Every business needs consistency and stability. A reliable financial planning and analysis (FP&A) process contributes to this and, at the same time, provides core information for management so that they can make informed decisions.
During this new phase of digital transformation, the finance function has seen a change in landscape, with organizations seeking to use technology to integrate, manage, and analyse enterprise data efficiently. This extends to tools available in the Cloud to transform FP&A into a strategic, digital-first exercise.
Finance teams are now adopting digital solutions that allow them to alter plans, reforecast or modify budgets in real-time and integrate planning across business units to speed up decision-making, therefore improving the accuracy and reliability of plans and forecasts.
This shift should come as no surprise as finance professionals have been moving away from creating planning and forecasting spreadsheets in Excel for some time. These outdated processes are time-consuming, prone to human error, created ad hoc, and isolated across business units.
Planning processes in the Cloud have become more agile, transparent, automated, and data-driven as organizations adopt digital-first strategies.
What does FP&A mean?
Financial planning and analysis (FP&A) refer to a set of planning, forecasting, budgeting, and analyzing activities that help an organisation make key business decisions and manage its finances effectively.
It’s possible to provide financial data that is either quantitative or qualitative, on the basis of which the business can be evaluated in relation to its goals and objectives. This analysis incorporates business and economic scenarios, historical trends to anticipate future challenges, and forecasts the financial results of the business to aid future business decisions.
From a business growth perspective, FP&A and cash flow management are shown to be the pillars that will ultimately generate profits.
FP&A can also be part of a standalone analytics solution that integrates with other business systems, such as ERP. With AI, automation, and advanced analytics, FP&A has evolved from basic spreadsheets and manual calculations to modern, cloud-based solutions that can handle the financial challenges that arise with rapid change.
FP&A tools powered by cloud technology can help finance professionals to:
- Provide key stakeholders with fast and accurate financial analysis
- Prepare integrated financial plans that consider multiple scenarios
- Predict cash flow and the revenue impacts of potential decisions
- Establish and maintain financial models and forecasts
- Measure and monitor business financial health and investment performance
- Identify, prepare, and consolidate budgets in collaboration with departments
- Align business strategy with implementation and measure success
Forecasting best practice
A growing need for AI-based FP&A tools emerged during the COVID-19 period. Virus-related shutdowns, disruptions, and changes caused immediate cash flow challenges and extreme financial stress for many companies.
It was imperative to develop more accurate forecasts, more realistic budgets, and to develop new and creative methods of generating profits, reducing costs, and assuring business continuity. But perhaps most importantly, they had to create long-term, integrated plans for adapting to - and surviving - the new normal.
Today's AI-powered FP&A solutions are helping companies address these challenges. In response, finance leaders around the world continue to apply best practices to forecasting by adopting Cloud technology to help their businesses prepare for what lies ahead.
Alongside adopting Cloud technology, companies that have implemented the 12 Principles of Best Practice FP&A have reaped the reward of higher business performance:
- Develop a strategy and put it into action.
- Determine what resources are necessary to complete projects and achieve plan results, and then allocate those resources to the budget.
- Understand how operational plans impact financial results and track their progress.
- Since the financial plan is based on tangible projects, you can perform in-depth variance analysis and get to know the story behind the numbers.
- Adopt agile business practices and take action when financial or operational objectives fall behind.
- Integrating financial and operational goals is essential to building a strong foundation for accountability.
- Hold employees accountable for meeting financial targets.
- Hold employees accountable for achieving operational objectives.
- Determine what drives success in the business and develop metrics to measure it.
- Define the drivers of business success and set long-term and short-term objectives.
- Plan initiatives and projects to achieve business targets.
- Improve the monitoring of results and tie them to incentives.
FP&A is not just used to forecast spending or sales and expenses, but to drive business outcomes as well. It's not enough to just predict desirable outcomes; a rigorous, well thought out plan needs to be developed to achieve them.
Strategically identifying what values drive success in your business is key. Businesses typically have a checklist of key performance indicators (KPIs) on hand, but never take the time to define what drives their success by taking a step back to look at the bigger picture. If they did, they would put a lot of those KPIs on the back burner so they could focus on measuring what is important.
Essentially, FP&A needs to be defined as a decision-making platform so that the Cloud can enable best practice FP&A. The system needs to be functionally capable of handling all aspects of financial and operational reporting, analysis, planning, budgeting, and predictive analytics.
Additionally, the platform should either be integrated with project management tools, such as Microsoft Project or have its own project management functionality. The reason for this is that in a best-practice organisation, well-defined projects understood across the board are clearly outlined by plans to drive the numbers in the right direction.
Financial Planning and Analysis technology from Advanced
Like you, many organisations are looking to technology to help control their business; to draw all aspects of the organisation together without significant upfront costs or ongoing investment.
Cloud Financials from Advanced has the capabilities to carry out the FP&A process from start to finish:
- Benefit from over 1,000 customisable reporting structures, which can be built above any segment or combination of segments, greater visibility and enhanced drill down capabilities to access and analyse data to inform strategic decisions.
- Empower your organisation with the highest level of security and superior protection of your data in the Cloud, with the peace of mind that your data is managed in the UK.
- Supportive of a range of legislative and due diligence requirements, including GAAP, AUDDIS and ADDACS, along with GDPR readiness to support you in your efforts towards compliance.
Using Advanced Financials can give you a single unified view of your finances - past, present and future. Our robust solution empowers finance employees to combine financial, operational, and external data (such as market trends) on a centralised platform to analyse, uncover in-depth insights, plan for the future, and guide their business toward more profitable decisions.
Thousands of UK organisations trust Advanced to help run their business for them every day, join them, get in touch today.