How Dynamic Planning Can Transform Financial Planning And Analysis

Pat Hickey

CFOs are often the cobbler’s children without shoes when it comes to information.

CFOs are, in many ways, responsible for delivering information to an organization. However, the priorities with analytics are often with the operational and sales departments. The finance team is left churning out backward-looking reports with Microsoft Excel and producing the “monthly reporting” package.

Forward-looking CFOs are trying to find ways to demonstrate their relevance to an organization beyond reporting the financials. The CFOs that “get it” see themselves as “architects of business value.” You can claim that title only by having the right empirical information to show the financial effect of your organization’s performance.

There’s no shortage of data, but …

The fact is, there’s a lot of data available these days. Companies have invested billions in big-expense items like enterprise resource planning (ERP), operational technology from plant equipment, point-of-service (POS) systems, and information services. All this data doesn’t necessarily mean it’s put to good use.

I recently spoke with one customer (a large consumer products company in the food industry), and we were discussing how they plan their revenues as part of their financial forecast. This customer’s sales leaders manually input the sales forecast based on their experience. I questioned, “Is it accurate?” Their response was, “Never. It’s usually 15%-20% too high, so we have to apply a fudge factor.”

Now, this is an organization with tons of data, full ERP, and retailers providing them with daily POS dumps. Yet they still rely more on a “gut feel” and fudge factor than data to help with a very important function for their business. The challenge for this company (and many others like it) is not the amount of data, but whether it is readily available as one source of truth in a platform they can easily draw from.

Strategic planning needs strategic technology

To effectively plan and forecast, companies need the combination of access to that one source of data truth and a solution that can deliver on the best practices of enterprise financial performance management. Trends now are to skip the annual budgeting process and plan with drivers dynamically on a rolling, go-forward basis. Leading companies are also looking at predictive analytics and Big Data to forecast their financial future.

These best-in-class financial processes are no longer possible with just Microsoft Excel and a smart financial analyst. Solutions need the speed of in-memory processing to deal with Big Data and the business functionality to efficiently deliver these benefits.

Technology needs culture to make it work

Irrespective of how advanced a company’s analytics solutions are, these solutions can’t yield significant benefits unless they are deployed with the right people talent. If all the finance team knows is counting the beans and preparing rear-view mirror Excel spreadsheets, then all they’ll do is automate those processes on newer technology. So why bother?

Finance leaders need to make a concentrated effort to develop, through training and mentorship, the skills around analytics and dynamic planning. If the team doesn’t respond to this challenge, then obviously they will need to acquire this talent to find someone who does.

Second, companies must organize themselves around a culture of sharing information. I still see companies whose approach to information is sending a request to IT for a new report, then maybe, six months later (if they’re lucky) the business gets a report. Leading companies develop competency centers within the business, embrace self-service solutions, and own the information they need to run the business.

Bottom line

For CFOs transitioning to become architects of business value, it’s less about the end game and more about the path to get there. Technology, data strategy, and organizational culture all need consideration – and the most important thing is to start on the journey.

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This article originally appeared on SAP Analytics.

Pat Hickey

About Pat Hickey

Patrick Hickey, P.Eng, Partner, Jump Analytics Inc. is a proven business consulting executive helping companies improve Business through Analytics, Cloud Innovations, and Enterprise Performance Management. Mr. Hickey has had a successful career at both SAP and the SAP partner community with building large consulting and sales teams. He has been responsible for delivering customer centric business solutions for the Office of the CFO along with providing advisory services to customers and contributing to many project steering teams.