What is xP&A, and what was FP&A?

Just when the term FP&A, Financial Planning and Analysis, is starting to get some traction there’s a new kid in town, xP&A, or Extended Planning and Analysis.

But what is xP&A, and why is it different to FP&A?

At their core xP&A, and FP&A are both Planning and Analysis processes, or to use a more common term, Budgeting, Planning, Forecasting and Reporting.  So what is the difference between Extended and Financial planning and analysis, and why the need to differentiate?

Well there is a growing consensus that financial planning alone isn’t enough. If you want to succeed you need to do more than just plan in a financial sense, you need to ‘extend’ your planning processes beyond purely financial planning, into extended planning

At least that is what leading analyst firm, and master of the acronym, Gartner revealed in 2020 when they introduced the new xP&A acronym. According to Gartner, 

“xP&A is a response to the challenges faced by enterprises seeking to exploit new digital business models and navigate current economic uncertainties… It is a platform-centric enterprise planning strategy that extends FP&A use cases beyond finance by adding other key operational applications that use the same composable vendor platform, architecture and data model in order to improve alignment. Newly added planning disciplines beyond those of the finance department include supply chain, sales, marketing, HCM and IT.”

What this is saying is that companies now need a comprehensive view of their business, across multiple lines of business and operations, and linking corporate strategy and execution. That is across both finance and operations. 

Where should the responsibility for xP&A sit?

With xP&A (extended planning and analysis) requiring a comprehensive view of the business, the responsibility should rest with the department with the widest view of the company, and that is the finance domain.  Finance teams are ideally positioned to deliver this unified view, since they often are already gathering company-wide financial data, and performing the resource allocation, planning, forecasting, and reporting functions for the business. The xP&A approach helps to further empower CFOs to lead company-wide strategic initiatives and help optimise business outcomes.

According to Gartner’s estimates

“By 2024, 70% of new financial planning and analysis projects will become extended planning and analysis (xP&A) projects.” 

In other words, xP&A is the way of the future. This is something we wholeheartedly agree with, and is something we have been working with our customers on for several years now.

How xP&A can help every business

While the functions provided by finance teams are critical, a company’s profitability depends on much more than their budgets and spreadsheets. At its simplest, business success depends on how a business actually operates, but how do you make sure your business operates successfully?

In today’s competitive, and more recently pandemic affected, environment, planning and adjusting for change takes on even greater emphasis.  With increased competition, smaller margins, and more uncertainty, both operational planning and financial planning take on even more importance.  The ease and speed with which finance professionals can incorporate the latest operational data into their planning process, and then adjust their budgets and forecast accordingly, will be a major determinant in ensuring success with your business operations.

Consistent and continuous planning must consider at a minimum;

Supply chain and sourcing

• Where can we get the products we want, cost-effectively? How will they be delivered, and when will they arrive?

Workforce planning

• How many people will we need during peak season, and with what skills? How will we recruit and train them? What is a competitive rate of pay to keep good people on staff? How do we measure performance?

Operations

• Are our factories, warehouses, and offices placed where we need them? What resources will we need to keep the lights on and everything looking fresh and festive?

Marketing and Sales

• What are the hot trends? What are consumers likely to demand? What themes do we want to promote? What is the sales team view of the market?

A good CFO understands the need to factor in all these departments’ needs and outputs, and their financial impact, in order to make the best financial decisions for the business.

Creating a clear path forward with xP&A

At bi5 we believe in a cross-functional, continuous approach that we call Integrated Business Planning. A successful Integrated Business Planning environment opens up clear sightlines throughout the entire business. It does this through the integration of  both financial and operational data so the finance department can see in real-time what is going on with their financial and operational activity across sales, HR, operations, and all other business domains and areas.

Whereas many organisations are just beginning to consider more modern and leading-edge integration and analytics, Integrated Business Planning, or xP&A,  delivers it

bi5’s approach to integrated planning looks at key business drivers (internal and external) to discover relationships that might otherwise be overlooked. When data from various systems are integrated into a ‘single source of the truth’, scenario planning and what-if analysis with your business plans becomes much more effective.

In our opinion, the bi5 approach is reflected in Gartner’s recommendations that organisations should develop an xP&A strategy that “enables finance to lead and coordinate broader, companywide continuous planning and performance management initiatives.” Empowered with greater visibility into live, dynamic enterprise data streams xP&A platforms let businesses “exploit rapid change and achieve improved business outcomes.”

As new xP&A tools give the finance office greater access to real-time data throughout the enterprise to help remove data silos, Gartner suggests the office itself will transform and take on an expanded role. Using xP&A, finance professionals can guide and improve company wide planning and financial budgeting processes, helping the business as a whole to run more effectively and improve business performance and ultimately financial performance.

xP&A puts everyone on the same page

Leading-edge xP&A platforms can deliver improved analysis solutions, with the ability to continuously access and analyse a depth and breadth of data throughout the organisation. Finance and business leaders can collaborate, forecast, analyse, and plan using a single source of truth.

Since everyone has access to the same data, analysis is dramatically faster and more accurate. It becomes possible to recognize patterns and influences, test various scenarios and assumptions, and anticipate emerging risks and opportunities.

Today’s environment of continuous change means businesses must find ways to become more agile and resilient—and anticipate what’s ahead. The Integrated planning and xP&A approach leverages the latest integration capabilities to deliver a holistic view of business performance. This unobstructed view possible with xP&A lets finance professionals make richly informed decisions more quickly to achieve improved financial success.r before

More important now than ever

The many shocks of the early 2020s have demonstrated why xP&A is the way forward, since resilience and agility are essential qualities in today’s business climate. Connected Planning and xP&A let you see clearly to meet current challenges and craft your vision of the future.

bi5 Solutions is a leading provider of modern Budgeting, Forecasting and Reporting (xP&A) systems and can help your business achieve

 

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