Key contributors:

• David Malortie, EY UK Financial Services,
• Jessika Dhanoa, EY UK Financial Services

Firms today exist in a world that is becoming more complex, interconnected and changing at an ever-faster rate. In all sectors, financial services businesses are recognizing the need for accurate and timely insights to support decision-making in their rapidly changing environment.

This article explores how financial services businesses can guide investments in Financial Planning and Analysis (FP&A) design. It also provides recommendations on how to do so wisely and thoughtfully, and not rush through projects, which may necessitate re-investment later and consume valuable resources at a critical time.

Where does FP&A transformation fit into this?

This pressure of responding to today’s challenges is exposing the limitations of outdated, ineffective planning and forecasting systems. Even before the COVID-19 pandemic, FP&A transformation was on the top of CFO’s agenda:

• 54% of CFOs thought their Finance function spent too much time reporting financial data and 73% thought too little time was spent providing financial analysis and insights [EY Banking CFO Survey; Jan 2020].
• CFOs agreed that enhancing business analysis will remain their top priority, alongside balance sheet optimization and responding to new regulations [EY Banking CFO Survey; Jan 2020].

As a result, sophisticated planning and forecasting alongside an agile and responsive Finance function are the most critical capabilities for CFOs over the next five years.

Additionally, re-evaluating FP&A systems enables CFOs to set the vision of moving to a business-partnering Finance function that offers a strategically driven approach to planning, and helps migrate the role of a CFO to a Chief Value Officer.

What causes FP&A transformations to go badly?

Many businesses underinvest in the design phase and instead push to implement a system in the hope to recognize benefits quickly. However, rushing the design phase introduces risk through the project lifecycle and beyond, notably:

• Project scope could be poorly defined, leading to gaps in the solution or duplication of effort.
• The implications of the change across the business may be misunderstood, causing problems with connected systems and processes.
• The resulting solution may not fulfil the expectations of the business.

All of these have the potential to require significant reinvestment of time and resources to fix and maintain the system later down the line.

Why is it important to focus more on design?

On the other hand, a well-considered design approach helps to guide the investment in FP&A transformation. It offers the opportunity to create the right solution for the business that not only answers the current need but also supports the long-term vision and future growth. Investing in FP&A design will help to identify and prioritize user requirements, increase adoption across the business and ultimately develop a more sustainable and integrated solution, reducing the risk of future re-investment.

Below EY teams have set out ten principles for how a financial services organization should approach the design process to maximize the return on investment in FP&A transformation.

Ten principles to guide FP&A design

1. Engage business users early and train throughout

It is critical that internal and external stakeholders are aligned on the agreed outcomes. Do this by engaging business users early, enabling them to understand the FP&A tool capabilities and to enhance their own capabilities. For example, when needing to modify FP&A models as business needs change.

A well-trained team will be key for successful design. Equip your workforce with the required skills throughout, early delivery of tailored training sessions will promote more involvement and reduce dependencies on specific individuals.

2. Go beyond current requirements

83% of CFOs see business analysis being a top priority in five years’ time [EY Banking CFO Survey; Jan 2020]. Further, they see the ability to quickly produce scenario and profitability analysis as the highest value offering of their Finance functions. 

FP&A transformation allows CFOs to develop the Finance function into a high value-add business partnering role. The design phase is an opportunity to set a clear and ambitious vision, well beyond overlaying new technology onto old processes and roles.

However, it is also important to consider an iterative delivery of the changes and define the minimum viable product for each iteration. This will help recognize the benefits quickly and deliver a smoother implementation over time.

3. Deploy a use case-based approach

When considering the new system, first focus on agreeing use cases and consider starting small. Prioritizing the use cases will also help define the minimum viable product for each development iteration.

FP&A tools can provide flexibility to model planning from strategic to operational levels. Some tools offer the integration of plans across multiple use cases, avoiding the transfer of data from point applications and spreadsheets leading to a more efficient, effective solution.

4. Define the operating model

While it’s tempting to simply lift and shift spreadsheets, copying and pasting into FP&A tools, it would be wise to avoid doing this before you review surrounding processes. Identify the processes and integration touchpoints that the FP&A platform will support, then consider how they need to change. Importantly, also consider the organizational construct needed to deliver the processes as well as the time and capabilities that would be required from the team.

5. Reconsider business performance measures

Use the opportunity of designing FP&A to review whether KPIs for business performance management are reflected in planning, scenario and reporting requirements, with driver trees aligned to strategic objectives. A more effective solution for the business may be to focus on forward-looking views, decision support and rapid course correction rather than traditional focus areas such as cost allocation and expense management.

6. Assess impacts of data design early

Senior management need to consider the data-dimensionality required for planning and forecasting, where increase in dimensions can impact model size and performance (e.g. dimensions needed to support planning management information rather than actuals management information). Where there are inconsistent definitions of dimensions and hierarchies among source systems, it is important to fix those inconsistencies using respective mappings before beginning build of the first iteration.

7. Assess tool capabilities and limitations

Avoid using the FP&A solution that has been proposed to simply replicate the capabilities of your existing technologies in use. When assessing tool capabilities and limitations there are several considerations to be made, including:

• How the tool fits into the overall technology strategy
• Whether a single or integrated solution is appropriate
• How much configuration an ‘out of the box’ Software as a Service solution requires to meet your business needs.

All these will impact the implementation effort and lifecycle cost, so it is important to make an informed decision.

8. Consider solution performance and design

Even with cloud-based FP&A solutions it is important to consider ‘sizing and performance’ design. The design of the system should be considered in the context of the wider solution architecture (data lake, general ledger, reporting layer, etc.) It may be necessary to also review this in tandem with the FP&A solution design and consider whether loading granular data into planning cubes may hinder application performance.

9. Resource it appropriately

While having a set of principles to follow when considering the approach to design is necessary, it is not enough on its own. Equally as important is ensuring that the right resources are appropriately committed to the design, whether this is an internal or external team, and that they are supported in the activity. Not appropriately resourcing transformation projects risks a loss of focus on the design in favour of concentrating efforts on implementation or on Business as Usual responsibilities for the assigned resources

10. Capacity analysis

During the design of each iteration, the technical lead and the build team should assign effort estimates against each build object based on the solution design and supporting documentation. This will help better assess the work required against the capacity in the team before commencement of the next build. A contingency of 10%-20% of the effort estimates should also be factored into the plans given unforeseen complexities during implementation.

Conclusion

COVID-19 has accelerated the need for FP&A transformation, presenting CFOs with a unique opportunity to align with their long-term business partnering goals.

Properly investing in the design phase of an FP&A transformation program can lead to a more effective solution and fewer problems in the implementation phase and beyond. It is also more likely to support the achievement of CFOs’ top priorities now and in the future.

In the next article, EY teams will discuss how a similarly well-considered approach to implementation can also help deliver success.

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Member firms of the global EY organization cannot accept responsibility for loss to any person relying on this article.