Although the world remains locked in battle with Covid-19, we are starting to emerge from survival mode and to consider our post-pandemic future. This means figuring out what's here to stay from the pandemic experience and what needs to change. One thing is certain, though: we are not going to continue where we left off in 2019 and 2020.
Along with the move to remote working, another dramatic shift we experienced was the sheer speed at which things changed and kept changing. Both were accelerations of an existing trend, driven by digitalisation and customer expectations of always-on, real-time access to products and services. Most of us have uttered the words "change is the only constant" before, but now we really know what this means.
Take the traditional financial year. Mapping out a plan for 12 months now feels ridiculously archaic. We now know that things can turn on a dime at any moment. Many companies around the world, including our clients, report shifting to a quarterly forecasting and budgeting cycle. If that had seemed unthinkable before, it very soon became outdated itself. Companies are now moving to monthly forecasting so that they can make immediate budget changes.
Initially, this was for pragmatic reasons: to manage cash flow during the health crisis. But this agility and flexibility also brought clear advantages. Notably, it allowed companies to identify, analyse, and take advantage of the opportunities that were out there, despite the pandemic. This could be an acquisition, a divestment, a new market, or a more dramatic pivot.
With agility and flexibility as their mantra, the companies that got this right largely had to change the way they worked. Their CFOs realised that trying to predict what happens next is a wasted effort. Instead, they focused on building their resilience and adaptability to whatever change came their way. Crucially, they didn't do this by clinging to traditional processes.
So how did these managers succeed? Unfortunately, there is no silver bullet solution. It isn't a case of "do these things, in this order, and you'll arrive at this outcome". Each organisation is unique, with different drivers and goals, people, tools and processes. However, there are a number of guiding principles we can consider when it comes to creating a more agile FP&A environment.
Four ways you can enable FP&A agility today
Successfully adapting to this next normal requires a new kind of decision-making process. Businesses must tap into critical information sources in real-time to make decisions based on their current reality. This means looping in the non-financial managers at the coalface: the regional sales manager with unique, specific insights; the retail manager in contact with customers every day; or the factory manager with hands-on supply chain experience.
In turn, this requires developing and maintaining four critical business principles:
- Empowerment: enabling people at the coalface to contribute their knowledge and insights to bigger picture discussions.
- Transparency: sharing the bigger picture and the supporting details across every level of the organisation; giving employees decision-making responsibility and insight into their impact.
- Ownership: making employees at the grassroots level feel responsible for implementing the outcomes of decision-making.
- Accountability: ownership ultimately drives accountability for all stages of the process, from the quality of the information shared, through to the implementation of the decisions made.
But these principles don't exist in a vacuum. They must be facilitated by digital tools. To enable these principles, you must provide your non-financial managers with access to financial information through user-friendly, easy-to-use tools. This will empower them to exchange information with your financial team regularly, with little friction. Without the tools to support empowerment, transparency, ownership and accountability, the agility and flexibility of your business will remain a pipedream.
Post-pandemic status quo
So where to now then? Any notion that we'd be "getting back to normal soon" has been replaced by the acknowledgement of our "next" normal. It seems unlikely that we will ever return to pre-pandemic, locked-in, top-down budgets and forecasting. For one, it is not only possible to do this differently, but doing it differently has also become the norm. Secondly, there are huge advantages to more agile and flexible accounting practices -- even in more stable times. And finally, even with economies and travel reopening in many countries, Covid-19 has a longtail, and we should expect ongoing waves of impact.
But we should not think narrowly around the pandemic. There is a multitude of new and evolving challenges that businesses face every day, and agility and flexibility will help us navigate them all. Take, for example, the climate crisis, which is increasingly impacting people, businesses and economies. Think back to the bushfires in Australia and America, and to more recent flooding in the US and Europe. These climate events all have far-reaching economic impacts, for instance, disrupting global supply chains. Another challenge is the threat of cybercrime to a predictable and stable business environment. A ransomware attack on Colonial Pipeline, the largest fuel pipeline in the US, caused fuel shortages across the eastern US.
Continuously improving accounting practices
The long and the short of it is that change really is going to be the only constant in the future. The good news is that more agile and flexible accounting practices don't only provide a way to manage this uncertainty -- they also offer multiple business benefits and competitive advantages. By enabling real-time information flow from the coalface, businesses can make faster and more informed decisions that allow them to adapt and react in a shifting landscape. This information can then be fed back into the organisation, allowing it to improve processes, decisions and operations. Repeating this process continually improves responses to wave after wave of uncertainty and change, and provides a platform for business continuity and advancement.