2022 Forecast: Transforming FP&A to Deliver Higher-Value Insights

October 16, 2021
5 Minute Read

A major goal of finance transformation is to shift from a compliance-oriented model to one that enables data-driven decisions and provides valuable business insight. But this shift does not happen overnight. And it requires not only the right technology but also the right talent to make the transition and realize the full value for your business.

We hear a lot about that first part of finance transformation—increasing efficiency by automating time-consuming, manual tasks and optimizing processes such as the period-end close. But then what? Once you’ve freed your team from day-to-day drudgery, how can you ensure they’re able to actually deliver those higher-value insights?

This remains a high priority for finance leaders, with advanced data analytics topping the list of priorities in a 2021 Gartner survey, followed by robotic process automation (RPA) and accelerating digital skills.

Plans and Forecasts: Faster, More Frequent

Demands on your FP&A team have never been greater. Members of the C-suite need accurate information to provide investors with credible insights into the organization’s current and expected performance.

Prior to the pandemic, most organizations really looked at this as a quarterly or monthly exercise—except perhaps those that were operating in extraordinary circumstances. The pandemic has forced us to throw the old playbook out the window.

Leaders can’t wait until the end of the quarter to estimate the impact of a spike in COVID cases or a shift in the supply chain. Instead, they have an almost continuous need to ask, “What if?” and conduct scenario planning for more and more permutations. We believe this need for agility isn’t going to end when—or if—the pandemic is behind us. Those who are agile will thrive; those stuck with annual or quarterly planning cycles will fall behind.

The agile will thrive; those stuck with annual or quarterly planning cycles will fall behind.

Often, FP&A processes are designed for Corporate Finance—not the rest of the business. While business unit leaders are typically aligned with the C-suite in overall objectives, their demands for data and analysis may differ from those in the corporate office. Further, they’re asking different questions and need to view data at a more granular, operational level.

So, let’s assume we’ve automated many of the time-consuming processes that bogged down the F&A function and freed people for more time to perform analysis. How do we take full advantage of this extra time?

  • First, we need to ensure that we have a data architecture that provides analysts and leaders with the information at the level they need it.
  • Next, we need to design FP&A processes that benefit both corporate finance and BU/operational needs.
  • And, finally, we need to break free of spreadsheet-based planning.

Too often, valuable data is trapped on an analyst’s PC, deep in an Excel spreadsheet instead of in a cloud platform that’s accessible to all who could benefit. Systems such as OneStream—a market leader in performance management—provide tools to drill down, consolidate and visualize data instantaneously.

Want to know how a 10% decrease in labor will impact EPS next quarter? Or, how a six-week delay in a critical semiconductor will impact output and sales? Modern performance management tools enable real-time planning and analysis at whatever level of granularity you need.

We’re seeing a demand for incorporating more third-party data into FP&A models. Blending econometrics, operational data, and financial data drives better plans and more accurate forecasts. By incorporating machine learning models, the forecasts get even better.

Using Data to Power Forward Business Momentum

As with so many aspects of business transformation in this digital age, transforming to deliver financial and operational insights hinges on effective use of data and analytics. Companies want to be able to analyze their business and gain the insight they need to make strategic decisions about how they can grow, whether by expanding their customer base or by re-evaluating the products and solutions they offer.

For example, healthcare providers are taking advantage of advanced data analytics to improve revenue cycle operations. Instead of relying on time-consuming, manual processes, they’re able to use new analytics tools to more quickly identify patterns and focus on patient collections with the highest potential for payback.

Consumer products companies are using real-time reporting and predictive analytics to stay ahead of evolving customer demands and compete more effectively with nimble start-ups.

And in the financial services industry, credit card companies are analyzing their data to identify product growth opportunities and to target new customers who are most likely to accept their credit card products.

This kind of data-driven decision-making requires that you:

  • Unify and harmonize enterprise-wide data
  • Rationalize disparate systems
  • Deploy cloud technologies and intelligent automation

Investing in Innovative and Disruptive Technologies

Although a surprising number of organizations still rely heavily on spreadsheets, robotic process automation (RPA) tools are also becoming ubiquitous, especially for day-to-day operational tasks. But beyond RPA, forward-thinking finance leaders are also embracing more disruptive technologies like AI and machine learning, helping them perform more value-add tasks like predictive data analytics.

In fact, AI adoption has skyrocketed during the COVID crisis, with more than half of companies reporting that they had accelerated their AI strategy in 2020 and 67% planning to continue that acceleration in 2021 (Harris Poll/Appen).

Of course, as with any new technology adoption, your KPIs can’t just focus on how fast you move—or even how much you save on the implementation. As my colleague Andy Jones wrote in a recent BlackLine Magazine article, the real measure of success is the outcomes you achieve as a result.

Driving the Transformational Shift in Finance

Despite the rush by organizations to adopt more advanced technologies, finance transformation is not a simple one-and-done switch-over. Your FP&A team is likely already performing the insight function, but probably not to the full extent that would be possible if they could spend less time on operational tasks such as pulling data, normalizing it and preparing it for analysis.

It’s possible to automate more than 70% of less complex general accounting operations (McKinsey), while more complex processes like FP&A require different tools and more advanced data and digital capabilities. The most strategic, value-add work requires the highest level of human intelligence to interpret what the data analysis truly means to the organization.

And as more and more aspects of the F&A function are automated with RPA and enhanced with technologies like AI and machine learning, you’re able to make the most of your people to identify promising strategic opportunities and grow the business.

Hiring and Upskilling for Future-Ready Finance

Of course, to take advantage of this transformational shift, you need the right talent. That means hiring new people as well as upskilling your existing team members so they can successfully make the transition.

This “people part” of finance transformation could prove to be the biggest challenge of all. Fewer people are choosing F&A as a field of study or career. Millennials, with different goals and aspirations, comprise the largest segment of today’s workforce. And they’re more likely to change employers multiple times throughout their career.

This challenging workforce trend is among several shifts that we foresee in the F&A function of the future—changes you should be preparing for now:

  • The prevailing mindset will evolve from historical reporting to predictive analysis.
  • A digital workforce will replace a significant percentage of traditional accounting roles.
  • Finance will mobilize teams of tech-savvy problem solvers who use experience and analytics in project-centric roles.
  • These teams will be composed of a mix of employees and gig-workers.

As RGP CFO Jennifer Ryu said in an interview with StrategicCFO360.com, “Younger people expect to come into F&A and immediately do value-added work; nobody just wants to shuffle paper. They want interesting assignments and opportunities to learn and help clients solve their problems. If you don’t provide these opportunities, some other firm will.”

As year-end planning ramps up, take a little time to reflect on how your organization and your industry may have changed over the last year. And think about how you can transform your finance and accounting functions to deliver more value to the business in 2022.

Whether you’re just beginning to look for ways to automate F&A processes or ready to level-up your analysis and insights, our Finance Transformation and FP&A teams can support you.

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Janis Parthun

VP, Advisory & Project Services
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