Developing An Intelligent FP&A Solution

Michael Coveney

Part 8 in the “Understanding IFP&A” series

In the concluding blog in this series, let’s go back to basics. In developing a more intelligent approach to FP&A solutions, organizations must first return to the fundamentals of business planning. There are only three things management can control:

  • The arrangement of its own core business processes, which typically falls into these categories:
    • Generating income
    • Producing and delivering service
    • Customer support
    • Developing new products and services
    • Delivering support processes such as those conducted by HR, IT, finance, etc., whose purpose is to ensure the smooth running of the organization’s core processes
  • The resources (money, people, assets) that are applied to those business processes
  • The volume and quality of work carried out within those business processes

By conducting its business processes in an appropriate manner within a business environment that is both unknowable and uncontrollable, outputs are generated that senior management hope are sufficient to achieve the organization’s purpose.

Seven key analytic models

With this in mind, there are seven key things that management needs to know about its business processes (each of these can be assessed in a range of linked analytical models):

  1. How efficient and effective are the organization’s business processes?
  2. What trends are “hidden” in the detail?
  3. What long-range targets should be set, given where the market is heading?
  4. Where is the organization heading if it continues with its current business model?
  5. What could be done differently to better meet long-range targets, and how much would it cost?
  6. What choices/risks does management face, and what would be the impact on corporate goals?
  7. How much funding is required to implement the plan, and where will it come from?

Space doesn’t permit us to go into the details of these models, but I’m sure you can work out what they would look like.

Assess the issues with the current planning process

To move to a more intelligent FP&A, the organization will need to assess where its current planning processes are with respect to the above questions: Are they weak or missing altogether? From this, the organization can develop an action plan on the planning models that should be addressed first and how the process should be conducted (or triggered) so they can operate on a continuous basis.

Technology

A modern planning system is essential in enabling FP&A departments to become more intelligent. But it must comprise the right technology applied in the right way. The models described above will have different structures, so they will need to be built on a common platform to enable data and metadata to be shared. There will also be a need to allow different users to participate at different times; thus, the technology solution will need to be collaborative in nature and support a wide range of data types.

A good way to assess potential solutions is by building prototype models. This will test both the functionality available and the technical skills that will be required. In the past, this would have entailed assembling the right hardware, installing the necessary software and all its components, and then giving people the right security access – all of which is a major task and certainly not cheap.

Fortunately, cloud-based solutions overcome most of these obstacles. It’s possible to set up a prototype and get a lot of experience without ever having to install or maintain software or maintain the associated physical hardware environment. By using a cloud-based solution, organizations can quickly assess their needs and start progressing towards their own intelligent FP&A.

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Michael Coveney

About Michael Coveney

Michael Coveney spent more than 40 years in the software analytic business with a focus on transforming the planning, budgeting, forecasting, and reporting processes. He has considerable experience in the design and implementation of business analytic systems with major organizations throughout the world. He is a gifted conference speaker and author. His latest book "Budgeting, Forecasting and Planning In Uncertain Times" is published by J Wiley. His articles have also appeared on www.fpa-trends.com, encouraging innovation in FP&A departments.