It's not too late to make those 2018 Resolutions and we've got a few for FP&A organizations. 2018 will bring key challenges to many FP&A organizations, not the least of which will be to ensure compliance with the recently enacted US tax code revisions and to understand how these changes will impact your company’s core business. But there are other challenges that present opportunities your organization could take advantage of. Some of these challenges include further investment in your FP&A organization to guarantee success in the year ahead. Here are some upcoming trends in FP&A for 2018 as they relate to planning activities and partnering with your sales, operations and executive organizations.
What investments in FP&A are we talking about?
Let’s start with technology. As companies collect more and more data, they will need systems to complete each transaction from sales to delivery to accounting to accounts receivable collection and finally consolidation and reporting. That’s a given. Most companies have some sort of ERP system coupled with a consolidation and close process or system and reporting. Some companies have already invested in a Business Intelligence solution as well, and populate the solution with pertinent data. Further, companies are also seriously thinking about moving these systems to the cloud and reducing on-premise expenses. All this is good stuff. However, finance departments are increasingly being asked to review detailed data at the customer and transaction level, and to extrapolate future behavior of those customers in relation to business, global and even political events. How does one get at this information let alone analyze it to understand underlying causes of sales fluctuations? Of course, to start, you need the technology in place to make the data available.
Invest in the right technology for your FP&A organization.
We recommend that having a solid ERP (G/L) system, coupled with both Consolidation and Planning (like Oracle’s HFM and Planning) applications – now on the cloud for ease of access—as well as adding the ability for your analysts to perform analytics at a more detailed level within a BI (Business Intelligence) solution should be the goal. We have written plenty of blogs for you to read about which systems will be the best for your company, so I won’t address that point here.
But then there are the processes your teams follow to maintain quality control in closing, planning, consolidation and reporting. Processes fall under a general and rather vague list of steps you require your team to follow to ensure controls are maintained from the initial transaction all the way to the final report spit out at the other end. Processes are a necessary part of any team’s efficient methodology and need to be both preserved and subject to continuous improvement or transformation. If you invest in new technology, some current processes will be rendered unnecessary and cease to be required. But team members come and go, and processes that are not captured somewhere central and easy to review and maintain can be lost.
Invest time in process reviews and encourage continuous improvement in relation to new technology and new strategic goals.
We recommend that key finance processes be documented and embedded within your new technology as part of the solution. Further, invest in performing continuous improvement of all your processes, whether performed by people or performed by your technology. Continuous improvement is defined as teams taking smaller chunks of time to review their processes and executing smaller transformative updates to the process over time so they are not completely overwhelmed by the task. An example of this could be a regular review of the most profitable customers’ sales activities in relation to the current pricing structure to encourage retention. Or an accounting review of how customer revenue is mapped over to the Consolidation and Planning systems, combined with an overview of whether that data is further transformed for cleansing purposes or analytical insight. Ask yourself if the transformation formulas still apply to current conditions, etc. Doing this in bits and pieces will enable the whole process to be revamped in shorter stretches and encourage self-documentation by the team members involved.
Finally, your people are the main drivers of both technology and processes. Finance organizations should take a hard look at what they are asking their finance team members to do, and see if the people have the tools and training they need to deliver on key requirements. Finance teams have traditionally collected data, run transformation formulas on the data and presented standard reports and dashboards to the decision makers. Often, the finance team members know what analysis they’d like to include in these reports to build insight, but they don’t know how to get at the data and manipulate it for reporting purposes.
Invest in the people of your finance team to enable them to provide both finance information and insights.
Finance teams typically contain several skill sets: accounting, finance, knowledge of excel spreadsheets at varying levels, knowledge of how to interact with ERP and EPM systems at varying levels and reporting and analysis. Some companies recognize that BI developers and data analysts who would interact with and extract data from finance systems are skills they’d like to have within the FP&A organizations, but don’t always get a chance to hire them. They have to log a ticket with the central IT department to get a new report written. How about restructuring your FP&A organization to include team members who would bring these skills to the group? Call it the Finance Information Team and have them roll up to the CFO. The Finance Information Team would be responsible for Technology process improvements, developing BI for Finance use and a team of analysts who are knowledgeable about data science and can interact with and interpret the data to provide key insights to the decision makers. Asking your typical financial analyst to have skills in all of these areas is asking a great deal of them. Some individuals do have these combinations of skills, but I would suggest those folks are rare.