What Is Financial Planning and Analysis?

FP&A teams play a crucial role in companies by piloting the budgeting, forecasting, and analysis that support major corporate decisions.

Financial planning and analysis (FP&A) is the umbrella term for the planning, forecasting, budgeting, and analytical activities that support a company’s major business decisions and overall financial health. Organizations rely on FP&A to achieve operational, financial, and strategic goals.

Forward-thinking FP&A teams are adopting modern planning solutions that allow them to quickly alter plans, reforecast, or modify budgets in real time. They’re also on a mission to integrate planning across business units to speed up decision-making.

The pandemic has underscored the importance of cloud planning systems and their ability to help businesses quickly course-correct in the face of disruption. FP&A teams that had put off making necessary changes to their planning systems and processes—or felt satisfied with a business-as-usual approach to budgeting and forecasting—quickly discovered that their status quo had turned into a status no.

But after navigating complexity and uncertainty in the age of COVID-19, a sense of optimism appears to be emerging. Many CFOs see a future filled with opportunity, and they plan to harness technology to take advantage of it. That’s where adopting a modern planning model comes in.

Building Your Blueprint for Business Agility

Historically, businesses have relied on traditional planning models. These models often use familiar but outdated systems, annual planning cycles, and spreadsheets—resulting in siloed data and decision-making, slow-moving processes, and stakeholders with visibility into only fragments of the bigger picture. This static way of budgeting, forecasting, and financial modeling can be laborious, time-consuming, and inaccurate. It leaves budgets and forecasts dead on arrival—calcified with outdated information and unable to incorporate new realities without a heavy lift. And worst of all, it tethers the role of finance to the day-to-day minutia of managing spreadsheet versions and chasing down the latest numbers, instead of elevating finance to the role of strategic business leader.

So, what’s the solution? It’s called dynamic planning, and it’s essentially the photographic negative of static planning. A dynamic, modern planning model incorporates real-time data from every business-critical source within the enterprise stack and beyond, promotes cross-departmental collaboration, and allows for a panoramic, comprehensive view of the company, including both financial and operational data. With capabilities such as automated data integration and faster financial modeling, active planning frees up time for higher-value activities such as analyzing trends, identifying key drivers, mapping correlations, gathering insights, and making data-driven recommendations.

Building this blueprint for agility would be extraordinarily difficult if you were to rely solely on spreadsheets or outdated systems. But many finance leaders plan to make technology investments that will help them achieve more agility in the future.

What to Look for When Comparing FP&A Software

As you begin to evaluate your options, it’s a good practice to focus on getting everyone in the selection process aligned and engaged. Before you start your planning platform search, outline your key must-haves and those of all stakeholders. Identify the capabilities you require now, but also consider what you will need in the future—your needs will absolutely change as your business evolves.

You don’t necessarily have to completely abandon spreadsheets or overhaul your entire tech stack to get everyone working together (and doing so may make more enemies than friends). But you do need a centralized planning platform where everyone can collaborate easily, with real-time data integration from multiple sources. That integration will provide a single source of truth (rather than dozens of Excel spreadsheets creating endless version-control headaches). And it’s critical for automation—a foundational element of active planning.

FP&A teams that had put off making necessary changes to their planning systems and processes quickly discovered that their status quo had turned into a status no.

One useful resource is our “Financial Planning Solutions: A Buyer’s Guide,” which walks through this process. But in addition to that, be sure to review this checklist of seven characteristics you should insist on from any modern FP&A tool.

1. Scalable. As you grow—and just as importantly, as technology evolves—you need scalable software to meet needed demands and capabilities. Consider the future of artificial intelligence, machine learning, predictive algorithms, and dynamic financial modeling, and look for a provider that’s already investing in these innovations.

2. Powerful. The volume, variety, and velocity of data will continue to accelerate. According to Seed Scientific, by 2025 the amount of data generated each day is expected to reach 463 exabytes globally. Ensure your FP&A solution is built on a cloud architecture capable of ingesting and analyzing exceedingly larger and larger amounts of data.

3. Easy to use. This is such a simple and obvious need, but a rare reality. Neither finance nor its partners in the business need another tool to struggle with. Your ideal scenario is an intuitive FP&A solution free of bottlenecks.

4. Easy to manage. Look for simple deployment and low, IT-free maintenance.

5. Affordable. Aim for a planning tool that won’t break the bank. This is important not just for this year’s budget, but as adoption of your active planning model grows, you’ll want to invite new users easily without worrying that added seats will decimate your budget.

6. Configurable. Every business and tech environment has different needs—including yours. Find a solution that can be configured so you can plan in the same way you run your business.

7. Secure. As attackers become more and more sophisticated, you need to trust that your data is safe. Look for Service Organization Controls (SOC) 1 Type II reports, SOC 2 Type II compliance, SOC 3 attestations, ISO 27001 certification, and other trust and privacy certifications.

Make Your Technology Work for Your Business

With an integration framework capable of ingesting data from multiple sources—and with democratized access to that data—you’ll be in a position to harness modern planning technology that positions you for agility and resilience.

By selecting the right FP&A platform, you can establish a centralized hub for all the business-critical data and reporting you need and make operational leaders and stakeholders part of a culture of collaborative planning. Start the conversation now. Ask your stakeholders what their ideal FP&A platform of the future would include.

After a challenging few years, you’ve likely gained valuable insights that are helping you establish smarter business goals for the future. Most finance leaders plan to take advantage of this unique moment to do what’s necessary to achieve business agility. Perhaps for them, the next wake-up call won’t be nearly as alarming.

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