Gut check: is your FP&A team ready for 2024?

Ahead of our webinar on enabling driver-based planning with FP&A, we sat down with KPMG EPM director, Mark Warne-Smith, to chat all things FP&A, including how your team can build resilience and leverage the latest trends.

Mark shares some eye-opening pitfalls FP&A teams experience when deploying technology — and how to overcome them. He also highlights some key questions to check if your FP&A team is ready for 2024.

Watch the FP&A webinar on-demand here.

How can FP&A support the organization in managing the strategic balancing act between risk and opportunity?

FP&A is unique within an organization because it is the hub of both business and financial information, and it tracks the key drivers of the business. FP&A takes your strategy and business ambition and translates that into the financial plan. So, they should be constantly looking at how the business is performing against KPIs and strategy, and then spending their analysis time on understanding what business levers they can pull to capitalize on future opportunities and risks.

However, if FP&A needs to spend most of their time on manual work to gather data, scrub their spreadsheets and consolidate detailed numbers, it’s difficult to perform their value-add, future-looking insight analysis. This is a common pain point I often see in FP&A.

Another risk I see a lot is FP&A analysis being too internally focused and finance-process focused. An opportunity lies in making sure they are industry-specific, not finance-process-specific. You need both skill sets, but industry-specific enables further strategic support to your organization.

• Does your FP&A team spend their time mainly on analysis rather than transactional work that does not require their knowledge and insights?
• Does your FP&A team have industry-specific mindsets to understand the market and help the organization mitigate risk and grow opportunities?

Are there any specific KPIs FP&A teams should have to drive their success?

There are two parts to this. One is business performance KPIs, both internal and external, and the other focuses on process performance. Business performance KPIs are driven by your strategy, whether it's to grow revenue, market share, volume, or geographies — FP&A should identify the KPIs that match that strategy and agree with the owners of KPIs (who could be across the organization — in sales, in factories, in the back office etc.) to track them together closely. They need to be the bridge between the performance owners and the C-suite to visualize how that strategy is performing financially.

Secondly, KPIs performed on your own processes should include areas such as efficiency and benchmarking themselves against other FP&A functions in similar organizations. They need to ask internal questions, such as whether they are delivering fast enough. If not, is that because there's a problem with the process, or are they spending more time on analysis and value? If it’s the latter, then great, but if not, there might be wider problems within the function.

• Does your FP&A team have both external strategic KPIs and internal efficiency and benchmarking KPIs?
• Does your FP&A team have governance agreed with the owners of KPIs on how to manage the KPIs and how to analyze the root cause of the problems?

What is the one area most FP&A teams aren't focusing on that could drive significant value?

Getting connected. For most businesses, the power of insight in each business area starts to deplete at each consolidation point, or they have great detail and insight in each business area, but people question the validity of information because the insights don’t tie up across the business. Connecting your own data and business drivers is often an untapped resource and critical to taking advantage of the next wave of technology.

Planning should be a business process that FP&A translates into financials. But in businesses that aren’t connected, different teams — from marketing to HR to R&D — feed manually into FP&A, which changes the relationship and means FP&A has to treat planning as a finance process. In well-connected businesses, they receive the plans from the teams, and then it’s up to FP&A to challenge the business to improve. 

• Does your FP&A team have clear visibility of how insights are connected between business processes and their financial data?

What trend in FP&A is flying under the radar, but will be big in the next few years?

It’s not under the radar, but it is undeniable that artificial intelligence (AI) is top of many CEOs’ agendas. It will change the way our FP&A teams work. You can easily imagine that an FP&A analyst will start their day with an updated set of forecasting scenarios, of various weightings on known drivers for their business, with integrated competitor analysis.

All of that will be overlayed with commentary to advise on the assumptions and next best actions for you to validate, challenge and aim to drive a better scenario than shown.

There is a real opportunity for FP&A to create scenarios including challenges to the business with more comprehensive insights and at a faster rate than ever before.

Currently, there’s confusion about where to start or invest to maximize the benefits of AI. Many businesses are thinking about customer experience, where the AI is talking to customers, or asking AI to look at the business, bring in external insights, and then offer advice on locations to open the next office or shop. The possibilities are endless. FP&A need to push their data quality and rules-based transformation now to take full advantage of AI, after all, its power is still only as strong as the data it works with.

• Has your organization set up a vision of how AI can help the business and connect with finance?
• If so, does your FP&A team understand how the vision impacts the way to perform their analysis?

What measures can FP&A teams put in place to help build business resilience?

Aside from constant monitoring of forecast impacts on KPIs, the biggest strategy to help resilience is competitor monitoring. It gets done, but a lot of FP&A is driven by internal numbers, trends, and history. Then the external environment changes and creates the next Netflix or Amazon, which wipes the floor with your business.

It’s the thing that everyone has to be concerned about because technology is moving so quickly and it’s only going to get faster. You can already ask AI to invent a new product, so having your finger on the external pulse is essential. 

• Does your FP&A team include insights on markets and competitors regularly?
• Does your FP&A team perform scenario analysis to prepare the organization for external environment changes?

What capabilities and tools should an FP&A team develop to achieve the forecasting and insights they need today — and tomorrow?

Technology delivers a lot of new capabilities, but only if you have the right underlying data processes, structure, and governance. Trends like AI and machine learning are great, but technology is only effective if the data is trustworthy. It is critical to have the fundamental data quality in place, so the AI has something good to work with.

Clients often use planning tools as a way to force rules into their processes, to harmonize across teams, systems, and geographies, which drives efficiency and insight. The tools maximize the power of driver-based planning, connected planning, and scenario modelling, and once AI is integrated with FP&A, it will drive even greater foresight.

• Does your planning technology improve efficiency and enable key analysis methodologies to help your FP&A team drive strategic business decision-making?

What mistakes are you seeing FP&A teams make when it comes to deploying planning technology?

Firstly, companies are trying to achieve greater efficiency and capability in spreadsheets, but they need a planning tool underpinning it. They cannot think of it as simply a tech upgrade — putting your current spreadsheets into the new technology is highly inefficient. Tools charge on a space or license basis. This means inefficiency increases costs, so if you use up the data usage space more than absolutely necessary, your tool won’t deliver the best value against your investment.

Instead, use the need for more rules-based tooling, security, insight, and standardized processes and data structure as an opportunity to bring better rapid insight and drive capability to your teams.

The final point is to harmonize and connect the teams and the systems with the tool — use the power of your people. One of the things we tell clients once they’ve chosen their planning technology is to let all their people know about the technology before you even kick off and get them to learn it. Your team is so close to your business and once they know the capabilities of the tools, they are the best people to tell you a raft of value cases for you to go and deliver.

• Has your FP&A team identified opportunities for efficiency improvements that can be applied to the technology?
• Are all stakeholders of your FP&A team aware of your technology and do they fully understand the value it creates for their planning numbers?

What role does Connected Planning play in helping FP&A teams provide insights that can transform their organization?

I don't believe you can do real Connected Planning without specific planning technology like Anaplan because of its sheer size. The strength of Anaplan is that it helps to connect all the functions across the business and harmonize them to drive deeper insights, faster.

On top of that, it's flexible because of the low code and people in functions believe they can own it, change it, deliver it, and get the best out of it, all on a single platform.

How does Anaplan help drive business agility and transformation?

The fact that you can change things fast is the main reason Anaplan sticks. The biggest challenge many clients have faced with technology has been how slow it is to update, often coming with a two-day IT SLA. Alternatively, they use spreadsheets which means with any sizable planning, a single change to assumption may need to be filtered through several spreadsheets to see the result. It’s not fast and/or it’s not scalable.

Technology needs to keep pace with the business, otherwise people go back to relying on extremely flexible, but ungoverned, spreadsheets.

Also, by bringing in elements such as scenario modeling, suddenly in a meeting you can model five or six different scenarios and have the answer then and there to carry on the discussion. Anaplan is fast, it’s live. 

• Can your FP&A team reflect the business and market changes to their planning outcomes on time, in a logical manner? Can their technology help achieve it effectively and efficiently?

Mark Warne-Smith

EPM Director, KPMG

Mark is driving planning technology implementations. With a focus on the Technology, Media, and Telecommunications and Consumer sectors, he has led global transformation programs both in Consulting and as a Finance Leader.