Despite the proliferation of new cloud solutions and growing talk of predictive analytics and big data, there’s still a significant gap between where financial planning and analysis (FP&A) organizations are today and where they want to be when it comes to the use of technology, analytics, and access to data.
These are the findings of the 2016 AFP FP&A Benchmarking Survey. That’s not a reason to feel disheartened, however. On the contrary, this presents a great opportunity for finance teams to gain a competitive advantage. By investing more in technology, analytics and data management, and discovery tools, FP&A can greatly enhance its efficacy and help the organization improve its financial performance.
The FP&A Benchmarking survey proves a key point: organizations that invest more in finance technology, analytics, and access to diversified, real-time data already see or expect to see big paybacks in terms of competitive advantage and cost savings.
The impetus is twofold.
- First, technology investment can significantly reduce the cost and cycle time of core processes and the amount of time staff spends on grunt work; that frees up professionals to focus on higher-value work, such as business partnering and decision support.
- Second, investing in analytics and data integration means FP&A has the tools to provide higher-level services to management and business partners and build stronger organizational competitive capabilities.
Getting core processes under control
First things first. According to the survey findings, companies that invest more of their total FP&A budget on systems show a strong relationship with shorter budget and forecasting cycle times. For example, companies that spent less than 10% on technology took an average of almost 90 days to complete the budget and 23 days to build the forecast. In contrast, companies that spent between 20% and 49% of their budget on systems completed the same processes in 75 and 16 days, respectively.
At the same time, the average number of days FP&A staff spent annually on collecting and processing data at companies that spent less than 10% of their budget on technology was over 384, or more than an FTE. In contrast, companies that spent between 10% and 20% on systems cut that number in half. Clearly, technology dramatically reduces the amount of time staff spends on grunt work.
The analytics equation
But technology goes far beyond process efficiency. It goes to the core of FP&A’s mandate: providing operations and management with data-driven decision support and foresight so they can prepare for what’s coming and remain competitive in an increasingly digitalized world. That’s impossible without greater access to real-time data and advanced analytics, including predictive models.
Certainly, FP&A still has a long way to go.
According to AFP’s FP&A Benchmarking Survey, three out of 10 finance professionals report that they are at a high level of analytics and data access maturity. They look at both traditional and unstructured data from various enterprise sources. They deploy both historic analysis and predictive algorithms. Such companies feed models with data to help forecast what lies ahead, so they’re not waking up surprised every morning. They can buy their companies time to adjust course and become more successful.
However, 56% of survey respondents strongly believe that to remain competitive, they need to up their analytics and data access game to include real-time access to internal, external, structured, and unstructured data, and rely on predictive models to glimpse the future. They know they need to make data-driven decision making part of their organizational DNA.
Separate research by IBM supports these findings. In a white paper published this summer, “Finance Analytics, Seven Hows and a Million Whys,” IBM cites a study of 1,000 CFOs that found that finance chiefs expect investment in analytics to double in the next two years. It also shows that companies that invest in analytics are more likely to be profitable. Further, it includes a study by Nucleus research that found that the ROI on analytics investment is $13.01 for every $1.
For finance teams, greater investment in analytics, data access, and core technology is not a question of if, it’s a matter of when. The survey demonstrates that the sooner, the better.
Where does your company fall? Find out in the 2016 AFP Benchmarking Survey. You can also hear your peers discuss the results of the survey during the companion Webinar, 2016 AFP FP&A Benchmarking Survey: A Function in Transition.