and eventual sign-off, can be lengthy and highly laborious for finance professionals. This way of working simply does not fit into the modern, connected world of 2021. Instead, organisations must operate with a highly collaborative approach – especially since remote working has been forced on many businesses, following the pandemic – with a standardized approval workflow to ensure everything is delivered in a timely manner.

The right software solution will enable this, offering a platform that is transparent across the entire organisation, with everyone working from the same real–time data to ensure business goals are aligned.

 

Use modern technology to enable your FP&A strategy

Modern financial planning software offers a powerful platform that allows FP&A teams to optimize the execution of their strategy planning. As we have seen, the FP&A process is rigorous and requires extensive operational planning. But thanks to automated and interconnected software solutions, your FP&A team can easily assess and monitor progress at every step. Moreover, technology that enables this process can free up FP&A professionals to focus on other value-added activities.

But not all technology is created equal. Look for solutions that can:

• Be implemented quickly and easily,
• Support predictive analytics to anticipate important changes,
• Support what-if analysis and scenario planning to model possible changes in your business,
• Automate key planning tasks and minimize errors,
• Support operational planning, financial planning, and people planning,
• Scale as your organisation grows or experiences seasonal fluctuations,
• Provide extensive dashboard capabilities,

With the right tech tool, your FP&A team can shorten its planning cycle while providing more accurate and deeper business insights.