Next-Generation Financial Planning and Analysis Is Here. Just in Time.
One of the biggest challenges companies face today is adapting to fast-changing business conditions and unpredictable events. Business leaders are more challenged than ever to anticipate what’s coming, respond optimally to unpredictable events and their impacts, and make the best decisions in the face of disruptions from weather, supply chains, and more to maximize performance.
The problem is that traditional accounting methods weren’t designed to help decision-makers plan and navigate in this kind of business environment. For example, with the era of cheap money now over, organizations need to focus more on profitability, as growth may be expensive. This can mean cutting employee costs (for example, by minimizing office real estate costs and allowing employees to work remotely, finding new ways to optimize supply chains, and more).
Business leaders need trusted, expert advice and insights to help them uncover these opportunities and continuously anticipate, adapt, and optimally plan and respond. And they are looking to their financial planning and analysis (FP&A) department for the resources to make this possible.
This means moving beyond traditional driver-based FP&A models, where drivers are primarily internal and based on past results or management discussions. The new model considers sophisticated external and internal business drivers that can only be discovered with the help of predictive analytics technology.
Here’s what’s new…
First, we’re seeing a move away from traditional planning practices, which assume only one future, to planning for multiple futures using scenario management capabilities. In a world of increasing uncertainty, single-scenario planning that happens once a year is no longer viable. Scenario management functions enable decision-makers to evaluate multiple possible scenarios based on the latest data – and do so continuously and in real-time. This empowers business leaders to anticipate better what’s ahead, mitigate new and emerging threats, and take advantage of unexpected opportunities in a timely manner. It also helps them embed a continuous, collaborative, and data-driven scenario-planning process into their culture.
Second, we’re seeing demand for extended planning and analysis (xP&A). xP&A is a next-generation approach to planning that integrates every organizational function around a shared model and a common data platform. xP&A recognizes that operational plans, such as production and purchasing, are linked to strategy and are a crucial part of any financial plan. No one can accurately plan without taking into account the roles played by these departments, their more detailed plans, and their managers.
And third, we’re seeing FP&A functions embrace predictive planning and analytics. Predictive analytics can save time, improve forecast accuracy, and provide a platform to help organizations cope in times of uncertainty. It is a logical next step for those wishing to improve their decision-making process and gain much-needed agility in FP&A. In fact, it’s fair to say that you can’t set up modern scenario management frameworks without these powerful capabilities. If implemented correctly, they improve the flexibility and dynamics of your decision-making process and support the best features of xP&A, such as collaboration and true planning integration.
Equally important, predictive planning provides additional essential capabilities in today’s uncertain world. For example, it encompasses statistical techniques for seasonal and time-series analysis that can be used to populate future values, as well as machine learning algorithms that can help discover hidden drivers and forecast their impact on future goals.
Are you ready for next-gen FP&A?
The future of FP&A is bright and promising. For the first time, technology and finance professionals are ready and able to help decision-makers take advantage of powerful new scenario management and predictive planning capabilities that can deliver tangible results to their organizations.
To learn more about next-gen FP&A, download the new paper from SAP, “Three Strategic Forces Shaping FP&A Today: Frameworks, Expertise, and Tools for Influencing Change.” You’ll learn how to get started with scenario planning, how to evolve into extended planning and analysis and how to embrace predictive planning and analytics.
SAP is helping customers become more agile with FP&A capabilities. Explore financial planning and analysis solutions from SAP, today!