FP&A Warning: Beware the EPM Bundle

Enterprise performance management (EPM) is relevant to every organization where outstanding performance is required to compete and thrive. It’s the process a business follows to drive organizational improvement by monitoring and analyzing key metrics across business units companywide.

Typically, EPM is divided into two distinct yet related activities: financial consolidation and close (FCC) and financial planning and analysis (FP&A). FCC refers to the process of finalizing the period’s accounting books and consolidating those results. The goal is to provide insight into the organization’s historical financial performance. FP&A activities include setting forward-looking financial objectives through long- and short-term planning, adjusting plans as needed, and supporting the organization’s strategic decision-making through detailed scenario and what-if analysis. While these two processes are separate, there’s a connection between them. Final FCC results drive elements of a financial plan, and the plan itself is included in FCC reporting. 

Some consolidation-led EPM vendors market a single solution for both FCC and FP&A. But this ‘square-peg-round-hole’ approach has its drawbacks. FP&A and FCC are fundamentally distinct exercises run by different teams, each with unique requirements. Applying a consolidation-led model for both processes means compromising FP&A’s priorities. 

Let’s dig deeper into the unique requirements of FCC and FP&A and the limitations of an FCC-led EPM bundled solution.

Periodic vs. continuous processes. The consolidation team follows a periodic process—monthly, quarterly, or annually—to close the accounting books and publish consolidated results for that specific time period. At the end of that process, there’s just one version of the actual results. However, the FP&A team is continuously creating new plans based on the most recent information. Without a finance-owned tool, the FP&A team can’t easily provide continuously updated forecasts and scenario analyses. That forces decision-makers to rely on outdated plans and gut reactions, compromising the organization’s ability to mitigate risk and seize new opportunities.

Accounting- and general ledger-centric vs. companywide. FCC is a centralized process with the goal of categorizing recent transactions into a set of general ledger (GL) accounts (for example, cost of goods sold, receivables, inventory, and so on). While the entire organization may be interested in the results, the accounting team executes the actual FCC process independently.

Financial planning on the other hand, while orchestrated by the FP&A team, is fundamentally a companywide process with active collaboration from department leaders. 

Rigid vs. flexible. FCC applies standardized rules to static data with limited dimensionality, so being reliant on IT to make infrequent organizational changes may be acceptable and even advantageous. In contrast, the very nature of planning centers on addressing change as it happens: adjusting plans for an ever-changing competitive environment, new go-to-market strategies, organizational updates, and new opportunities.

Without an easily adaptable system, planners will either be forced to use outdated models or will revert to disconnected spreadsheets along with a manual copy-and-paste exercise to enter results into an aggregation/consolidation system masquerading as a planning tool. 

Structured reporting vs. self-service reporting. FCC produces consolidated financial reports that adhere to a well-defined structure. These reports are typically static and allow for limited financial analysis of key metrics. In contrast, the planning process requires that the people closest to the business make informed, self-service decisions based on rich analysis of both operational and financial data. 

In other words, planners require a system that supports ad hoc report creation and accessing answers with a click. Without quick, accessible, and self-service answers, business users won’t have the information they need and will either make uninformed decisions or waste valuable time tracking down the details.

Enter the Modern Planning System

The best approach for achieving success is to leverage a purpose-built solution for planning. To guarantee that your FP&A process isn’t compromised, make sure your planning application:

• Is agile and flexible, and can support robust scenario analysis.
• Has an easy-to-use and consumer-grade interface that encourages companywide collaboration.
• Is finance-owned and doesn’t require IT resources or technical skills to manage.
• Includes out-of-the-box planning intelligence for quick deployments.
• Provides real-time results without batch processing.
• Adapts without limits to dimensions, attributes, or versions.
• Provides seamless integration with any source system.

Want to learn more about how Workday Adaptive Planning can help your organization achieve modern planning without compromise? Read our eBook “FP&A Warning: Beware the EPM Bundle”.