PUTTING THE “A” BACK IN FP&A: BECOMING A TRUSTED PROVIDER OF BUSINESS INSIGHT

The latest report from FSN, “The Future of Planning, Budgeting and Forecasting,” underscores how important it is for financial planning and analysis (FP&A) organizations to rethink, redesign and retool their approach to planning and analysis in order to drive profitable growth and adapt to risk.  On the one hand these organizations operate in a challenging environment. Heightened volatility, uncertainty and risk are now part of the normal course of business.  On the other hand, they have an unprecedented opportunity to tap into new sources of internal and external data to generate new insights into performance gaps, root causes and alternative courses of action.  By putting analytics at the center of the FP&A practice, organizations can transform themselves from sources of information—reference books on the shelf, so to speak—to trusted advisors and providers of reliable business insight.  This point is highlighted in FSN’s finding that FP&A professionals are seeking their own identity within the larger finance organization in order to maximize their contribution to the business.

Unfortunately, the majority of organizations continue to rely heavily on outdated systems to gain business insight.  In a recent IBM global C-suite study, IBM researchers interviewed over 570 CFOs around the world. When asked “What capabilities or tools does your organization use for decision support activities?” – respondents stated that they continue to rely primarily on intuition and spreadsheets two-thirds of the time.  Dedicated, purpose built analytic tools were used only 15% of the time for decision support.

That’s not an ideal situation. But there is good news too.  In a related IBM study that dug deeper into the use of analytics, researchers discovered a group of leaders whose enterprises outperformed their peers by 40% in revenue growth and 43% in profitability.  (In the chart below, these leaders are designated by the green circles.)  We can see here that leaders are 50%-90% more likely to have implemented analytics in reporting, analysis, planning and forecasting.

 

 

 

These same leaders are 40%-150% more likely to apply advanced analytics capabilities such as multi-dimensional analysis, predictive modeling and simulations in planning, analysis and forecasting.

 

 

The IBM study further showed that the pace of analytics adoption across key areas of finance is set to increase very quickly in the years ahead – more than double over the next two years. The fact that greater use of analytics correlates strongly with the primary metrics of business success—revenue growth and profitability—indicates that the benefits of advanced analytics go far beyond the cachet of being the first to implement a clever new tool. Analytics give FP&A professionals the insight they need to take a more prominent role in finance and be more important partners and advisors to the business as a whole. With advanced analytics becoming pervasive across a range of finance activities, it seems obvious that the sooner an organization takes steps to investigate and implement these capabilities, the sooner they will be able to join the ranks of the leaders, rather than risk falling behind. 

To learn more about some of the analytics enablers, view this recent webinar, hosted by the Institute for Management Accountants and featuring Gary Simon of FSN and Tony Levy of IBM: http://www.fsn.co.uk/channel_bi_bpm_cpm/putting_the_a_back_into_fpa#.WFlruXrG-jE 

 

Spencer is FSN's newest thought leader with over 20 years experience in management consulting and now works for IBM. Click here to learn more about Spencer.

 

 

  • 2016-12-28 17:39:52
  • Spencer Lin
  • IBM, FP&A, The Future of Budgeting, Planning and Forecasting,