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Last week, in Part 2, I shared some of my experiences working in the Corporate/Banking world and long hours to ensure the organisations were reporting correctly and compliant on time. One of the key imperatives of any organisation is to bring in more revenue and maximise its profitability, but a lot goes into this with the production of further accurate information, more reporting, and a view to reduce manual workload – just to name a few, with the help of the 4Ps, for example:
Maximising Profitability
Senior management may have different perceptions of what this is, but I am pretty sure the CFO (or as I coined the term Digital CFO in Part 1) realises that Profitability is the primary goal of all business ventures and without this, there is no survival in the long run. So, measuring the current, past profitability and forecasting is very important. Profitability is measured with the support of data from multiple sources, such as income and expenses. This data can reside in one system, but most likely in multiple sources, such as spreadsheets (ah those spreadsheets!), databases, ERP systems, those bought by organisations ‘out of the box’ and those built internally ‘in house’.
What is ‘Out of the Box’ FP&A?
When we think about reporting and measuring numbers for profitability, we think about FP&A (Financial Planning & Analysis) or previously EPM (Enterprise Performance Management). Over time, FP&A has become a department and function in itself within the Office of Finance. This department/function is always under pressure and with constant deadlines/milestones to meet, the reporting / measurements are specific. Due to this, organisations go for specific FP&A solutions / applications that would provide them with the capabilities they need with a view to save time and money, so they purchase generic solutions ‘out of the box’.
Gartner refers to FP&A as having a set of four activities that support an organisation’s financial health:
- planning and budgeting
- integrated financial planning
- management and performance reporting
- forecasting and modelling
The FP&A solutions are usually brought in to enhance Finance’s ability to manage performance by linking the organisations’ Corporate Strategy to execution.
But, does this ‘out of the box’ approach always help? I personally don’t think so based on my experiences (others may disagree) in isolation. The world of FP&A has changed and is evolving. It’s moved away from a decentralised structure, where the ‘out of the box’ would support via doing things in the same way without much flexibility, collaboration or control (away from being an agile data driven organisation), to being a centralised operating model (via the Finance Analytics COE) with a new data driven and led structure.
Image Source: FP&A Trends
The FP&A structure today is not only about cutting costs (one of the motivations for purchasing ‘out of the box’) but it is about improving the service level to the whole business and organisation. This model is central to the versions of truth when we talk about the Numbers Don’t Lie (Part 2), provides the ability to forecast more accurately and cut budgeting processes by half (or more), with the minimising of operational time and more time on running the business and Change the Bank in parallel.
Evolution of Effective FP&A
Financial analysts require flexibility, agility, autonomy, and the capabilities not only to produce report outputs, but the ability to prepare their data, produce calculations and do analysis in a self-service way. The evolution of FP&A is driven by the business and the end users and this needs to be done quicker as opposed to those traditional 3 month development cycles.
Image Source: Strategic Finance
And, actually if you think about it, a self-service data driven analytics environment that can be present alongside the ‘out of the box’ solutions, not only allows you to analyse the current state and predict the future state, but also is more cost-effective long term (it should not be a fixed cost target), when we consider time-to-market, total cost of ownership, support fees and overheads.
Technology in Finance is one of the most important drivers when we talk about the modern world of FP&A whether the organisation is centralised, decentralised or a mix of both and this is driving the key strategies of the organisations in the following ways, as we see from FP&A Trends:
Image Source: FP&A Trends
The Alteryx Analytic Process Automation Platform enables the above required functions as well as enabling work and people providing a new paradigm of positive impacts on the organisation, culture and structure of the financial analysts’ time.
Come join me to learn ‘How to Maximise Your Profitability within FP&A using Alteryx+EPM’ on 29 September 2021 where I will show you how the Alteryx Analytic Process Automation Platform can help you achieve the above and more.
