Technological innovations and increasing business expectations are creating an inflection point for finance, planning, and analysis (FP&A). Many CFOs may soon have to make a choice: adopt a new model that expands the function’s strategic role, or reduce its footprint as predictive analytics and other value-added capabilities migrate to front-line business units.
To date, the experience of companies with more mature FP&A functions suggests that CFOs are choosing the former approach. As finance departments explore ways to partner with the business, the FP&A function is emerging, in many cases, as the pointy end of the spear.
The rapid improvement in the capabilities of several technologies is one factor driving a rethink on FP&A, but it’s not the only one. Also at play is a growing desire for FP&A to apply its capabilities also on the revenue side
Its routine work—budgeting, planning, and associated reporting—is increasingly being automated, freeing up resources that can support or even lead to more valuable work, by providing insights on everything from supply-chain and pricing strategies to product and customer analysis.
While many FP&A functions have been evolving in this general direction for some time, the impact of several technologies, from robotic process automation (RPA) to natural language generation, predictive analytics, and a range of self-service and mobile applications, is now so profound that the time may be ripe for senior finance leaders to think beyond mere evolution.
In this issue of CFO Insights, we pose the question: Is it time to emulate what some leading organizations are already doing, and envision a new operating model for FP&A—one that dramatically elevates its contribution to the organization?
Why a new model?
The rapid improvement in the capabilities of several technologies is one factor driving a rethink on how FP&A should be structured, but it’s not the only one. Also at play is a growing desire for FP&A to apply its capabilities not only on the cost side of the business, but also on the revenue side—possibly even in real time, as analytical tools allow for teams to access and analyze data almost instantly.
Whether a company gets to that stage any time soon (and some have), there is little doubt that FP&A can play a larger role as an “influencer,” augmenting data with related business insights that can help drive the top line. To provide FP&A with true influencer status, however, even those CFOs who have worked to tighten the partnership between FP&A and the business may have to step back and ask whether there are better ways to proceed.
In some organizations, for example, this FP&A/business partnership has been achieved by supplying dedicated teams of FP&A to a specific function, market, or business unit leader. But while this model has the look and feel of a business- finance partnership, it may pose several disadvantages.
For one, it can be costly to supply that type of support to numerous internal clients. Plus, the resulting FP&A processes may vary as each team goes its own way. And since these dedicated FP&A resources are producing outputs for the same team that is giving them inputs, their strategic perspective may be limited.
That’s not to imply that there is a single model that organizations should embrace. Rather, the goal is to enhance the impact of the FP&A function by addressing three distinct levers: digital transformation, capability centers, and agile teams. How a particular organization proceeds will depend on its current state and long-term aims.
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